Technology Roundtable

Technology's Impact On The Property

By Joan Marsan, Technology Editor -- HOTELS Magazine, 2/1/2000

Hoteliers around the world echo a common refrain.

They are in the business of pleasing people, serving guests, forming

relationships, and being first and foremost hospitable. In the past

decade, technology has steadily influenced the ways hospitality professionals

have performed these essential tasks. Many feared that technology

would detract from the hotelier’s

ability to offer the personal service that is the industry’s hallmark.

But other visionaries have seen that technological innovation

offers the opportunity to approach guests in new and exciting ways.

In the century to come, technology will have an

unimaginable impact on customer relationships. In part one of HOTELS’ 2000 Technology

Roundtable, eight operations and technology professionals keenly interested

in technology’s impact at the property level look at the ways

hotels are using technology to reach out to their customers

now, and how they plan to adapt for the future.

The Roundtable participants we gathered represent properties that compete

in the same urban market, Chicago. They face similar challenges, and

while they sometimes share outlook and approach, occasionally they offer

widely different attitudes towards technology, its function and its

execution in the hotel environment. Their discussion, presented here

verbatim in edited format, centered primarily on three hot topics: connectivity,

whether within the hotel or beyond; training employees to work within

an advanced technological environment; and anticipating and providing

the services guests expect.

The Roundtable convened in December in Chicago in the technologically

sophisticated boardroom of the Sutton Place Hotel. The group was joined

by Roundtable moderator and sponsor Rob Grimes, chairman and CEO of

Cyntergy Corp. Discussion was initiated by a series of questions posed

to participants by the moderator.

Participants engaged in an honest and provocative

discourse that clearly demonstrates the complex and controversial

nature of technology’s

impact on the industry. It is our hope that their experiences

and insights will help you navigate your way through the hi-tech Information

Age of this new millennium. Part II, to be published in the June issue,

will consist of discussions with corporate-level technology

professionals, the meeting for which will convene this month in Lausanne.

Q: What are the greatest technology challenges facing your properties

right now?

James Lingle: Internally, e-mail and what it has become. People cannot

operate without their e-mail, particularly sales people. Clients want

contracts by e-mail. They want instant communication, and for someone

within the hotel to be without that is a big issue.

Generally, I’d categorize problems in two areas. One is the things

we have to do on a daily basis, the support, making sure viruses aren’t

attacking our hotels. And then you have other big picture

things like integrating all the different technologies.

Rudolf Binggeli: Determining what the market needs or what the guests

need. There are a number of services that will become the standard in

the hospitality industry, but at this point, where things are thrown

left and right at people, it is very hard to determine which services

are really going to make it in the long run. On the other hand, we have

to make and prepare the investments required to be competitive.

Werner Schneider: A lot of the big issues are

related to the Internet, be it second and third phone lines in the

room, high-speed access, or video-conferencing in meeting rooms. I

think another big job for us is to train all of our people to use

this technology. You have to put a lot of emphasis on training. A

big challnege is we are doing things the old way and we don’t

effectively analyze how we do things to make greater use of the technology.

Michael Demir: Connectivity—from the guest room, to high-speed

Internet access to even employees that work at home, employees that

travel—that’s a big challenge for us. You don’t always

know what’s on the other side of the fence, how you get to that

person or how they get back to you. The second problem

we are looking at is knowledge management. How do you transfer some

of the knowledge that people have gained over the years through the

organization?

Melissa Fitzgerald: Probably the biggest challenge is our meeting room

space. Being new, we put T1 lines in 30% to 40% of our guest rooms.

We have the Internet through the TV, so guestroom-wise, we are up to

speed. But we need to develop our meeting room space so we can sell

it better.

Michael King: A lot of our challenges are based on Internet connectivity

to the guest rooms, retrofitting, and no high-speed connections in an

11-year-old property. Certainly older properties would be more of a

challenge.

Q: Let’s talk about in-room technology.

What do you already have in place? What do you think the room is going

to need to look like in the future, and what investments are you making

to get there?

