Evolving Technologies To Drive Competitive

Advantage in Hospitality Industry

By Erik Lars Hansen Raymond M. Owen

The debate over "high-tech" or "high-touch" is largely a thing of the past in the hospitality industry as emerging technologies drive unprecedented change in the way hotels operate and serve customers. It is clear that investments in technologies can generate greatly improved operating efficiencies, higher hotel revenues and enhanced guest services. The pace of change, however, has been so extreme as to leave many hotel organizations uncertain about what types of technology to adopt and the best ways to create a seamless integration of systems company-wide. In addition, investments made by many hotel owners and operators during the last five years have lagged as a result of the serious downturn weathered by the industry. Many hotel organizations are using technologies so outdated as to place their companies at a competitive disadvantage in the marketplace.

The technology life cycle provides a model to assess how and when companies and individuals adopt new technologies. Pioneers are generally the first to acquire new technologies and take the greatest risk. A second category of technology users -- leaders -- adopt relatively unproven technologies, but the risks are known and accepted. Obsolete technology at the other end of the spectrum may seriously impair a company's ability to compete. In terms of costs and benefits, the best balance appears to be with the leaders who invest significantly less than pioneers and incur reduced risks, yet their technology investments can yield similar benefits.

Finding that balance in technology investment is critical today for hotel operations, given its importance in two areas:

Implementing technological advances promises the potential for greatly enhanced guest services to meet rising customer expectations, improved cost control, more effective marketing strategies and expanded opportunities for hotel companies and properties to achieve a competitive advantage. However, technology is only as good as its application by an organization, and therein lies the challenge for hospitality companies‹weighing how best to invest in technology, as well as train employees and implement its use.

The 1990s: A Decade of Integration

A retrospective view of how high technology has been used in the hospitality industry reveals the depth of change wrought in hotel operations during the past four decades. Accounting and financial systems were introduced during the 1960s, but exclusively as mainframe-based systems operated by the largest hotels. Systems oriented to property management were introduced in the 1970s. During the 1980s, systems were ported to mini-computer and micro-computer based platforms. Accounting, financial and property management systems finally became available even to the smallest operators. Sales and marketing applications were developed to provide a competitive advantage for properties.

The 1990s will be marked as the decade of integration, driven by powerful networking capabilities offered by client server technology. This technology will bring no less than the dismantling of the management information system (MIS) paradigm as we have known it, more completely democratizing access to information than at any time in the past.

Client server computing currently has no standard, agreed-upon definition. Generally, however, the client server architecture involves "integrated, networked computer systems using applications cooperating across the network," according to Stewart Alsop of InfoWorld. Instead of having a series of mainframes networked together, client server architectures involve one large processor unit (which may or may not be a mainframe) and a network of clients linked together, often across large geographic areas. Client server systems make the best use of both the networked client computers processing and user interface abilities, and the server systems database, computational and data management abilities.

Client server architectures offer major benefits to companies adopting these systems. Data access is faster because the "server" is not burdened with running applications. Data access is more evenly distributed, and users have the ability to query and create their own reports. At the same time, design of the database can be truly independent of the applications, which are run on the ³user² computers.

Client server technology in the hospitality industry offers significant opportunities as companies make decisions relating to technology. In addition to improving services, hotel operators are seeking ways to effectively integrate the disparate systems accumulated during the last decade. Most of the larger hotel properties currently are running multiple computer platforms (systems), and due to the cost of technology, will continue to do so for the next several years. These platforms have evolved from a patchwork of tactical solutions initiated by various functional areas. Client server technology is probably the most viable strategic option for medium to large multi-property owners and operators as technology upgrades are made. The number of enterprises in general industry that have adopted client server architectures, for example, has risen from 35 percent in 1992 to more than 60 percent today, according to the research firm, International Data Corporation. Similar levels of use can be expected in the hospitality industry.

Client server technology benefits hotel organizations primarily because it ³decouples² the applications from the database contained on the "server"system. In practical terms, this means that the applications typically used in the hospitality industry (back office, food & beverage, front office, etc.) can be developed by different vendors (as is typically the case), yet use a common database. Ad hoc reporting and MIS support are simplified and more efficient.

The client server approach, then, makes it possible to rebuild an information technology (IT) infrastructure to unify mainframes, midrange systems and PCs with universal connectivity in a single infrastructure as the ultimate goal. Optimally, hotel organizations should be able to reduce IT costs, leverage investments in PCs and improve staff productivity. In addition, client server technology sets the stage for the still more sophisticated technologies of the next decade in which guests will have greater access to in-room technologies, and fully integrated systems using a common database will be the norm.

