Technology Roundtable
Technology's Impact On The Corporation
By Joan Marsan, Technology Editor -- HOTELS Magazine, 6/1/2000
Technology discussions often focus little on machinery
and a lot on information. The valuable byproduct of those cables and
chips, after all, is an incredible quantity of data ready to be transformed
into powerful knowledge. Technology specialists are rarely titled
solely “technology
officers.” Instead, they are information specialists, vice presidents
of knowledge technology, and directors of research and
development.
These technology gurus are positioned to shape
every hotel departments’ evolution.
They see firsthand the effects of changing distribution models. They
create systems that enable a more efficient, customer-sensitive service
for the guest. They turn every client interaction into a potential profit-enhancer.
They provide guests with more of what they want—hi-tech, high-touch
service.
In part two of HOTELS’ 2000 Technology Roundtable,
five corporate-level technology professionals share the high-impact
knowledge and ideas that will alter business practices and customer
behavior industry-wide. As in part one, they share their strategies
for adapting to the future.
The roundtable participants we gathered all specialize in information
technology. But they represent hotel companies with
a diverse array of interests. Their properties span the globe, and their
full spectrum of offerings range from budget stays to luxury suites.
Their discussion, presented here verbatim in edited format, illuminated
topics such as the simplification of on-property systems,
data and privacy management, the evolution of in-room
technological amenities, the cost of providing new
technology and the inevitable changes reshaping distribution.
The roundtable convened in February in Lausanne,
Switzerland at the Hotel Royal Savoy during the International Hotel & Restaurant Association’s
European Hospitality Technology Exhibition and Conference
(EURHOTEC). The group was joined by roundtable moderator and sponsor
Rob Grimes, chairman and CEO of CynterCorp, Rockville, Maryland. Discussion
was initiated by a series of questions posed to participants by the
moderator.
Participants presented and debated the ideas that
will determine technology’s
future impact on the hospitality 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 one of HOTELS’ 2000
Technology Roundtable was published in the February issue
and consisted of a discussion with property-level technology professionals
who met in December in Chicago.
Q: I thought we would start by going around the room, allowing everyone
to introduce themselves.
Hedwig Wassing: I am vice president of sales and marketing and communications
for Golden Tulip Hotels. We have about 370 hotels worldwide. We are
very much looking forward to the next generation of solutions and the
cost structure associated with it.
Willi Tinner: I am the vice president of information
technology of Swissôtel. Swissôtel has 20 hotels all over the world, and
last year we made the IT department a separate profit sector. Swissôtel
is our top client, and we still serve them in all aspects
of information technology. But we also are looking
for other opportunities within the hotel industry to get external
business. We are a 10-person staff, so the setup is quite big with
10 people for 20 hotels. We put a lot of effort into standardization
of the information technology architecture within our hotel group.
Scott Heintzeman: I am the vice-president of knowledge
technologies for the Carlson hospitality group.
We have about 600 hotels in 45 countries; 400 are Radisson properties,
and 200 are Country Inns & Suites.
We also have eight Regent hotels and seven cruise
ships, just to keep it fun and interesting. We take care of all of
the information technology for those hotels and reservation services,
as well as customer information systems.
John Cahill: I am CIO at Manhattan East Suite Hotels in New York City.
This is a new job for me this year. After 15 years with Intercontinental,
I joined this small, family-owned business. It is an all-suite hotel
company with 10 hotels all in midtown Manhattan, which offers a very
different set of challenges from what Scott endures. But there are some
challenges, nevertheless.
Fraser Hickox: I am with the Hong Kong and Shanghai Hotels, which operates
the Peninsula Hotel Group. I am the group research manager for the company.
I am responsible for the design of the technology for our hotels and
a research facility we operate where we handle all matters of technology,
from testing the weight of the pillows to the switching box on the rooms.
Q: What are the greatest technology challenges facing both your company
and the international marketplace?
Tinner: Today the dilemma is that we almost cannot find people anymore
who can support the complexity of the technology we have put in place
in each of the hotels. On the hotel level, we have realized we went
too far with implementing pieces of software and pieces of hardware.
We are looking to find ways to take this complexity away from the hotels
because the costs are rising and rising, and we need too many people
to support all the systems we have implemented. If you move back entire
applications to a data center where they are maintained by professionals,
you can reduce the skill set required on the hotel level, which also
means lower salary costs.
The other dilemma is getting more out of the data
we have available. In our company, 20 hotels worldwide,
we have databases in the hotels. We started to bleed the data together
using technology. In doing that, we realized that the quality of data
collected at the property level is bad. The next initiative was to
improve quality of data. Linking data quality into an incentive program
for the reservation managers and the front office managers worked
quite well. Now we have all the data in one central database in New
York—150,000 to
200,000 customer records. But we do not know how
to turn that into knowledge and how to use the data. The next step
will be to analyze or provide processes, methods and tools to analyze
data and to turn the results of this analysis into a one-to-one marketing
effort.