Schneider: Internet connectivity is a big thing. Everybody is in the

process of getting that organized right now. I would say within a year,

I am sure probably 75% of hotels will have high speed connections in

their rooms. Once you have the Internet, it opens so many doors for

you and for the guests. Do you need TV Internet, or do you just need

PC Internet? Certain people might say TV is not needed. Like in Chicago,

we are looking at strictly the PC side at this stage because it is a

90% business hotel. But we have properties that are more leisure properties,

and for those we are looking at TV Internet.

Lingle: I think that’s a better way to look at it. What is your

market in the hotel you are trying to sell? Putting Web TV in a hotel

where 90% of the people who come have laptops is really ineffective

for those users. It’s not as easy for them to check their E-mail

and log in to their office to transfer files over or back. You have

to look at who your customer base is and most of your Internet users,

not all, but it’s my opinion that most of your Internet usage

is really business travelers. People who are there on

leisure probably have somewhere to go other than sit in the room and

surf Web TV all day long.

The other thing that should be a major consideration

is this building the infrastructure in order to bring the Internet

into the rooms. You know, Web TV makes it very easy because these

companies are able to use the existing cabling systems, coaxial cable,

to get Internet to the room. So the question is, what’s the

cost of building the infrastructure, and do you already have that

infrastructure in place?

Binggeli: It’s probably a question of where

the standard is moving. If the standard becomes every hotel in the

world has Internet access and you do not have it, you are probably

in trouble. The market is really determining where you are going with

your strategy. I believe the second phone is going to be one of the

standards because it gives you some advantages over high-speed Internet

access, such as direct dialing into a corporate network. With the

high-speed Internet access, only time will tell where we are going.

It is too early to say whether Web TV is going to persist. It has

its limitations.

Grimes: I might just share with you an observation. This hotel is a

business hotel, yet in my room where I stayed last night, I have a Game

Boy controller on top of the TV. Now, if we consider perhaps that the

games people play and the services they order, such things as movies

and food, can move to the Internet, then perhaps not controlling it

or not offering it through the TV gives away revenue.

Q: Those of you who

are offering or thinking about offering high-speed access, whether it’s

having cards in the hotels or otherwise, are you thinking about charging

for it?

Schneider: We hope everybody charges for it. There

are hotels that don’t charge, which is going to be a problem

down the road because it could become a basic amenity. Most of us

do contracts with outside companies on a commission structure basis

for investments and the hotel receives a commission. Hopefully that

model is the one that becomes the standard, rather than having the

hotels absorb it in their room rate.

Lingle: I think a lot of the revenue will come

from Internet access where your users get linked to somewhere. They

get on line and they go somewhere else and purchase something. You

as a company get a percentage back or a commission back on that. That’s

where the real money is to be made in Internet acces, not charging

some business traveler $10 a day in order to get on the Internet.

Binggeli: The thing is, even companies rolling

these systems out say usage is no more than 3% of occupied rooms in

a business hotel. If you are running a hotel that may have a higher

average age per guest or is more of a leisure hotel, you’re

dropping to 1%.

Grimes: There are some companies out there that

tried to charge an extra $15 or so for a business room that included

access, but you don’t

hear a lot about that anymore because of expectations.

Q: We’re still on the subject of the Internet.

How are you using the Internet for marketing and getting reservations?

Does anybody have a Web site specifically set up for your hotel?

Binggeli: We are not using a specific Web site for our hotel. We reserved

the domain at the Drake Hotel, but basically forward to Hilton.com.

One of the reasons for that is the Hilton.com site has extensive capability

to make bookings and guest histories. Feeding into our central reservation

system is something that we at an individual site would not be able

to provide.

Fitzgerald: Currently, you can’t get to House of Blues Hotel

by typing in House of Blues Hotel. If you type in House of Blues, you’re

going to get the entertainment venue rather than our hotel. That’s

just a conflict with the club. You have to type in Loews

Hotels and get through that way. Loews uses Priceline, QuickBook and

Travelscape. In the first quarter of next year, they are looking at

participating in StarCite.

