Year 2000: A Business (Y2K) Issue
Where hotels are vulnerable - devices with embedded software
What should be done
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
Automatic Call Distribution 
Badge Reader
Bar Code Reader 
Cafeteria Equipment
Cash Register 
Cellular Phone
Check Scanner & Writer 
C02 Level Monitor
Credit Card Scanner 
Digital Phone 
Door Control
Elevators & Escalators 
Emergency Lighting
Encryption Device 
Environmental Systems
Fax Machine 
Fire Alarm 
Guard Station Electronics 
Humidity Control
Interactive Voice Response 
Lab Equipment
LED Panel 
Mail Sorter and Inserter 
Metal Scanner
Microwave Equipment
Optical Character Reader
Postage Meter
Power Management System
Predictive Dialer
Programmable Thermostat
Satellite Equipment
Scanner Secured Door
Secured Gate
Telephone Switch
Speaker Device
Sprinkler Systems
Security System
UPS (Uninterruptable Power Supply)
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 

Also See
The Battle for Electronic Shelf Space on the Global Distribution Network / Arthur Andersen / Summer 1998 
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