The third challenge, which is in the human area,
is to align business with IT. I think it’s somehow wrong if we just think, “How
can technology by itself improve within the whole hospitality industry?” I
am seeing now even more that it is a joint effort. Very often, a department—be
it marketing, be it human resources or be it finance —wants to
achieve something. Then they realize, “OK, we can do it this way.
But in order to do so, we need IT.” So this joint effort to
bring a project through the capital expenditure approval process
and to get the OK from the board is not a single action
anymore. It is not the CIO who goes for a project. It is not the vice
president of marketing who goes. We go together and try to push that
project through. Aligning business with IT and having clear responsibilities
within projects are big, big challenges we face in our group.
Hickox: The rate of change of technology is one
of our biggest challenges. We’ve got an expectation that, in the future, the wire infrastructure
will have to provide for as much of the hardware as it
can. I think Willi [Tinner]’s point was also very interesting,
having seen our company go through a central information
system that is only as good as the information being fed into it.
The most complicated piece of equipment is great, but unless the information
is captured in a set format and presented properly, it is a waste
of energy.
The other thing is, I think it’s important to have all departments
working with and having investment in the technology, as [Willi Tinner]
just said. Otherwise, you tend to find the IT person sitting out and
getting knocked on the head for wanting to spend too much money. And
everyone else takes one step back and says, “This is the IT guy’s
game.”
The technology is getting simpler in its end user applications. We
have to accept the fact that the people who are our end users are not
necessarily terribly qualified, and we have to make it simple and practical
for them.
A very typical example: A challenge we had in
one of our hotels was getting our front office staff
to smile at the guests while checking them in, rather than scowling
at the machine. There are some people that tend to scowl—not because they’re cross at the guests,
but because when they are doing something that requires a bit of mental
effort, they tend to scowl. Then they come back to the guest, and the
guest thinks, “Gosh, what have I done wrong?” So we put
smiling faces on the screens. They are a reminder.
Heintzeman: The hardest thing we have wrestled
with is integrating the use of information into
the actual work processes within the hotel. A piece of it is the complexity
of training, a piece of it is the complexity of systems, a piece of
it is trying to make use of the information that has been collected.
But if you really boil it down to the employee’s
perspective, it is the difficulty of folding the
collection of data and the use of information into the actual moment
of the work processes in the hotel. We know a lot about customers,
and we would like to use more of that information to improve our service
to customers. But it is quite hard to pull it through to the hands-on
application of the job.
Wassing: A major concern is making the organization aware from the
general manager level down that IT is a core competency for any manager
who has the potential to use data to deliver services to customers.
Also, proactively marketing IT products to customers is a challenge.
On the other hand, technological advancements will completely change
the distribution arena. If today I were to ask someone to make a list
of all the Web sites where our hotels are represented, they would probably
fall short by 80 percent. We are not in full control of the way we are
presented to the end consumer or the professional buyer, and we need
to get a grip on that.
The third thing is, new structures create great cost reduction opportunities,
and I have a strong feeling that the industry is not awake enough to
comprehend that and ask for its fair share. If we do not, all other
parties will be benefiting from our ignorance.
Hickox: I read something the other day that said the hotel industry
generally lags the airline industry by 5 to 10 years. The airlines seem
to be more capable of massaging this information effectively.
Wassing: There is a major difference. The airlines
always envied the hotels because the airlines only
got the passenger’s name, which
could be misspelled. So they had to introduce costly loyalty programs
to track their most important customers. The hotels have everything
about the customers—address, passbook numbers, the works—and
they do not use it.
Cahill: My situation is a little bit different
from what I’ve
been hearing from everybody, in that the strategic design of the technology
at the company has been centralized from the very beginning. At the
property level across the whole company, there is no finance and accounting,
there is no sales and marketing, there is no engineering and there is
no IT. The only thing out there, effectively, is a big client sitting
on the desk. It’s a single reservation system and a single PMS
with lines connecting everything back and forth. This enabled us to
do some things a little bit earlier than others in terms of the centralized
database, having single image inventory, last room availability and
a single point for reservations being made. Even if you call the hotel
directly, the call is immediately bounced back to the central office.
There is no way to get a room at the property itself, unless you walk
in at midnight and beg for it. Our challenge was: How do we exploit
the fact that we have all of this already in a very competitive city
where the rates were going through the roof? And how do you take advantage
of it? Several years ago, the decision was made to build a customer
database, and it’s been done with data captured from the very
beginning. What has happened now is that they are really
beginning to take advantage of what that information
is telling them, enabling them to yield the product better and deliver
it better to the customer.