Demir: We have a corporate-based Web, and what

they are really trying to do is present Four Seasons as a product

versus presenting Four Seasons Chicago. They keep this Web site updated,

and that’s kind of a

nice thing.

Lingle: For people who have the same flag on every

hotel they own, that’s important. Omni has a corporate Web site.

None of the hotels has their own individual site. A lot of sites have

unauthorized links, and content control is very important when you

are selling a product and selling a brand.

Q: So how are you specifically

marketing on the Web besides an affiliation with a brand? Are you posting

yourselves in certain places?

Kelly Wisecarver: I have been researching various

products that are out there on line, and what I feel is going to be

most effective is going for those sites that are specifically designed

for an end user, such as the meeting planning sites, and choosing

to be connected to a key word search, like Chicago hotels. Another

reason I choose sites that we are going on is their connectivity to

other sites. That’s

part of the beauty of marketing on the Internet. When

you have a small marketing budget to work with, if you research it

correctly, you can be on one site that will connect you to many, many

others globally and open your doors to new customers all over the

world. You also have the ability in many of these sites that you sign

up for to get actual quantitative results back. I can see how many

people looked at my site and see what e-mails came to me.

Q: What percentage of your marketing budget is allocated towards Internet

marketing?

Wisecarver: For 2000, it’s approximately 30% of the advertising

budget. When you are looking at the costs you spend on Internet marketing,

it’s usually an annual membership fee rather than one ad in the

newspaper costing you $2,200. You’ve got $3,000 for an entire

year’s worth of membership to this particular medium and you have

opportunities to build in things like having a quarterly announcement

on their e-mail that might go out to 17,000 meeting planners, and you

get a little banner ad once a year. Right now, it’s a buyer’s

market.

Q: How many of you are participating with one of the auction sites

out there? Do you see them as being a great advantage or are there limitations?

Fitzgerald: Control over inventory is a limitation using the sites.

King: We open them up for weekends when we are

very slow and occupancy is low. That’s where it helps with revenue,

but other than that, nothing too extensive. We normally will go $20

lower than our average weekend rate, and we get people through Priceline.com

using a higher rate.

Fitzgerald: We are a lot lower. If we really want

the reservations through them, we have to price it to the point where

Priceline isn’t

good enough, bring it up so much that we aren’t going to get anything

out of it.

Q: The majority of the people here today are not using auction sites.

Do you believe you will be using them in the next year or so?

Schneider: I think it’s more for the three-star motels. I don’t

see us using it.

Grimes: Let me throw out a point of consideration

on that. This started in the airline industry. The consolidators that

have been around for a long time in the airline and hotel industry

were around before the Priceline.coms. Yet you can get Concorde tickets

through consolidators and through some other discount methods out

there. I don’t know

if we compare a Concorde flight to a Four Seasons Hotel,

but the model is being set through others businesses that are out

there.

Demir: If you look at the airline industry, their

revenue management systems are way more sophisticated than the hotel

industry. I think that’s why they’re able to do that.

They know a lot more about their inventory control than the typical

hotel would.

Q: What percentage of reservations are your hotels getting from the

Internet?

Schneider: It’s still small. It’s interesting, in November

at the Vancouver property, our Internet reservations were the same as

our central voice reservations. We have seen a decline in voice and

a corresponding increase in Internet, but it’s still relatively

small.

Grimes: When was the last time you heard someone

promoting their phone number? They’re promoting their Web site, they’re promoting

everything else, but the phone number doesn’t get promoted.

Binggeli: I think in any given typical hotel

today, we’re not

going to exceed 1 or 1.5 percent of transient business in any way through

Internet bookings. If we talk again one year from now, we might see

a figure that is double or triple what it is now. I wouldn’t be

surprised if it was three times the number it is now.

