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Hospitality Technology Contracts
and Pitfalls
This article is from the Summer 2007 issue of Hospitality Upgrade magazine.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 (678) 802-5307 or e-mail.
By Raymond M. Asad, HRA. MBA.

Technology business contracts and negotiations can be challenging to meet all the needs of the buyer and the provider. The goal is to have a win-win situation where all parties involved clearly know and understand their responsibilities, long-term objectives and business circumstances. 

It is important to keep in mind that the success of your technology provider or supplier and their longevity in the market place will ensure your long-term support and success. Thus, negotiate with fairness by knowing the market and understanding the competitive arena. 

Whether you are purchasing a new property management system for one property or  several thousands properties, or purchasing GDS services, a CRM system, or a new key lock system all will require a legally binding contract of purchase and services.

It is crucial to have a deep understanding of your business objectives, circumstances and current situation financially and strategically before signing. Also equally as important is that your team and internal management supports and shares the objectives and strategy. 

Most contracts contain three or four components, sometimes more depending on the suite of products being purchased or the number of core third-party interfaced products.

There is the overall master agreement which contains all the terminology and definitions. It contains what is being purchased, what services are being provided, pricing, responsibilities, warranties, software licensing and other clauses that should cover everything you can think of. This is also the place where everything to meet your business and technology strategy and situation should be included and expressly written.

Depending on the physical location of the software being licensed will be delivered and reside will have an impact on taxes. If it is local to your property then local taxes will apply. If it is in a remote hosting location, then taxes will be based on the remote location tax rate. 

Two other contract common components are the service level agreement(SLA) and statement of work(SOW). It is imperative that the content of these two sub-agreements are not contradictory to the master agreement. The SLA provides service level standards and performance measurements by the vendor. The SLA contains more customer responsibilities as it did in the master agreement, so make certain to review all the customer responsibilities and that all can be met. Remember that the SLA promises are contingent upon meeting your responsibilities as well. 

If you are considering a purchase of a suite of products which are implemented at different times, review the support fee schedule and when support fees for which components are due. Support fees should only be charged on installed components.

Also, make sure to leave room open for renegotiating support fees on an annual basis depending on performance to the SLA, or perhaps growth of your organization.

The SOW should clearly detail every action to be completed by the vendor with an acceptable timeline. Again, review the responsibilities stated in this agreement for both parties and make sure that 1) You are able to fulfill your share of responsibilities. 2) That there are no contradictory statements to any of the other two agreements. Often times hardware specifications are provided within this section by the vendor. Make certain that these specs are sourceable from various providers and allow for technological changes and phase outs

Tip: In addition to remedies, contingency plans should also be included and agreed on in the SOW. Also, try to engage non-technical team members to look at the business operations angle. Operation members are very keen on their day to day needs and can be of great assistance in making certain the technology meets daily business needs.

The majority of the challenges that you�ll encounter will tend to be in the following different areas:

  1. Software and hardware support
  2. Working with third-party systems such as GDS interfaces, credit card processing
  3. Whose responsibility is it?
  4. Lost in translation between techs and business needs
  5. Training of staff and management teams
  6. Systems Infrastructure preparedness
  7. Negotiating contracts for international implementation
  8. Fees


Raymond M. Asad, HRA. MBA is a hospitality technology consultant with nearly 20 years of operations and IT management experience on an international level. He can be reached at [email protected] or by calling (714) 414-7252.

© Hospitality Upgrade, 2007. No reproduction or transmission without written permission.