We talked about the address being complete and
proper. It took a lot of incentives—including the grand
prize of a new Volkswagen car to an employee in a random drawing
last fall. A serious amount of effort in building this database
went into training and incentives for the employees to get it
all right, to the point now where between 85% and 90% of the records
of the last three years are complete from a mailable address standpoint.
And 79% of the guests in the database have their personal preferences
being gathered by the staff. The staff includes the front desk
people, the reservation agents, the bellmen, and the housekeepers.
Anybody who finds out anything fills out a special form. Because
they do that, their name goes in a hat for a drawing. There are
incentives up and down the line.
Rob Grimes: Who inputs that data?
Cahill: That is input at the front desk if it is generated at the property,
but it can be anybody because the system is totally centralized. So
every workstation has access not only to the database but has access
to getting information filed, though we try to control it a little bit.
It is an enviable position to be in.
Now our biggest problem is: How do you keep pace
with the expectations of the guests for the technology
amenities in the guest room? How far do you go and how much money
do you spend on what technologies, knowing full well that two years
from now, it’s
probably going to be obsolete and you are going
to have to do something else? How do you maximize the investment you
make? That is a serious challenge because it is extremely costly.
Although we put CAT-5 cable in an awful lot of
rooms, we can only do that during a major renovation.
To do it at any other time is prohibitive. So you wind up with a diversity
of connectivity issues from one building to another, which I find
personally annoying. We do not want guests to have to sit down and
read a how-to book in every bedroom because every technology is different.
So I think that challenge is there. And while you guys are looking
to take some of the technology out of the property itself, I’m looking to take it out of the corporate office
and give it away. I’m looking at ASPs [alternative service providers].
I want to sit back and manage the process rather than worry about keeping
systems running 24 hours a day, seven days a week. I think the guest
room is a problem, and I’d really love to give away all of the
hardware.
Q: With the cost of data getting cheaper, are we collecting too much
data right now or are we not collecting enough?
Cahill: One extreme is collecting every keystroke,
and the other extreme is what we did for most of
our lives—throwing
it all away or letting it all expire before ever
using it. I think we have reached the point where collection makes
sense. You are gathering everything you can, clean data on 90% of
the people who are staying at your building, right down to the stay
level. You have got the opportunity to do some great things from a
one-on-one marketing standpoint and understanding the guest preferences.
So as you renovate your rooms or deal with new potential amenities,
you know who your clients are and where they are coming from. You
can do your target advertising properly. There are so many things
you can do based on knowledge as opposed to intuitive guessing, which
is typically the way it has gone on for so long in this industry.
It is getting the coding structure right.
Hickox: I think at some hotels though, they do collect too much information.
I know at one of our properties, one of the general managers just about
writes a book on every guest, and it is impossible for anyone to react
to it.
We needed to limit the amount of information we kept. We know that
guests have specific requirements, and a very small minority of them
have very specific requirements, which we would ensure were in place
before he or she arrived. But there are these things that change from
one year to the next. We had to eliminate them from our collection process
because they were time-consuming, and no one could react to them. This
is a great challenge when you come from a hotel group like ours where
we like to treat the guests very specially. We try to go out of our
way to help with all the amenities.
Wassing: You are storing information about three entities. One is the
customer, one is the product and one is the channel. And with each entity,
most of the data is associated with the end relationship, an individual
transaction. You really get information you can use if you are able
to store relevant customer data (how long did you stay, how much did
you spend, which channel did you use, how many times did you contact
me to make one transaction, when was the contact) with which you can
cross-associate files. You can use the information to develop products.
You can develop the customer base. You know how many times the guest
used a product, what his lifetime as a customer will be, and what share
of business he will bring. Knowing all of this, you can optimize channels
to match preferences and economize.
Heintzeman: We have been very careful not to collect too much information.
I think today there is a real danger for companies to
collect too much information. We get rid of a lot of information we
believe is inappropriate to see. We do not save phone numbers people
dial, we do not save what movie you watched last night, and we do not
save details that we do not need. We only save what we need to serve
our customer and to understand how they bought and what they bought
in terms of a specific room product. I think it is important for us
as an industry to be respectful of what we know and only keep what is
appropriate.
Grimes: Your operations are a little bit different. You
have travel, restaurants, and many different things.
It would seem that you are probably collecting more
information and doing more cross-channel marketing programs than almost
anybody.
Heintzeman: We probably have a potential there that is untapped. Is
that a lost opportunity? Yes, somebody could say that. Are we concerned
about customer privacy? Definitely. We try to be very respectful of
what we know.