Wisecarver: I think many people are unsure about

booking through the Internet and safety is still an issue. I think

people are using the Internet to get information about a hotel that

they’re going to

go visit or to find a hotel that they want to visit, but they’re

calling whatever phone number is advertised on that site to make that

reservation. And I know that’s true because so many people say, “Oh,

we looked you up on the Web and you look really nice.” But they

want to talk to a person. This is a human world. People want to talk

to someone. They want to have an affirmation that yes, this is a really

nice hotel and not some glitzy picture we put on the Internet. That’s

part of the difficulty in tracking the success of marketing

on the Internet or putting out your reservation abilities on the Internet.

Binggeli: On the other hand, let’s face one thing very clearly.

We’re sitting in the United States of America where mostly because

of the very low phone charges in the local market, the Internet was

able to explode drastically. If you go to many other parts of the world,

the Internet is not where we are today and it’s moving much, much

slower, mostly because people pay up to $50 for a local call for a single

hour. It’s not the charge of the Internet service provider in

these countries, it’s the phone charges. People are just not used

to using it and they’re reluctant to make a reservation through

the Internet. I guess it’s a matter of time again because a lot

of these markets have opened in the last few years, the monopolies have

been given away by the government, and AT&T and MCI are moving in.

But it’s going to take a while.

Grimes: Consumers seem to be a rather interesting

group of people. I think there are probably companies in the retail

space that felt they gave high customer service and they gave high

product, I can think of a couple of bookstores that thought that they

did. But they found that the consumers, if they can get the same end

product—the same hotel

room, the same whatever it might be—for a lower price, they may

be willing to sacrifice the personal touch. We may be setting up some

roadblocks to that right now by not buying into the Pricelines and other

people that will give them a better price. Customers may say, “You

know what, I got a cheaper price for it, I don’t need the personal

service.”

Schneider: Internet bookings will probably increase

if you feel you get a better deal through the Internet than you get

elsewhere. I think there are a lot of hotels that promote that now,

they have better rates through the Internet than you could get by

calling the hotel. I notice especially that resorts do this quite

a bit. I’m not sure the

business traveler uses those.

Lingle: I think one way you could increase Internet

bookings is through your meeting planners. I think every hotel in

the world negotiates rates. If you give your meeting planner the chance

to go onto your Web site and say, “I’d like to book a room for Bob Smith at the AT&T

rate for these nights.” That’s one way to increase the Internet

bookings without decreasing the personal relationships you have. You

still have your salespeople calling on these people, you’re just

providing them another avenue to book that business.

Q: A lot of hotels are financed by outside investors. How do you sell

technology purchases to the investment community? Do you face this as

a challenge?

Euskar Echeverria: I think the idea that traditionally

our revenue was based on banquets or space is changing rapidly. The

cost of power and all the materials—food, space and people—and the revenue

that the hotel gets, compared to a T-1 connection for a few days for

a company, it’s incredible. Companies and owners and investors

are realizing that it’s true, you have to make a big investment

initially, but then the revenue comes pretty easily compared

to the everyday operation of a banquet or a ballroom.

Schneider: Owners or investors will always ask

for the return on an investment. Sometimes we have a hard time convincing

them that by spending half a million dollars on this, it’s really a return. It’s

more if we don’t, what do we lose. And that becomes more difficult

talking to the owners because they want to see on paper

what they make and how much the profit will increase by spending the

money.

Q: So how are you budgeting for technology upgrades and enhancement

and replacement? Are you leasing your systems? How are you making sure

you stay current through your budgeting process?

Binggeli: It’s the same thing as regular maintenance, like engineering.

Things, items have a certain lifespan and you plan for it and you plan

for the replacement. The good thing for a hotel, looking at the individual

property, the needs are pretty static. Maybe over the last few years

a lot of people have been building up, but once you have your administrative

arm covered and you get all your workstations in place, you have the

service lines, you’ve got your guest rooms included, the needs

stay pretty static.

Fitzgerald: We’re lucky that we’re new. The biggest upgrade

we have is Delphi, so in the next two years, we don’t see any

huge expenditures until things start becoming obsolete, workstations

start deteriorating and having to be replaced, things like that. We

started the hotel with all these technology amenities so we’re

not looking to rewire.

