| By Andrea J. Daly and Christian E. Hempell, Los Angeles - Summer
1998
As the World counts down to the year 2000 the alarm continues to sound
about the Y2K issue. That is the codeword for the change required in computer
software and chips to acknowledge the year 2000. With Y2K heralded as a
millennium time bomb, many people and hospitality companies are wondering
whether it is reason for panic. Or are consultants and vendors blowing
Y2K out of proportion?
The answer depends. Some companies may he in trouble. Where senior management
and general managers maintain an attitude of "It's not a problem
here" - it is definitely time to panic That is also the case for companies
whose leadership believes that, "It's a computer problem, and my IT Director
says it's covered." With less than ] 7 months left until Saturday, January
1, 2000, the time to make a company Y2K ready is quickly running out. However,
if your company is one of the many actively addressing the Y2K challenge,
the watchword is "steady as she goes."
Hospitality companies need to understand that Y2K is not merely a technology
challenge. It is a business issue. Y2K can potentially affect every part
of an operation or a guest's hotel experience. And even the best of precautions
taken at the property can be foiled. The breakdown of any supply source
of the hotel experience including airline traffic control, international
telephone networks, reservation systems, supplier computer systems, ATM
machines and energy supply could mitigate diligent Y2K preparation by management.
If technology is a business enabler, then a technology problem such as
Y2K can become a business disabler. The business question to explore is
not whether the PMS or POS system is Y2K compliant. Rather management needs
to ask - "to what degree is the entire guest delivery experience insulated
from Y2K issues?" The ability of hospitality professionals to provide consistent
service and an excellent guest experience is not assured during the first
weeks or months of the year 2000. Furthermore, directors and managers of
hospitality organizations are potentially liable for problems generated
by Y2K issues. Legal analysts are predicting the hospitality industry may
be burdened with numerous legal proceedings if hotels do not take reasonable
steps to prevent service disruptions due to computer failures. All of these
issues make a realistic assessment of Y2K essential for every company in
the hospitality industry.
What is the Problem?
From a technical perspective, the Y2K issue is not complex. In most
cases, it is a simple matter of dates not processing correctly when used
in arithmetic calculations, data comparisons and sorting (sequencing) of
data. The Y2K challenge would be much easier to address if these arithmetic
processes simply caused the programs to fail. Unfortunately, the failures
usually result in the applications producing unpredictable results. which
are discovered only when the resulting business issues arise. A property's
operation is comprised of a maze of systems and interfaces. If any portion
of that operation is non-compliant, the possibility for problems and delivery
failures can occur throughout the property.
From a business perspective, the issues become more serious. Given that
hotel reservations are often made a year in advance, and even more so for
the millennium celebration, room blocks, availability and rate calculations
may appear to handle Y2K without issue, only to surprise operators with
zero balance folio printouts and long front desk lines. Emerging business
issues already include rejection of credit cards with a 2000 expiration
year. Customers are inquiring and demanding written Y2K compliance prior
to booking New Years celebrations. And the Securities and Exchange Commission
(SEC) is requiring hotel companies to disclose the state of Y2K readiness
and the cost associated with these measures. Not all hospitality companies
have accurately estimated the increased cost of Y2K compliance expenditures
for 1999, which can impact not only guests, but also shareholders.
The hospitality and gaming companies that are not Y2K ready can also
expect to see some of the following issues in their operations:
| Electronic guest door locks all closing, or opening. at once |
| Malfunctioning elevators, potentially trapping guests or forcing them
to walk stairs |
| Inability to process on-line credit card or banking transactions |
| Incorrectly calculated length of stay |
| Reservations booked for January 1900, rather than January 2000 |
| Slot machines that calculate they are 365+ days overdue for payout
on January I, 2000 |
| Supply channels that fail (i.e., interrupted deliveries) |
| Incorrectly processed financial applications such as payroll, accounts
receivable, accounts payable, etc. |
| Issues with guest database records, frequent guest programs, and mileage
accounting |
It is important to note these problems don't just apply to computer
software. Anything with an "embedded system" is suspect. An embedded system
is one in which a microprocessor is contained within the hardware. Microprocessors,
for example, run building elevators, and control heating. ventilating and
air conditioning. Hotels and other hospitality companies, as a result,
are highly vulnerable when it comes to embedded systems. Devices with embedded
software, almost all of which are found within a hospitality operation,
include those listed in Exhibit I.