Grimes: What if you asked the customer in the
registration form, “Are
you OK with us sending you information on our cruise
opportunities?”
Heintzeman: We ask some of those questions from time
to time. But I think we have been coached on this a
bit from our hotels in Europe. There is a huge sensitivity to privacy,
so maybe we are a little overly sensitive on these issues. It is an
issue that has not caught full force in the United States yet, but I
think it will.
Grimes: Do you think privacy is being pushed by the international community
into the United States? A lot of the technologies for the hospitality
industry are pushed from the United States out, specifically some of
the Internet technologies. And all of a sudden, control of information
is not within the same groups it used to be. It is not the airlines
anymore, it is not the hotels anymore, it is these third party companies.
Heintzeman: Don’t misunderstand. We are
collecting information that can be used to help
me in my marketing effort directly around products or services that
a customer has purchased. If they want information about packages
or promotions that are destination-specific or information-specific,
we will collect that and push that back. And anything that I can capture
that helps me provide a direct service to that individual, I will.
Q: Will privacy issues present technological challenges in the international
market? Will we face a lot of regulation in the hospitality industry
because of the types of information we have available to us?
Wassing: I do not think so. I think there is a golden rule, which is
you cannot come to the limits of the law. You need to stop at the limits
of ethics. So anything you do with a customer that your customer is
not willing to accept, you should stay away from. And saving customer
knowledge within an operational course during a stay is quite normal.
To keep it a little bit longer after the stay to deal with complaints
is also quite normal. I think frequency analysis on customer behavior
is valuable to you and the customer. But you should be very careful
with using data later on. You should discard anything you do not need
or are not going to use in the future to keep your files small, simple
and useful to the customer and yourself.
Hickox: I think there are some sensitivities to the privacy issue,
particularly in our part of the world where different people from different
countries and around Asia are subjected to greater scrutiny from governments
than normal. They are a little cautious about these things. We are starting
to see, not so much in the hotel industry, but in industry as a total,
people becoming more aware of what data is being captured and how it
is being utilized. There are some things that people prefer to keep
very private.
Grimes: So your hotel in New York is collecting and using data differently
than a hotel in Asia?
Hickox: It is definitely different in different cities. We are very
aware of privacy issues, and we are spending a lot of time on them.
I think people are going to be concerned about how information is captured,
how it is processed, and the disciplines that are associated with its
control.
Heintzeman: And if it is resold.
Hickox: That is right. But beyond the resale, there is the political
side of it, as well, that is very important.
Q: How does the European directive on data protection affect the hotel
industry moving forward?
Wassing: I think I just gave the answer on that. We must stay in the
limit of ethics, which is much more strict than the limits of the law.
If the customer is not willing to share the information with you for
you to use, then you should not keep it. It is the same with the loyalty
programs of airlines. You subscribe to a program, you sign up for it,
and you agree to give your information. There is a clause saying they
only use information for a specific purpose. It is a trade-off: What
do I get back from releasing this information to another party?
If you go by law, you do not only have to say you are keeping this
data, but you also have to register centrally for what purpose you will
be using it. If you are using it for other purposes, then you are likely
to be sued.
Tinner: I think that is the key. We collect only
data that we use to serve guests better in our environment.
We already have some fields where, if the guest doesn’t want to respond, we do not punish
the guy and say, “You do not get an incentive because your data
quality is not good; guest declined.” What we are collecting right
now is preferences and mailing information, and we use that. We have
not yet faced any major problems with that. But maybe the trend is that
if you have given your data, and finally you can follow the trail and
find out where your data went, people’s sensitivity will definitely
decrease.
Q: Are hotel operators going to get rid of their control and let other
operators manage their technology?
Tinner: We are starting to bring that idea up to the people who own
us. I think it will take a long time. Individual owners, especially
in Asia, do not like to have things out of their control. But some argue
that if you could just join a group, plug in and use their technology,
it would be wonderful. There are pros and cons, but in some areas, it
would take a lot of convincing to get owners to buy into such an idea.
Hickox: There are other hotels that are outsourcing a lot of technology.
I would not say that we have not considered it, but the concern would
be the real liability of the provider of the service. I have just had
an instance of this in London in the last couple of weeks, where we
have a very small office. We found that every time something went wrong
with the network, we would get a different person in the door who would
make some major change, which then required a subsequent visit by somebody
else from the same company who made another major change. The problems
compounded.
There is a need to contract with a company that you can be very comfortable
with, that will be responsible for insuring that your product is running
reliably and that will respond immediately when you have a problem.