Q: How long do you believe that your technology investments are going

to last?

Fitzgerald: Probably not for another two or three years will we have

to look at it again.

Schneider: Luckily technology is a lot cheaper

today than it used to be so we can afford to replace it more often.

Trying to standardize in a group of companies is really tough. By

the time you start and finish this project, before you finish, it’s

obsolete, so you never really get to a standard.

Lingle: And when you try to standardize across

a company like we’ve

done with our PMS system, 24 or 26 new PMS systems over the course of

the last three years, that’s a lot of money.

King: We do a three-year depreciation schedule as well and basically

replacement is pretty much on schedule with the PCs as well. Major systems,

pretty much, three to five years it seems.

Schneider: We’ve been traditionally buying things, but now we’re

looking more and more at leasing. You know, looking at three-year leases,

after three years, you give the thing back to them and get it replaced

so that you’ve maintained your equipment at least half decent.

You still have 386s in the hotels in some places. As

everybody is doing better today than 10 years ago financially, leasing

is more attractive from a financial perspective.

Q: What are your companies doing as far as recruiting hiring, training,

upgrading the knowledge skills of the people on the property in order

to be able to use the systems?

Demir: We’ve hired a trainer, and she’s concentrating mainly

on standards training at this point. We’ve also built a training

room and equipped it with computers. We’ll probably do computer-based

training for some of our systems and hands-on training for some of the

other systems that computer based training isn’t available for.

You put a lot of money into these systems and it’s important people

know how to use them to their capabilities. And when you get it out

there and they do learn how to use it, they become more creative and

it’s almost like adding value to what you bought.

Q: Are you creating a lot of your own material for this type of training

or are you buying packaged material?

Demir: It’s a combination of both. If it’s available, I

think we’d like to buy it, but if it’s not available, it’s

on us to prepare it ourselves. I think strong operational

procedural standards to a certain degree eliminate training or make

it much easier. We have strong company-wide standards and try to mostly

take advantage of that, recruiting from within, having people with a

very steep learning curve because they already know what the standards

are.

Lingle: It’s important a lot of times to look outside the hotel

world and try to find people who understand technology for technology’s

sake. They bring a different perspective into how you work and how you

support the users. I recently hired several people to fill out my team.

Several are internal and several are external, and the guys from outside

of the hotel business that worked for companies that provided support

really bring some good ideas to the table. You don’t get stuck

in that rut of, “This is the way we’ve always supported

this, so let’s continue to do that.” I think it’s

important we don’t limit ourselves to looking at the resumes of

people who have only done IT support at a hotel.

Schneider: I felt ultimately that when it comes to hiring an IT person,

I ended up saying the hotel guy is more beneficial to me because at

least he understands the hotel operation. I can train him in the IT

side more easily than I can train an IT guy in the hotel business.

Lingle: I kind of find it the opposite way, actually.

We’re not

a large enough company where I can bring somebody in at an entry-level

type position. I have to bring somebody in who has a certain level of

technical expertise. In my experience, it’s been a six- to nine-month

learning curve for someone who has no experience with the hotel industry

to come in and truly understand how every system is related, understanding

that when he takes down interfaces, nothing gets posted to the PMS for

charges. It’s easier for me to teach that to someone than it is

for me to teach them how to install a network card or how to install

software or something like that. It’s much less time-consuming

because they can go in and make an immediate impact,

which for me is important, at least at the size our company is and the

support level we require.

Schneider: I think it depends on how the company

perceives the role of IT. You can look at IT either as a maintenance

technical role, putting network cards in, setting up PCs, putting

a network in place, designing a network, setting up your Internet

service provider, that’s it.

Or you can look at IT as a consulting function, the link between IT

and the hotel operation, somebody who’s able to integrate IT and

give the operation strong benefit by improving operational procedures,

giving the operation an advantage. Now, how a company perceives that

is up to the company, but I think that defines the kind of person you’re

looking for.

