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Time to Invest: Predicting What’s Next for Technology in Hospitality

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March 01, 2012
Technology Investment
Douglas C. Rice

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One of the biggest challenges for any technology executive is predicting the landscape of toolsets and IT infrastructure that will be available in the future.  If you make the right choice, today’s investments may last for 10 or even 20 years. In contrast, the wrong choice could force you to replace core elements of your systems strategy in half that time, or less.

The hospitality industry is largely a consumer of these building blocks, which include such things as network protocols (think TCP/IP), materials (silicon, copper, fiber), data protocols (SQL, ODBC), operating systems (Linux, Windows, iOS, Android), and presentation and messaging protocols (HTML, SOAP).  These are not developed for hospitality; rather they serve a wide variety of consumer and business needs. The building blocks just referenced are familiar names in the industry now, but how can you determine what the building blocks of the future will be?

One of the best lessons I learned from a wise person many years ago was that if you want to predict the future, find out where the big money is being invested.  In technology, this means learning where the industry giants are investing their billions in research and development (R&D) – companies like Microsoft, Intel, Apple®, Cisco, Google, Oracle, IBM and AT&T, to name just a few. When many of them invest in the same building blocks, you can count on those building blocks becoming mainstream and supportable for many years to come. If you were watching these barometers, you foresaw the end of the mainframe era.  You also saw the Internet coming years before the dot-com boom began, and you anticipated the mobile app revolution.

A Window to the Future
One of the great privileges I enjoy from the vantage of running on of the hotel technology industry’s largest trade associations is frequent opportunities to see the world from the vantage point of many different industry technology leaders, including those that focus on hospitality, as well as those serving the broader technology space.  HTNG’s regular face-to-face meetings of industry technology leaders offer great insights into where technology industry leaders expect to go in coming years, and how hospitality technology providers view those trends.  These insights provide clues as to which investments will be future proof and which will be risks.

We see three major trends that we think will shape our world between now and 2020.

The Cloud
Despite that no one really even agrees on the meaning of the word, there is no question that the cloud is by far the biggest area of investment. Microsoft, Amazon, Force.com, Apple, and now even networking companies like Cisco are placing huge bets on moving complexity and cost up the wire, away from the user and into data centers where they can benefit from scalability, shared support resources and load balancing. You can argue that much of the money being spent is on marketing hype rather than technology, and there is undoubtedly some truth to that point of view.  But these companies would not spend money on marketing if they didn’t expect sales, which means they expect to deliver product.  We are only in the early days of the cloud revolution currently, but the amount of money these companies are spending ensures that it will catch on. 

One of the most important aspects of this, from a hospitality perspective, is the development of cloud service brokerages.  In an industry where the dozens of different systems controlling a hotel must be mashed together from different parties – at a minimum this includes the building owner, the management company and the franchisor – if services are going to be cloud based, there must be cloud-level interoperability.  Brokerage services can be thought of as cloud-based middleware that ensure robust and reliable communication between cloud-based systems operating in different clouds. They are what will enable a cloud-based CRS running in the Force.com cloud, for example, to easily connect with a cloud-based PMS running on Microsoft Azure.  They can also allow a hotel company to engage a single vendor to manage the aggregation, integration, customization and governance of cloud services.  Intel is one of many companies making big investments in the cloud services brokerage arena, which by definition are independent of any single cloud services provider.

This is good news for hospitality. It holds the promise of relieving the hotel owner of responsibility for managing the operation and integration of premise-based systems, with associated costs for deployment, equipment and maintenance performed by on-site or locally based staff.  There is a healthy debate as to which technology services must remain premise based to avoid major problems in the event of network outages. But the number of hotel technologies that are proving to be robust in cloud deployments – at least in parts of the world with good Internet access – are growing every year as obstacles are overcome.  There is a distinct possibility that every aspect of hotel technology except for end-user devices and portions of the network infrastructure may ultimately move to the cloud.