Telephones are a good example. Generally, the maintenance contract on
telephone PBXs says service technicians should be there within two hours
of a call. Sometimes we find these people caught the camel, and they
arrive quite a bit later, which is, of course, a problem. Another worry
with the computer is that if we lose the computer in the hotel overnight,
we have lost the vitals. It is really quite serious, particularly when
you are trying to check 700 guests out within two hours the next morning.
Grimes: But certainly there are other industries that could be modeled,
perhaps like the grocery store industry, that have the
same critical nature.
Hickox: Yes, except the grocery industry is checking
out a bunch of commodities collectively at one time,
whereas we are collecting transactions over a period
of time and have to report at one time. Also, we have urgency. Because
generally when guests check out, they are in a hurry to the airport
or wherever they are going, and they do not want to sit there while
someone is going through the vouchers.
Heintzeman: There is another difference, too. Depending on the size
of the hotel, there might be 10 to 20 different systems interfaced or
hubbed into that PMS. They are all woven together in a complex environment.
Having said that, the moment there is an outsourced, totally Webified
solution, I am going to let John [Cahill] try it first, and then I will
be right behind him.
Cahill: We are all talking about outsourcing the
technology that is in place today, that exists today.
I do not think years from now we are going to be looking at the same
models. I think things are just going to change so rapidly in the
next three to five years that paradigms we are working with now are
going to be obsolete. We are going to forget what it was like back
in “those days.”
Hickox: But you still would need somebody technical, whether it is
a thin client or Internet system. There still would be some technical
person to respond immediately when there is a problem.
Tinner: I also think that with today’s technology architecture,
it is probably not safe to outsource everything. But I think if you
analyze a PMS, there might be too much in today’s PMS. It is a
little customer information system, it has some accounts receivable
parts. So the PMS is overloaded in order just to support the check-in,
guest stay and checkout process. I think there is huge potential for
taking components out of today’s local area network and putting
those components in the back-end processes. I think
there will always be a local area network or a local computer environment,
similar to the airlines reservation system in a data
center. But the departure control system downloads essential information
just at the time of departure. Not all functionality must be available
on the property level that is available today. Taking some of this
functionality back to other systems may enable outsourcing potential.
Cahill: It is probably a wireless environment at that point in time,
so some of those black boxes that you are dealing with today become
a non-issue. The Internet becomes your transport medium. It has got
to be thoroughly reliable, not because somebody has to check somebody
out who is running to the airport, but because the whole economy of
this planet is going to depend on the uptime performance of these networks.
Wassing: I am quite confident that we will move
that way, but the primary importance of today’s backup systems
is to avoid the product failure of any one system.
In a future structure, it will be much easier and much less costly
to create security than it is today.
Cahill: We may have guests arriving with smartcards
in their wallets or lapel pins, emitting all of
their preferences and code for their room—where they are in
the building, what their preferences are. An incredible anticipatory
process is capable of being put in place in that wireless environment.
If everything we need to know about the guests is sitting in these
little pins they are wearing on their jackets, in my mind, that is
phenomenal.
Hickox: But what happens when that central process, or whatever it
is that is massaging the information, breaks down?
Cahill: That is a Y2K situation.
Grimes: But the general assumption is that the other technologies needed
to secure this network and keep it running are in place, and the backups
are in place?
Cahill: If somebody got the model right, they could effectively have
every hotel in New York City, for instance, on one processor.
Wassing: Look at CRSs. That is the case there. There are a few data
centers in the United States that run private label reservation services
for several companies out of one box.
Q: Where do we see in-room technology going?
Cahill: In one of our buildings, all of our rooms are wired for high-speed
Internet access. High-speed Internet connect capability is US$10 for
a 24-hour time period. Usage is less than 3% of occupied rooms on any
given weekday night and is entirely nonexistent on the weekend. In other
properties we have Web TV, which is more of a toy than a business tool,
and it gets significantly more use.
Heintzeman: Do you have all the rooms on high-speed Internet now?
Cahill: All the rooms in this one building, our newest building, are
high-speed wired. This is the only statistic I have. They have Web-TV
and a data port linked to a high-speed connection. Web-TV is free.
Heintzeman: Do you think the customer knows you have high-speed Internet
access?
Cahill: Yes. It has been marketed intensely.
Heintzeman: So usage is 3% with guests fully aware that the service
is available?
Hickox: If I could just share our New York experience:
Each one of our rooms is wired up for ISDN. We did
a survey amongst the guests leaving the hotel and asked them about
their usage. Twenty percent accessed the Internet while they were
staying in the hotel. In Kowloon, we actually measured this to some
degree. At 7 o’clock in the morning and
7 o’clock at night, there is very high usage. And at 4 o’clock
in the morning, when the Americans wake up, they read
their e-mail.