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Geneva Rinehart 
Managing Editor 
Hospitality Upgrade magazine 
and the Hospitality Upgrade.com website
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Also See: The Online Metrics Handbook for Travel Marketers / by Cindy Estis Green for TIA and HSMAI / March 2007
Future Proofing Your Property / by John Burns / March 2007
Ask Not For Whom the Wedding Bell Tolls / Mergers and Acquisitions - Good for the Hospitality Industry? / Michael Schubach / March 2007
Hello, Front Desk? I Think I've Been Robbed!/ Nick Price / February 2007
The Personal Data Privacy & Security Act� Is Your Hotel Ready? / Rick Warner / October 2006
Hospitality Loyalty Programs; Strategies for Points-based, Recognition-based Programs / Mark Haley / October 2006
How Fast Do You Want to Go? Understanding the risks and costs with technology implementation and getting there too fast/ Ed Klein / October 2006
What's New in the Hotel Guestroom? Digital, HD or IP Televisions / Ashok Kumar / June 2006
A Future Vision for Hotel Revenue Management / Caryl Helsel and Kathleen Cullen / June 2006
Marketing to the Next Generation of Buyers; Scoring Your Hotel Reservations System / Debra Kristopson / June 2006
Consortia-Corporate-Group Best Available Rate (BAR): Good or Bad for Hotels? / Caryl Helsel / October 2005
Check In Kiosks: Coming to a Hotel Lobby Near You? / Jerry W. Sheldon / October 2005
Moving into Compliance Mode; Realizing the Benefits, Cutting the Costs / Dorian Cougias / March 2005
What Hoteliers Need to Know About Flat Panel and HDTVs / Jake Buckstead / March 2005
10 Trends Affecting Hospitality IT in 2005 / Bradford Iverson / March 2005
Searching for Bookings? Optimize / Dr. Matthew Dunn / August 2004
Instant Messaging: Age Is Everything - Expectations of Immediacy, Productivy and the Rise of IM / Elizabeth L. Ivey / August 2004
Baby It's Cold Outside the Firewall / Michael Schubach / April 2004
High Wired: The Hotel Room of the Future / Kelly Stanford / April 2004
We're Not In Kansas Anymore; Differentiating your hotel through technology / Mark Haley / January 2004
Understanding the Power of Customer Relationship Management / Neil Holm / Hospitality Upgrade Magazine / November 2003
The Case for Self Service in Hospitality / Marvin Erdly and Amitava Chatterjee / Hospitality Upgrade Magazine / October 2003
Five Questions to Ask Online Distributors / Michelle Peluso / Hospitality Upgrade Magazine / October 2003
Surf's Up - Internet Marketing for Destination Properties / Marvin Erdly and Amitava Chatterjee / Debra Kristopson / Hospitality Upgrade Magazine / October 2003
Wireless Changes Everything; So, do ya want a latte with that or what? / Jocelyn Valley / Hospitality Upgrade Magazine / June 2003
Customer Awareness or Customer Beware? Data Security in a CRM-Obsessed Industry / Elizabeth Ivey / Hospitality Upgrade Magazine / June 2003
Your Magnificent Selling Machine Would you Prefer Your Hotel to Get: the Web Hit or the Phone Call? / Robert Camastro / Hospitality Upgrade Magazine / June 2003
Tradeshows & Economic Soldiers / Dan Phillips / Hospitality Upgrade Magazine / April 2003
Hotel Telecommunications in the 21st Century / Geoff Griswold / Hospitality Upgrade Magazine / March 2003
The ABCs of CRM  / Mark Haley & Bill Watson / Hospitality Upgrade Magazine / March 2003
Getting the Most out of Your IT Investment / By: Clay B. Dickinson / Hospitality Upgrade Magazine / Fall 2002
The Role of Paper in a Digital World / By: Bill Fitzpatrick / Hospitality Upgrade Magazine / Fall 2002
The Rotten Pineapple (international symbol of hospitality) / By: Steve D'Erasmo / Hospitality Upgrade Magazine / Fall  2002
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Attention Hotels - An Ounce of Prevention is Worth a Pound of Cure / Elizabeth Lauer Ivey / Hospitality Upgrade Magazine / May 2002 
HOSTEC - EURHOTEC 2002 - Room for Improvement / Christel Dietzsch / Hospitality Upgrade Magazine / Feb 2002 
Technology and the Human Touch / Dan Phillips / Hospitality Upgrade Magazine / Spring 2002
Wireless Technology:  Where We Have Been, Where Are we Going? / Geneva Rinehart / Hospitality Upgrade Magazine / Spring 2002
Effective Customer Relationship Management (CRM) Implementations / John Schweisberger and Amitava Chatterjee, CHTP / Hospitality Upgrade Magazine / Fall 2001 
What's Up With Call Accounting Systems (CAS) / Dan Phillips / Hospitality Upgrade Magazine / Fall 2001
Technology Dilemmas: What have IT investments done for you lately? / Elizabeth Lauer / Hospitality Upgrade Magazine / Summer 2001
Full Circle from Centralized to ASP - The Resurrection of Old Themes and a Payment Solution / Gary Eng / Hospitality Upgrade Magazine / Summer 2001 
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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