Lingle: I think you need to perceive it as a bit

of a mesh between the two. That’s why I feel people coming from the outside can

provide us with a new insight, whether it be consulting about how you

set up your network, what things make it run better, what things make

it a more solid operation versus just going in and installing network

cards. I think you’re not going to get away from that part of

it because the only way to get away from it is to outsource

all your hardware work. And why are you hiring people with that capability

to turn around and spend double that to outsource all of your hardware

work? You can be a consultant, but you can also be a

technical individual.

Wisecarver: I think one of the things you also

have to remember is that all of the hotels have different systems.

This particular Chicago hotel market is very competitive for finding

any quality individuals to work for your property, let alone whether

they’re skilled in

any area of hospitality or IT. And your system is only as good as the

people who are using it. If the people continually change for whatever

reason, I don’t believe you ever get the full advantage of that

system. The ability to keep up with the training is a very big task

and one that I know we’re having difficulty just finding people

to train. Just keeping up with the actual training of all the users

is going to affect the technology and how we’ll be able to integrate

it into the hotel.

Echeverria: It’s very sad to say that I think training is the

very first thing to be out, whenever you’re running out of time

or money or whatever.

Q: Does everybody here know what HITIS (Hotel Industry Technology Integration

Standards) is? It is a technology initiative put forward to standardize

interfaces between systems. Are you aware of it, and to what extent

do you think it will have an impact on you, your jobs and your companies?

Do you think it is a good initiative?

Binggeli: I think it’s a great initiative as such. It will impact

the operation mostly through the products that are being offered and

the choice of products that we’re able to make, knowing that we’re

able to integrate them because they comply with the standard. I think

it’s a bit scary as to what companies are involved. Basically,

all the big companies out there, not hotel companies, but big IT companies,

are involved. We’ve got everyone from Sun to Microsoft and back.

While this has a great advantage in terms of knowledge

transfer, it also has the disadvantage that everyone wants to get their

own little piece somewhere. They seem to be losing focus once in a while

and getting into a lot of detail.

It’s going to be a good selling tool for vendors. They can say, “I

comply with the standards,” and you have another piece of equipment

that’s complying. It’s going to give them a certain confidence

that you don’t have to worry about interfacing. Of course, there’s

going to be about 1,700 substandards that no one’s really complying

with..

Demir: Sometimes now if we have a problem with

two systems, one vendor says it’s on this side, the other vendor will say it’s on

the other side. If the standard is out there, you can look at it objectively

or even hire a consultant to say, “Hey, this is what’s going

on,” and then go from there on solving some problems. I think

it would aid in that regard. It helps you troubleshoot

the existing interfaces that you have.

Lingle: One of the concerns I would have is we’re putting ourselves

in a little box that says this is what we can do. So many hotels have

a hodgepodge of technology and I don’t think it’s going

to be an easy thing to make them give that up any time soon to say, “I

comply.” Plus, is every vendor who a hotel does business with

going to be necessarily concerned with being compliant with the standards?

As a hotel company, I don’t want to limit myself to only one standard.

I want to limit myself to what gives me the best opportunity to serve

my guest. I don’t want to turn the hotel industry into Apple Computer,

to where you’ve got to buy these components or it’s not

going to work in your system.

Grimes: It’s been billed as something that will have a great

impact on the property level due to interfacing and the amount of money

that’s spent there. If in fact those that work at the corporate

or property levels are either unaware or don’t support it, you

don’t get the vendors to come on to it, and the standard doesn’t

happen. But if those in the industry are in support of this type of

initiative, then the vendors comply. They get on line and you won’t

have applications that are out there in the future going forward that

haven’t gotten the seal on the box.

Q: Would anyone like to share some closing thoughts before we end the

discussion?

Lingle: I think that

as IT professionals, it’s important for

us to understand one thing, and that is that for the

systems and the people we support, it’s all about the guest. In

everything we do, we need to make sure we focus on allowing these people

to serve our guest because our business is not a 10- by-10 room. Our

business is the person who’s in that 10-by-10 room, and it’s

important that we not lose sight of that.