Of the 20% who accessed the Internet, 1%, if we were lucky, would even
consider modifying anything on their computer to enable another delivery
system because they had a tenuous relationship with their machine. They
do not want anybody to touch it. And if their machine does screw up,
then the IT fellow back at their office is going to be upset with them,
so they do not want to do anything. These systems are not delivering
what the guest is looking for. When people talk about high-speed access,
what is high-speed access? What speed are they really looking for, when
most people are walking around with their little modems in their machines
that are limited anyway?
Q: Let’s think in terms of the future and
consider higher-speed access movies on demand and phone calls.
Hickox: Certainly in a few years time, we will not even need the cabling
in the hotel room. We are looking at digital television coming out,
and the demonstrations I have seen in Australia and the UK are astounding.
I think it will change the way we watch television. I think it will
open up opportunities for us to communicate better with our offices.
Tinner: The travelers or guests who are on business and carry their
own equipment will become independent from any infrastructure because
mobile and wireless technology will provide them with faster access.
The hotel room is one place you want to do business. If you have long
waiting times at the airport, you want to do business there as well.
You may be in a conference room, there is a half-an-hour wait, and you
want to quickly look up your e-mail. Today, with the cellular phone,
you are very limited in your bandwidth, but that is going up. In one
or two years, you will see either integrated cards with antenna or hooked-up
telephones that provide you with fast access.
In the room, we have to somehow satisfy the leisure traveler or the
traveler who does not bring his own equipment. That goes in the direction
of Web-TV, with a display in the room where you can access the Web for
information gathering or for any purpose. More companies are Web-enabling
their applications so you do not need your own equipment, you just need
a Web browser to do business with your applications back home. I think
our focus will be to provide Internet access via the TV. It is not yet
an ideal situation.
Hickox: With flat definition TV, the resolution is there.
There is another challenge, too. SMS [short message system] technology.
This is going to do some major, major things. We are playing around
with this very actively in Hong Kong. Personally, I use this to send
messages to my children - one in England, one in Australia - from wherever
I am. It saves a fortune in phone calls, not to mention the fact that
I do not have to wake them up. We are experimenting with communicating,
booking, doing all sorts of things with this telephone. It was a bit
clumsy with the keyboard, but I am sure we will come up with some other
alternatives. There is already a fold-out keyboard available. Now we
are moving away from the Internet. We are not putting dot com on something.
We are really just doing it for a few pennies through the telephone.
Cahill: If you apply the things that Willi [Tinner]
and Fraser [Hickox] have just said to the high-definition
digital and the sound technology that is coming to the room, we have
already begun to see a downturn in revenue through the handset. It
is going to be very interesting to see what kinds of PBXs come out
in the next year or two. They are not going to have to be the full-service
technologies that they have grown to become over the last 10 or 15
years. The marriage of cellular technology, Web-TV, and high definition
technology is going to change the dynamics in that guestroom sooner
than many of us anticipate. I know we’ll
put CAT-5 cable into the rooms, and we’ll do it during renovations.
But I think the cost of doing that is outrageous for any returns that
are ever going to come from it. Many of us have done it because the
marketing people have done focus groups and said to the potential guest, “Would
you like to have high speed in the room?” And of course, guests
said yes. But nobody said, “How much are you willing to pay for
high speed in the room?” Nobody asked that question.
Grimes: And isn’t that the point, that maybe
people are not willing to pay at all?
Cahill: I think there is an element that is willing to pay for it.
Maybe for the moment, they have a high-powered use. Maybe they are getting
a massive PowerPoint file downloaded and the cell technology is still
not sufficient to handle it. Plugging into a data port is not going
to work either--it is going to run all day.
But we have started to do even more even for the people who are now
using the data port. Because they have dialed the 800 numbers to get
to their home networks, they have been doing it for free. So now we
are going charge for it, and we are going to drive that business away
again. I have not seen anybody sit down and wrestle with all of the
changes that have come into telecommunications, understand the impact
that is going to have and how we should change our business.
Hickox: Absolutely. The digital television is going to have a major
impact, and I do not think as an industry we have really thought it
through enough. With CAT-5 cable we are certainly preparing for it.
I think the advantage of the digital television is we can deliver more
services to guests, and the television becomes the delivery point. We
are actually experimenting with a whole lot of ideas in Hong Kong in
preparation for this. We know there will be a slow start. But once it
gains momentum, I think the use of digital television to watch television
is only secondary to some of the other opportunities that are going
to come about.
Tinner: We also are close to the time when we will consider throwing
out the PBX because the PBX is only there for telephony. At this time,
we still need the data access provided by the PBX. But why not use a
cell phone provider for the entire telephony for the hotel? Companies
in Europe make it possible. You are on a so-called closed user group,
and you get the hardware already for free. So why not go the interactive
way and get 500 cellular phones? If our guest checks in and wishes to
use hotel infrastructure for telephony, give him or her a cellular phone.
