Real Estate Report
Published peridocially for professionals in the real estate and hospitality industry by KPMG LLP
Never before has the impact of technology been so significant in changing the way of doing business than it has in most recent years. Never before has technology been such a leveler in the competitive landscape as to enable new, small companies to so effectively compete with mature and established companies.
In this technology era, the hospitality industry has not kept pace with other industries in its technology use. While the hospitality industry had been a technology trendsetter in the previous decades with its sophisticated reservation systems, in the recent past its use of technology has been more stagnant. Hotel owners have frequently been more concerned with new carpeting and new paint for the hotel rather than new technologies. This is understandable because technology has been changing at such a rapid pace and jargons are so prevalent that it is hard for a hotel owner to perceive the real technology value and its impact on the operations of the hotel.
Hotel owners are consistently bombarded with technology vendors who have a new gadget that will solve all hotel problems and create immense profits. It is no wonder that hotel owners have become non-believers and have not been willing to invest in these technologies. At the same time the old systems that have been keeping the hotels running in the past are no longer sufficient to meet the new hotel operational needs, as well as customer demands. The costs of maintaining old technologies appear to be escalating. The old systems are becoming more expensive to maintain because they’re being stretched to their limits and kept together with a “band aid” approach. Furthermore, hotel guests have become a lot more technology savvy and expect more from their hotel stay. Also the existing disparate systems need to interact with each other to meet the hotel needs, and since these systems were not designed for the desired interaction, forcing this interface is both costly and time consumptive.
To effectively respond to the ever increasing customer needs, as well as maintain a competitive position and improve operations productivity and efficiency, hoteliers have no choice but to upgrade their systems and take advantage of the new technologies. Realizing this reality, hoteliers are faced with the decision of how to afford the significant investment that is required to attain the necessary technologies. These systems and technologies are often expensive and not easily affordable by the hotels.
Application Service Providers (ASPs) may be an answer for hoteliers
who are faced with these dilemmas. ASP is an approach to renting from third
party providers the amount of software and technology services that each
hotel or hotel company needs. This approach allows the hotels to obtain
the new systems and technologies that they need, often without making a
heavy upfront investment and with more manageable ongoing support and maintenance
costs. Hoteliers may also receive more favorable performance from the ASP
than from their own in house technical staff because they can demand the
terms and conditions that were agreed to in the service level agreement
(SLA) that they signed with the ASP.
The ASP will be responsible for providing the application, hardware, software, network, infra-structure, and customer support. The hardware, software, network, and infrastructure services are sometimes referred to as hosting services. There are various levels of customer support that span the initial reporting of the problem, including any business or environment - related issues such as “my printer does not work,” to problems with network, application, accessing the system, etc. The customer service levels covered are specifically addressed in the contracted SLA. SLA defines length of time to respond to, address, and resolve the various types of problems. Below is a sample definition of the various levels of customer service that are covered by ASP:
Among the most prevalent business applications supported by ASPs are the finance and accounting, human resources, payroll, procurement and customer relationship management systems. These systems have been available for a while by ASPs who are “horizontally” focused, meaning they provide their services across many industries rather than specialize in one single industry. The hospitality-specific applications, such as Central Reservation Systems (CRS), Property Management Systems (PMS), Revenue Management Systems (RMS), and Sales and Catering Systems, are new in their ASP form through a very small number of startup “vertical” ASPs specifically focused on the hospitality industry. It is expected that by mid-2001, there will be a number of comprehensive and viable hospitality - specific solution offerings available through ASPs.
Several of the largest hotel companies are already experimenting with the ASP model in a variety of ways. Based on early trends, ERP applications involving finance, accounting, and HR, appear to be the first applications under consideration for third-party ASP hosting and management. For hospitality-specific applications, such as PMS and RMS, several leading hotel companies are looking to third party ASPs for environment and applications hosting, but not applications management, which they intend to either keep in-house, or share the responsibility with applications software vendors. Another spin on this model is for large hotel companies to establish their own enterprisewide ASPs for centrally hosting and supporting business applications for their franchisees and managed business units. This is to facilitate new software rollouts, maintain better software version control, and eliminate the need to maintain servers and support staff at the property level.
This new ASP approach to obtaining technology services fulfills the needs of small, medium, and large hotels. However, similar to other technology usages, this concept is also new in the hospitality industry. Although some hotels are seriously pursing the ASP concept, many hoteliers are concerned with security and confidentiality of information. They want to keep their systems in their own premises and under their lock and key. They are afraid that if they do not control their own systems, they are exposed to information loss and systems problems. Until this myth is dispelled, the ASP model will meet with difficulty in gaining widespread industry acceptance as a viable solution.
The prevalent and widespread use of ASP can bring the technology renaissance
to the hospitality industry, propelling the industry to take advantage
of new systems and technologies and achieve the benefits of the new paradigm
that other industries are currently benefiting from. Now is the time for
the hospitality industry to assess the use of ASP and embrace it in the
areas that provide value for their business.
KPMG Consulting, LLC
Francis J. Nardozza, Managing Director
National Hospitality Industry Director
Tel. 305 913 2642
Fax. 305 381 6529
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