Hotel Online Special Report

Full Circle from Centralized to ASP
The Resurrection of Old Themes 
and a Payment Solution
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This article is from the Summer 2001 issue of Hospitality Upgrade, formerly the Hotel & Restaurant Technology UPDATE magazine.
By Gary M. Eng
...Exploit the Internet’s ability to facilitate sales for the property / franchisee.  The ease of access by which consumers can complete a travel transaction at a reasonable cost was proven by the popularity of the travel Web sites.  

A-S-P.  “Application Service Provider.”  Hmmm, seems like we’ve come full circle. 
Remember those great names in computer technology, names like Burroughs, GE, Harris, IBM, RCA and Sperry Univac?  Some of you may not even realize that GE, Harris, RCA and Sperry were in the business of building general-purpose computers.  For some of us old-timers we associate the term ASP with familiar terms like: service bureau, timeshare (as in computer services not vacation rentals) and centralized processing.  If you believe in the concept of cycles, computer technology has evolved from mainframe to minicomputer to PCs to handheld PCs and now clusters of PCs function just like the mainframes did in centralized operations or as application servers. The excitement over the great potential of the Internet lies in the successful matching of centralized operational efficiencies, low cost access to the correct markets matched with the right application.  In the old days general purpose computing was rare and expensive and timesharing those applications and resources were great economic tools, just like an efficient ASP operation it seems to complete the cycle.  

ASP technologies will lower the entry barrier of technology costs so more people can take advantage of powerful computing applications.  (Hmm, … sound familiar?  Kind of like the same reasons we heard for buying mini-computer then personal computer technology?  I wonder how many times we can save those man-hours? ) The ASP model can be substantially more efficient operationally reducing replication of facilities and maintenance tasks.  Larger more powerful applications can operate centrally so they may be efficiently managed by highly trained technical staffs and offered inexpensively to their users.  These traditional service bureau tactics will allow very powerful ASP applications to be offered to a broader market place because they lower the costly entry barrier by sharing those costs with other users.

Shared application processing has always lowered the cost to access powerful technologies allowing a larger market access to expensive solutions.  This year at HITEC, we should expect to see more implementations of ASP technology than ever before.  Virtually the entire travel and entertainment (T&E) industry (lodging, restaurant and auto rental) is seeking to exploit an ASP strategy.  Property management systems will be marketing and installing Web-based ASP service offerings, as will restaurant management, auto rental counter automation and retail point-of-sale systems. They’re all going to be extolling the benefits of ASP applications.  Some Web sites in the travel industry will continue to evolve functions that Internet companies, like, have revolutionized from the past – auctioning.

Auctions could be perceived as a more formal commercial event, the kind where James Bond would purchase an expensive collectible and find some beauty to deliver it.  On the other hand, auctions could be perceived as a loud, noisy informal gathering where the sales activity would coincide with loud, fast, unrecognizable verbiage spoken with some artificial Southern drawl and followed with the bang of a gavel and the recognizable sound of the word “sold.”

Well, the dot-coms have unquestionably made auctioneering more tame and common place.  To many of us, the use and functionality of the auction sites isn’t something to be confused by or to marvel at, it has actually become institutional, commonplace and accepted., unquestionably among the best known of the T&E auction sites, supplies auction-type travel services.  Others operate not so much as auctions but more travel service-oriented Web sites like Expedia and Travelocity.  Even the flags themselves have advanced their Web-based applications as a one-stop shop to organize and purchase an entire trip. Other flag Web sites are evolving to support the same functionality.

The success of is most commonly associated with a lower cost purchase of airline tickets; this Web application also supports room sales functionality and appears to have benefited the hoteliers as the last minute sale of empty rooms increases.  

The Web auctions’ success has drawn the attention of a number of flags that are developing these types of applications to service their franchisees.  The Web applications provided by many flags are great candidates to host a last room sale auction function.  But with that development comes the question what’s the best way to take payments over the Web for my franchisees?

There are a number of ways to address this challenge so here is one of them.  The initial goal should be to exploit the Internet’s ability to facilitate sales for the property/franchisee.  The ease of access by which consumers can complete a travel transaction at a reasonable cost was proven by the popularity of the travel Web sites.  Auction sites are great places for consumers to find a bargain, but frequency, familiarity, habit and creature comforts may fall by the wayside if auction sites sell a competitor’s service to your regular customer.  

So, presume that your flag’s Web site is being auctionized.   Seems to make sense doesn’t it? A number of the flags are working on this very function, but the auction function developers should be aware to avoid becoming commercially in conflict with your customer’s business.  A flag should be cautious to avoid the perception that it has become competitive with his franchisee and to help make a sale for its customer and avoid becoming involved with their money.  

Recently the flag of a multi-thousand member retail organization failed to remain alert to that critical line. It resulted in a very expensive failure in its investment in the technology of its Web-based strategy and an even greater cost to the trust it had established with its member organization.  The initial introduction of its strategic Web-based application created great interest with its members, but by the rollout of the application, the flag came much too close to the line of trust established with its members.  It was perceived that the flag’s Web-based sales application was directly competitive with its responsibility to support sales activity for its members. Its members found that the revenues associated with the sales generated off of the Web application were controlled exclusively by the flag and the benefit to the members became vague.  Members rejected the support of the Web-based application and the substantial investment in its Internet strategy failed.  But the worst has yet to come, because the members no longer have a strategy to address their competition and remain defenseless against competitive Internet strategies, especially ones that work.

This scenario may be applicable to the flag-operated ASP travel sites.  As those applications are expanded to support last room sale auctions, they should support the payment services to their franchisee’s/member’s provider.  Here are some tips for the developer of your auction service provider:

  1. Your ASP application should be merchant aware. It should know who’s going to be the merchant with each transaction and the application must be able to support numerous merchant accounts on the system.
  2. The application should also address the security of the transaction by some method of secure encryption from the purchaser to the host and support address verification in its tendering process.
  3. The system must be able to associate the room sale with the merchant ID specific to the account owner.
  4. The auction system should address a variety of payments to the hotel’s preferred financial institutions and/or frequency or coupon redemption programs.
  5. The payment interface should support multiple types of transaction and destination processors.
Value-added network providers who focus on the payment industry might provide access to multiple payment providers and may be the best solution for the ASP auction functions developed by flags for their franchisees.  Access to multiple processors will allow the flag to avoid the administration and liability associated with the acceptance and management of their customers’/franchisees’/members’ financial transactions.  

If you have questions about this article or other topics on electronic payments, please address them to Gary Eng at


Geneva Rinehart
Associate Editor
Hospitality Upgrade magazine 
and the Hospitality website

Also See: Choosing a Reservation Representation Company / John Burns / Hospitality Upgrade Magazine / Spring 2001 
The Rise and Fall of / Lessons Learned: Life after a Dot-bomb / Mark Haley / Hospitality Upgrade Magazine / Spring 2001 
Your Bartender is Jessie James and He Needs to Pay for College / Beverly McCay / Hospitality Upgrade Magazine / Fall 2000 
Understanding and Maximizing a Hotel’s Electronic Distribution Options / by John Burns / Hospitality Upgrade Magazine / Fall 2000 
The Future of Electronic Payments - From Paper to Plastic and Beyond / J. David Oder /  Hospitality Upgrade Magazine / Summer 2000
Timeshare Technology Steps Up / by Elizabeth Lauer / Hospitality Upgrade Magazine / July 2000 
Biometric Payment: The New Age of Currency / by Geneva Rinehart / Hospitality Upgrade Magazine / Mar 2000 

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