There are some challenges with theft and pricing. But these providers
are eager to enter in such an agreement. You have a closed user group
within the hotel, you can use the cell phone as an internal telephone,
and it does not cost you much. You can go into revenue-sharing model.
So I think we will see the PBX going away. Revenue is going down. Show
me the return on investment. This is becoming very, very difficult to
bring in.
Hickox: Another thing, maintenance is a major consideration.
Heintzeman: I think most guests would be quite
happy if they could have access to a modem jack
and a power plug for their laptop without having to crawl underneath
the bed, stand on their head and have three elbows to try and reach
behind the dresser. And it is so easy to do. You put a lamp on the
table. And in these lamps, there is a base with a power plug, and
you plug in the modem. The lamp costs you $50 or $100, and you’ve
solved 90% of the technology requests the customers have. It is just
not that complicated. But if you do not give the guests access to
those two plugs, they are not going to be happy with anything.
Hickox: I stayed in a hotel where they had something similar to that.
They had a master switch, and when you switched the master switch off,
it stopped charging the computer.
Grimes: I have heard that we need to provide these
things, and I have heard we should charge for it.
But I also heard a comment made about driving guests away from the
services we offer and the things they use, forcing them to go to the
cell carrier or somebody else who is going to give them a better deal.
If you look at the revenue generators—phone
access, television, even room service—in the hotel today, you
will see a pattern. A lot of these things can be accomplished over the
computer now or in the future. If people walk in with their laptops
and we do not solve their problems for them, they will be ordering the
movies, games, and even delivery service for food online, and we won’t
get a share of the profits. Are we going to be an industry
that ends up having to compete with each other by providing
free access and giving all this away? Or are we going to find a way
to control and offer that channel and set of products in order to
keep revenue in house? Somebody is going to make that money. If it
goes out-of-house, it may not be us.
Q: Is there a cost per customer for technology today, a different model
than what was being used in the past for figuring out technology costs?
Wassing: The model is there. I think we are implementing it from the
transaction point of view because that is the traditional environment
where we have collected all of our data. The next step is personal contacts,
voice contacts and Web contacts. If you talk channels, that is not just
one thing, it is a chain of interlinked priorities that finally presents
a product to a customer. The list of points of contact is going to be
more diverse and longer.
Hickox: If I could just throw in a few things. Telephone revenue has
fallen dramatically and will continue to fall. We are fortunate in some
of our hotels because we have people from Europe staying in the United
States who do not yet have cellular phones that work in America. But
that will change. The cost of maintaining the PBX is quite expensive,
and I doubt that we will really make much money out of it. It has gone
from being a profit center to being an amenity that has to be there.
Under the digital television environment, I do not think we will be
dealing with any one specific provider. I think our guests will have
the ability to dial up a number of providers. In fact, in America there
are several existing videotape-for-hire companies that are actively
pursuing different concepts. If they succeed, then we have got to try
and work out how we make the dollar out of it. Traditionally, hotels
have been greedy with the dollars they want to earn. The days of charging
a dollar for a facsimile call alienated the guests. I think we have
to be more discreet in what we charge and the premiums we put on things.
If we are discreet, the guest will still use the service. If we get
greedy, the guest will find alternatives. That is the key.
We also need to acknowledge that guests are much more aware about comparing
the cost of a service with what it costs in their own homes. For example,
if the Internet costs US$20 a month, guests have great problems paying
US$10 a day. And for video on demand, to watch substandard quality in
the room and pay for it when they go home and watch much higher quality
satellite TV, there is a fair amount of resistance. You are only as
good as the worst thing in the room. And if the television is a bit
shabby or if the quality of the picture is a bit shaky, that reflects
badly on everything else in the room. In our group, we have trod very
carefully in this area. I do not think we have it perfect yet. But we
are looking at the opportunities of digital television, and we are working
with a number of providers that the guests will dial in to. We will
try to influence it by getting rebates from the providers rather than
paying wide margins on top of the cost.
Wassing: I think there are two things that may help. People tend to
use things that are easy. Cost becomes secondary. Also, people tend
to accept cost more easily if it is disguised. I do not know how to
translate this to our problem, but definitely these are two parts of
the solution.
Hickox: In the Kowloon hotel, we give every guest free access to the
Internet, but that is included in the room rate.
Tinner: I think that is the way to go because if you pay certain room
rates, you expect that amenities are included.
With all of this focus on TV, we forgot one important thing that might
have a lifetime of only another two years. This is printing in the room.