Many Enterprises Have Done Little or Nothing
In a recent survey, Gartner Group, Inc. estimated that 25 percent of
companies surveyed bad not started their Y2K program Of the remaining 75
percent, most have completed only the initial phases of a Y2K initiative.
Why the slow response to such a grave problem? Some of the more interesting
reasons for not aggressively addressing the Y2K problem include:
| There's lots of time
to fix this, it's only 1998. |
With less than 17 months before
January 1,2000, many systems are already producing errors. The hospitality
industry will begin to see these issues in reservations during the next
few months. Although the majority of technology projects come in behind
schedule and over budget, the "go - live" date for Y2K compliance is truly
fixed. |
| It's such a simple problem, someone
will come up with a simple solution sooner or later. |
While many specialized tools have not been developed,
there is no silver bullet that will solve all our Y2K problems. Many hospitality
companies have software that is compliant, but system interfaces. spreadsheet
macros and guest databases may not be. With all the small system variations
that exist at the property level, the effects may not be catastrophic,
but likely annoying or serious. |
| Our core system is a package and
our vendor says it is Y2K compliant. |
Even if your vendor says your system is Y2K compliant
that doesn't make it so! If the package is important to your business testing
of the package is essential. It becomes a complete system issue including
hardware, software and interface components. There are literally hundreds
of combinations among POS, PMS, PBX, call accounting, purchasing,
inventory, group sales and electronic time clocks. These all need to be
tested. At a minimum, an increased level of capital expenditures in 1999
for hardware and software replacement may be required of owners to exterminate
the Y2K bug. |
| It's only a problem for mainframe
- based operations (e.g. S/370, S/36, S/38). |
Information systems applications are only the tip of
the iceberg. Any system with a microprocessor chip that handles dates is
suspect, including elevators, security systems, telephones, safes, etc.
Although very few mainframe computers still operate in the industry, these
additional chips are present and often are old enough to warrant a Y2K
replacement. |
| We'll cross the bridge when we
get there. |
Wait until January 1, 2000, and you run the risk of being
unable to do business, due to crashes and errors produced by your mission-critical
systems. There is also the associated litigation risk of being sued for
not having exercised "due diligence" in preparing your company for Y2K
The long lines at the front desk on that Saturday morning in January, and
every day thereafter, may be a large risk in terms of lost customers and
future market share. Are you willing to bet the farm? |
| We can always hire a Y2K consultant. |
The help wanted sections of newspapers are bulging with
ads seeking Y2K talent, and recruiters can hardly handle the influx of
calls requesting Y2K personnel Along with the shortage of talent, fees
have escalated as much as 25 percent in the past year, according to Gartner
Group, with further increases expected. |
| It's not my problem. |
Y2K is not simply a technology issue. It is a business
issue. The only 'safe harbor" available to directors and officers, who
are potentially liable for Y2K problems is a demonstrable effort to determine
the relevant facts and to implement appropriate responses. Although most
industry executives and property managers are aware of Y2K, the potential
for delivery failures may still be underestimated by many. Even with a
safe harbor, be aware the Y2K- related litigation has already started. |
| We've assigned a full time Y2K
project manager who has completed an impact assessment and is currently
implementing our Year 2000 Plan. |
Given the enterprise-wide impact of Y2K, implementing
the plan requires company- wide participation and support. Even if corporate
supported systems are being addressed, the real issue will occur at the
property level, resulting in various degrees of compliance, service failures
and response plans. For a company that has managed, owned, franchised and
marketing affiliated properties, the challenge of maintaining consistency
throughout the chain will be further increased. There is much to do in
implementing a Y2K plan. |
What should be done?