A New Era of Guest Services

For most hotel operations, client server technology is inevitable. The benefits of integration via networked computer systems are compelling given the impact of improved technologies and the opportunity for business process reengineering. At the same time, older technologies are phasing out, and hotel operators will need well-integrated systems to support the database marketing and guest services required to compete in coming years. These include:

One-Stop Guest Services These services in the hospitality industry have two different applications. Guest services accessed by the guest typically involve the use of the in-room television remote control to select from a suite of interactive programs and services. Guests can navigate easily through multi-media video and audio, and be automatically connected by phone to outside services.

In addition, guest services provided by the staff typically involve a PC running a front-end application that allows access to outside services, as well as access to guest-specific information maintained in a central repository or database. In either case, the method employed is driven by the guest familiarity and comfort in using technology.

In the future, one-stop integrated systems will make the same basic services available to hotel staff available to the guest by means of fully integrated systems (retail, ticketing, reservations, etc.) using a central guest data repository and access to outside service providers. All these functions will be on-line and presented to the employee and guest in an intuitive graphical user interface.

Smart Cards These cards contain an integrated circuit that can allow a guest access to the room or other services in the hotel. Smart Cards also have the potential to be coded for use in charging retail items, meals, minibar use or other purchases. In the future, travel agencies ultimately may issue Smart Card itineraries rather than paper ones. Airlines will have a reader that verifies the traveler's flight number and seat assignment. Hotels will have a reader that can encode the card for use as a room key and capture frequent guest program information.

Since the Smart Card will be a universal card, it could be used at different airlines and hotels during the same trip.

The main drawback of Smart Cards currently is standards. Vendors write information in their own coded software which can only be understood by their own reader. Further agreement on standards will need to be reached by the various manufacturers before the power of this technology can be fully exploited.

Video Check-In and Express Check-Out For these services, touch screens on free-standing terminals at kiosks are being developed as part of systems to check in and check out guests without the need to use the traditional front desk. Touch-and-Go, the first system of its kind in the industry, provides the guest who has an advance reservation and a credit card the option of avoiding the front desk at the beginning or end of the stay. Touch-and-Go was successfully tested by Hyatt Hotels at two properties and is now being rolled out to between twenty and thirty of their properties. The target speed for the system is to allow guests to check themselves into their own rooms in less than 90 seconds. The system on check-out allows a guest to approve expenses which appear on-screen, and then print a folio of charges.

Database Marketing At the core of technology-driven marketing is the ability to better target a hotel's customer base. A hotel's customer information file provides the opportunity to segment customers, develop profiles of frequent guests, target prospective customers and improve retention. Many finer hotels maintained a guest history system manually before the advent of affordable computer systems. However, these manual systems were limited in their ability to serve as the basis for a marketing program, and also did not permit the chain operator to identify the best individual customers who frequented multiple hotels within the chain. Client server technology now permits a hotel chain to maintain one single customer database which can be accessed by all of the properties connected to the server over the network. In addition, far more data can be collected about the customer and his spending, making the database much more powerful as a focused marketing tool.

Executive Information Systems (EIS) These systems offer a way to extract information from disparate systems and present it in a usable and informative manner to top management. What is required is a front-end interactive interface which displays and queries the back-end database (common repository of information) and feeder systems, which include existing financing and operational systems. Design and implementation of an EIS system is typically complex, requiring close examination of a hotel operation's key performance indicators, information sources and other system design features. Once created and implemented, however, an EIS system has the capacity to provide management with a user-friendly, readily accessible and current view of a hotel operation's key financial results and performance indicators.

Technological advances thus have the potential to generate a range of benefits critical to remaining competitive, and ultimately driving expanded market share and profitability. Nevertheless, the barriers to increased investments in technology by hotel owners and operators can be daunting. These include general resistance to change, lack of available funds or manpower to invest in technology, and a perceived inability to quantify benefits.

Like other service companies, hotels are by their very nature more reliant on information than many other industries. The success or failure of a service company can be directly tied to the accuracy of data contained in databases and the speed of retrieval. Clearly, technological advances applied in the hospitality industry will set increasingly higher standards for guest services and hotel operations‹with customer expectations continuing to accelerate. As a result, investments in technologies and effective application of these technologies in hotel operations and services will become one of the most decisive factors differentiating successful hotel organizations globally in the years ahead.

Erik Lars Hansen is a partner in Arthur Andersen's Hospitality Consulting Group. Raymond M. Owen is a manager in the firm's Business Consulting practice. Both are based in the firm's Los Angeles office.

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