Turning from infrastructure to hardware, it’s hard to deny that the big money is moving to mobility.  Apple may have been the first of the megacompanies to figure this out –arguably, they became a megacompany by doing so – but other giants like Samsung, Microsoft and Amazon have also been leading the charge.  Tablets have not yet fully replaced PCs in business travel, but the gap is narrowing rapidly.  Indeed, the form factor of notebooks is getting smaller as that of tablets gets larger.  We are fast approaching the day when the difference between the two is the presence or absence of a paper-thin keyboard.

For hospitality, this creates both opportunity and challenge.  Mobility gives us the ability to communicate with our guests and staff in real time.  This capability can be used to both define new service models and revenue streams, and to improve existing ones.  Today’s challenge is that mobility requires massive investment in wireless infrastructure and bandwidth.  (More about that challenge in the third trend.)

The key takeaway for hospitality is that when you invest in user interfaces, it will typically be wise to design for mobile devices first, rather than for PCs. Certainly this is true for applications that face guests, but also for staff-facing applications where the staff is or could benefit from being mobile.  This includes a large proportion of front-of-house, back-of-house and guest-facing hospitality applications.

Don’t bet on a particular operating system, the leadership in this area will change based on competitive dynamics outside the control of anyone in hospitality. Multiplatform toolsets such as HTML5 are widely supported and are becoming de facto standards for deployment of applications across multiple platforms. While not yet perfected in all environments, it’s the clear winner in overall investment by mobile operating system and device manufacturers.

Cellular Offload
Mobile devices create the need for massive bandwidth.  iBAHN collects extensive data on these trends, which it has generously shared with the industry, and the data is downright scary: bandwidth requirements are roughly doubling every year, with mobile devices leading the way. 

Many hotels have shortchanged the investment in upgrading bandwidth and supporting Wi-Fi infrastructure, believing that the migration of mobile devices to 4G/LTE cellular technologies will solve the problem by ultimately reducing or eliminating Wi-Fi.  But a look at where the megacarriers are investing proves this assumption completely false. 

Carriers such as AT&T, Verizon and Sprint realized in 2007 to 2008 that the data tsunami was coming, and there was simply not enough cellular radio spectrum for them to outrun it, even given future advances in cellular technology through LTE and beyond.  Carriers such as these and their counterparts in other countries know they cannot satisfy the demand for mobile data with cellular technologies, at least not in densely populated areas.  Their strategies for satisfying the need are based on moving cellular traffic to terrestrial networks – meaning Wi-Fi.  Virtually all major carriers in developed countries are aggressively investing in what they call offload, meaning they are building out or gaining access to Wi-Fi networks, and enabling their devices to roam onto these networks automatically.  If you have an AT&T smartphone and leave wireless enabled, and walk into a Starbucks, McDonalds, American Airlines Club room or Hilton-branded U.S. hotel, you have probably already experienced this.  These few examples exemplify the economics: in congested areas, it is far cheaper for a cellular carrier to build or fund a Wi-Fi network, than to install an additional cell tower and/or buy additional spectrum.

This is good news for hotels, because it means that cellular companies have an economic reason to help fund hotel Wi-Fi networks.  In New York and San Francisco, where cellular coverage is saturated, some carriers have gone so far as to offer free Wi-Fi networks to certain hotels, because it was the least expensive option for them to satisfy the needs of their customers.  Hotels in less congested areas won’t get free Wi-Fi networks anytime soon, but many hotels can now find, at a minimum, willing investment partners to help offset the cost of a Wi-Fi network in return for the ability to route cellular traffic through it. In remote areas, the cellular network may be sufficient to meet consumer needs. Urban and suburban hotels are well positioned to benefit from this trend, but will need to forge appropriate alliances with carriers to do so.  Over time, carriers expect roaming models to develop, enabling phones from different carriers to offload to a single Wi-Fi network, with payments to the provider of that network based on traffic volumes or other factors.

There are many risky bets in technology, but a few safe ones. When you are making decisions on investments, strive to determine the major trends, and then invest in solutions that align with those trends. If you aren’t looking at the cloud, expecting the user interface to migrate to mobile devices, or thinking about how your hotel can benefit from carrier investments in Wi-Fi, you’re probably missing the boat.

Douglas C. Rice is the executive vice president and CEO of Hotel Technology Next Generation.

©2012 Hospitality Upgrade
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