Solving the year 2000 problem in a hospitality business requires six
steps:
| 1. |
Awareness -senior management and property general managers
need to focus on the problem and realize the financial and technical impact
of Y2K. |
| 2. |
Responsibility - a board-level director should be given full and unambiguous
responsibility for coordinating the response to the problem. A Y2K Program
Office with a project manager should be established to manage the internal
and external resources needed to understand the implications of the problem
and achieve compliance. |
| 3. |
Analysis and planning - an inventory of all property and corporate
systems should be done to identify the impact of date routines on operations,
be it program code, hardware or an embedded system. This may involve testing
systems with a simulated Year 2000 date, scanning the program source code
(manually or with computer-based tools), contacting hardware and software
suppliers and seeking assurances, and finally, selecting and planning solutions
for each system affected. As indicated earlier, this analysis needs to
extend to areas outside the PMS and accounting programs to include all
embedded systems Assurances should be sought from key suppliers, whether
food and beverage or operating suppliers, that they are actively and seriously
considering the implications of Y2K, and have plans to achieve compliance
before the' deadline.
|
| 4. |
Modification or replacement -the affected programs should be modified
or replaced. as appropriate. The cost, as well as the time requirements,
should be reasonably estimated, with a cushion for testing and contingencies. |
| 5. |
Testing - the replaced/modified systems and other related systems need
to be tested to ensure they will work from the Year 2000 onward. Given
that testing initially requires the majority of time in Y2K compliance,
the need and resource commitment should not be underestimated. |
| 6. |
Implementation - if the changes are significant, the replaced/ modified
systems need documentation and user training to ensure successful implementation. |
Where are you now?
Given the scale of work required to fully address Y2K in most organizations,
the time left may only be enough to effect partial compliance in priority
systems, such as fire and life safety, PMS, reservations, and accounting
functions. For these properties or companies (possibly the majority), the
only solution will be a triage system, whereby hard decisions will need
to be taken on the relative priorities among the diverse business requirements.
The travel public's awareness of Y2K issues - and the potential for
financial and legal problems continue to grow' daily. The financial community
and even shareholders have stepped in to question companies' Y2K readiness.
In turn, this means hospitality companies must move quickly to understand
the impact of the Y2K situation and minimize its risk to guests, employees
and shareholders. Although preparing a company for the millennium change
is a daunting task, those that do implement compliance measures will create
an advantage over competitors who have done little or nothing.
Exhibit 1. Embedded
Software Devices
Air Cooling Heating
ATM
Automatic Call Distribution
Badge Reader
Bar Code Reader
Cafeteria Equipment
Cash Register
Cellular Phone
Check Scanner & Writer
C02 Level Monitor
Copier
Credit Card Scanner
Digital Phone
Door Control
Elevators & Escalators
Emergency Lighting
Encryption Device
Environmental Systems
Fax Machine
Fire Alarm |
Generator
Guard Station Electronics
Humidity Control
Interactive Voice Response
Lab Equipment
LED Panel
Lighting
Mail Sorter and Inserter
Metal Scanner
Microwave Equipment
Optical Character Reader
Pagers
PBX
Postage Meter
Power Management System
Predictive Dialer
Printer
Programmable Thermostat
Projector
Router |
Safe
Satellite Equipment
Scale
Scanner Secured Door
Secured Gate
Telephone Switch
Speaker Device
Sprinkler Systems
Security System
Timers
UPS (Uninterruptable Power Supply)
Vault
VCR
Vending Machine
Video Conference Equipment
Water Cooling
Water Heating
Water Detection System
Water Purification |
Andrea J. Daly is a Senior Manager in Arthur Andersen's Business
Consulting practice in Los Angeles and consults with companies on Y2K issues.
Christian E. Hempell, also based in Los Angeles, is a Senior Consultant
in the Hospitality Consulting Practice.
©Arthur Andersen |
