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Technology Dilemmas: 
What have IT investments 
done for you lately?
To view more articles covering technology for the hospitality industry please visit the Hospitality Upgrade Web site or to request a free publication please call (770) 953-2300 or email.
This article is from the upcoming Summer 2001 issue of Hospitality Upgrade, formerly the Hotel & Restaurant Technology UPDATE magazine. 
By Elizabeth Lauer

As I sit here on a balmy spring evening struggling through the deadline for the summer edition of Hospitality Upgrade, I could curse the day I met Richard Siegel.  Just kidding Rich, but I do wonder why I am writing these articles and who actually reads them.  I wonder what possessed me to pursue a career path in the technology of a sometimes disorganized and seemingly disadvantaged hotel industry.  I wonder who among our technology vendors will survive the Space Odyssey to HITEC 2001.  I wonder if HITEC will experience more than a couple of no-shows.  I wonder if more people will be floating their resumes in search of greener pastures and better employers.  I wonder if we will take technology more or less seriously at this year’s event.  I wonder if the hotel industry is ever going to embrace and exploit technology to its fullest. 

There are dozens of reasons why we should take technology more seriously.  One of the most practical reasons is so that we might make smarter technology investments for the future.  I know a good portion of the population feels pretty burned out when they reflect on the technology in their lives today; from the cell phone plan that keeps evolving, to the recent implementation that took twice as long as projected, to the tech stocks in their portfolios slipping, slipping downward.  We obviously had higher expectations.  How has technology made our lives any easier or allowed us to work less and play more?  Why are some people more skeptical than others when it comes to technology?

Sometimes when I research or evaluate new technologies, I find myself asking: Who in the real world needs all this stuff?  What is truly useful and what is an unnecessary expense?  How will the technology decisions we make today affect us tomorrow?  Technology seems to make the Western world go round.  We’re afraid if we stop innovating the G7 economies might self-implode, yet we seldom have time to get comfortable with the latest technology before we’re forced to reconsider it. 

$: How We Made It, How We Spent It

There was a lot more money to be made and spent in the hotel industry when the high-tech industry was experiencing rapid growth and prosperity.   The demand for accommodations from the tech sector showed no sign of slowing.  So hospitality companies joined in the elephant buffet by building new properties and renovating old ones.  When it was time to budget, we’d always opt for new banquet chairs and drapes before back-of-house management systems.  The battle for capital reserves favored the sales systems over upgrades to property systems, but only after the new FF&E was shipped. 

Controlling costs, reducing labor expenses while simultaneously offering attractive compensation plans to retain promising staff?  That’s not how the industry has been making its margins and earnings per share in the last decade.  Glossing over the obsolete, while reaching for that pie chart of market share has been much more profitable.  Instead of trying to operate more efficiently, we have sought to sell more rooms, more groups, more banquets, more Toblerone™ from the mini-bar and more reconstituted chicken strips at happy hour. 

With respect to our technology purchases, they have historically focused on the marketing of the property and the sale of guest services.  Those investments have probably paid for themselves through improved occupancy and rate.  There have been great strides in central reservation systems pioneered by franchising companies.  Internet distribution has been fueled by the online travel industry. 

Travel is by far the most successful e-business and yet the technology used by the hotel industry is barely ready for the travel industry’s net success.  Loyalty program administration and automated yield management has been furthered by the nation’s airlines, and hotels have benefited from the strength of the commercial carriers and improved access to secondary markets.  I’m not suggesting we take too much direction from the airlines right now, for they have their own troubles.  I’d hate to imagine a comparable level of frustration and grief upon check in at my hotel.  That is if and when I reach my destination.

Why We Haven’t Spent Enough

We’re taking on new channel partners and marketing alliances without an industry-wide commitment to single-image inventory and seamless reservation processes.  This development takes money of course, but consider the alternative.  Also, we still rely on night staff to reconcile front-office systems with back-of-house financial systems.  The night audit is becoming a more difficult position to fill.  Turnover and training costs for this position are among the highest, due to the steep learning curve that comes with the complexity of disparate hotel systems. 

While we have enjoyed a period of relative prosperity, we take a closer look at our income statements and notice that our costs have been rising.  The annual increase in costs may soon surpass average RevPAR growth.  Labor and energy are leading the increases.  Maintenance costs, telecommunications costs and management fees may be due for a little inflation as well.  We find ourselves powerless to control these rising costs (no pun intended), and yet for every operational problem, a viable solution can be presented through improvements in technology.  The energy surcharges are not going to counteract the effects of rising energy costs.  Nothing short of stringent energy management controls and practices will allow those expense levels to return to historical levels. 

Go Tell It on the Mountain

It seems that everything reported in the hotel industry is a marketing event and new technology is no exception.  The information resources and well-documented articles are outnumbered and overshadowed by press releases.  These are the research tools on which your industry peers have been relying.  Personally, I’m a little tired of reading about “who is doing what” and more interested in what is working for whom and how they measured their results.  Anything that might be used as a true competitive advantage is not so readily shared.  Some of the best investment information is obtained through word of mouth or intensive research, yet some image-conscious companies respond very favorably to marketing ploys and gimmicks. 

Despite the proliferation of technology-related press releases, many hoteliers admit that their management staff doesn’t spend enough time learning about new technology.  At the recent Resort Management Conference in Vail, some of the most prominent hoteliers agreed that they do not spend enough money on technology, despite a robust bottom line and significant capital reserves. Unfortunately, there is no standard formula that could be applied to set our technology budgets accurately. In order to make realistic projections for technology capital, the overall business strategy must be evaluated.  After the business and technology requirements have been compiled and prioritized, then the budget can be determined.  While hoteliers may think this a potentially expensive and complex undertaking, seldom is concern shown for the cost of doing business inefficiently or the cost of maintaining outdated technology. 

Hopefully, we will have learned a few good lessons since last June.  Lots of bright ideas have been extinguished in the past year.  Others went out for good reason.  How was anyone to know what was a risky investment and what was even more risky?  Where do we stand on our technology initiatives?  And all those press releases we sent out… did we follow through with 100 percent of them?  Over the past decade we have made much smarter real estate investments, but have demonstrated increasingly risky behavior when considering and selecting new technology.  You wouldn’t build a hotel without a feasibility study, why would you invest in the technology that runs the operation if you didn’t have a strategy for using it to its fullest?   You wouldn’t make a real estate acquisition without performing some level of due diligence, so how can you justify a sizable technology investment without understanding the impact of the technology on the bottom line. 
Advancements in technology will continue, but that doesn’t mean all of them are going to fly.  Investment must be prudent.  You must do your homework and be willing to accept a moving target occasionally.  Educate yourselves, challenge your technology providers to raise the bar, understand that you will get what you pay for and most importantly, don’t bet the whole farm on one gardener’s advice.

Elizabeth Lauer is a senior technology strategist with HVS Technology Strategies, a division of HVS International. HVS International is the largest hospitality-specific consulting firm offering services to hotel owners, operators and financial institutions. She can be reached at (303) 443-3933 or elauer@hvsit.com.

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Contact:


Geneva Rinehart
Associate Editor
Hospitality Upgrade magazine 
and the Hospitality Upgrade.com website
http://www.hospitalityupgrade.com
grinehart@updateplus.com

 
Also See: A High Roller in the Game of System Integration / Elizabeth Lauer / Hospitality Upgrade Magazine / Spring 2001 
CAVEAT EMPTOR! Simple Steps to Selecting an E-procurement Solution / 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 
Choosing a Reservation Representation Company / John Burns / Hospitality Upgrade Magazine / Spring 2001 
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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