Being able to print out what you receive, either if you work on Web-TV
or if you work with your notebook, is essential. I think that today,
some sort of print facility in the room is an important thing.
Hickox: So do you think the facsimile has got a long life?
Tinner: Not fax. If you are traveling and you get your latest update,
sales figures or whatever it is at three in the morning, you do not
want to go down to the business center to print. You want to do it in
your room.
Cahill: Your point is extremely well taken. We opened a property earlier
this year where every single room has a fax, copier, and printer built
into a workstation with a lamp and all the other things we talked about
before. Having that printer in the room is the single largest reason
guests issue positive comments.
Grimes: Are you charging for that?
Cahill: No.
Q: On an international basis, what is going to happen with distribution?
Are we going to continue to see it changing hands to new partners? Is
distribution going to become a one-to-one thing? Are the Pricelines
of the world going to dominate distribution?
Wassing: There are a lot of new entrants trying to establish a position
and take part of the money. Some will be successful, and some will disappear
again. The consumer has more and more alternatives, and as the distribution
parties are interested in satisfying the consumers, consumers also see
prices with a new transparency. They demand the best deal, and hotels
are not necessarily in the best position to accommodate their requests.
So there will be third parties who play a very important role in distributing
information and completing transactions.
Hickox: Ten years down the track, we are going
to have the so-called Y Generation, or the end
of the X Generation. There is a theory written about these people
and how they feel loyalty, which will not be there as it is with the
current generation. Younger people come from a computer-based education.
They say they want to come to Zurich, this is the number of dollars
they want to spend, this is the location where they want to be, and
they’ll book
it without a thought to brand. That will be where
the growth is.
Heintzeman: There is going to be massive consolidation
of the dot-com offerings that are out there today.
What the poor customers are going through today to figure out how
to book their own travel is unforgivable. It is a disaster. There
is a group of early adapters, and they are making heroic efforts today
to find a way to book travel, try online distribution channels and
use them. Fortunately, some of them are successful in actually making
this happen. But the fracturing of the distribution channels today
is going to be viewed tomorrow as unforgivable by the customers, and
this will force consolidation. There will be a handful of very, very
good and very comprehensive sites that are rich in information and
quite user-friendly, and they will become tomorrow’s GDS for
end consumers.
Grimes: It is interesting how, in our business,
things make this big circle and come around. Is
one of the hospitality companies going to get it right and, in fact,
become the portal for these communities of people? Perhaps it is not
going to be one of the outside providers out there. I think that for
a while, people were questioning AOL’s
existence and whether AOL was going to continue to
expand. And yet it has a community, if you will, as a portal. And
there are other portals. I think people were probably questioning
Yahoo. But now it is back as a community. Is there an opportunity?
Is that what we are going to turn into?
Wassing: It will not be obvious that the hospitality company is offering
it. Look at lastminute.com, one of the newcomers with a high potential
because we are very much into a last-minute lifestyle. Who are the investors
behind lastminute.com? Three of them are Starwood, Bass and Priceline.com.
Why would they invest in it? To secure future positions. Do they get
exclusivity for the channel? No. Do they want that? No.
Heintzeman: Exclusivity would kill the channel.
Grimes: But maybe they are redefining their business and what hospitality
is.
Wassing: I think it is a matter of reach versus
conversion. If you see the growth Internet bookings,
it is tenfold in 10 month’s
time, and even more for some channels. How is this
growth realized? It is not because channels like Travelocity and Expedia
are growing fast in their own right. The fact is
that channels merge, pile up and share a multiplying factor. Each
of the individual sites attracts its audience to the mega-site that
did not use the other sites previously. There is not a switching behavior.
It is just the same people plugging into bigger opportunities.
Heintzeman: It needs to be made simpler, more user-friendly. Customers
will load their personal profiles into the site they find meets their
needs consistently. Once you are recorded, it is easy. I can make a
one-click travel booking. I do not need to move my data, I become loyal
to those sites, and those sites become dominant.
Cahill: What you are talking about is an interim
step toward where it is ultimately going. Ultimately,
I am going to have a personal agent sitting on my wrist, which holds
my personal preferences, my life, experiential things that I love,
etc. If I want to go to Lausanne, I am going to hit it and say “Lausanne.” It
is going to know I want this airline, and it is going
to search all these non-exclusives, put together an itinerary and
deliver it back to me. I no longer have to find the right thing at
the right place and the right time by searching all these other potential
opportunities. Let the technology do it.
Wassing: But the broker of this information is the new major player.
Somebody has to be the broker.
Cahill: It may not be one.
Grimes: Do you believe those three or four major brokers exist today,
or do you think those three or four major brokers are going to emerge?
Hickox: I think they are partners in whatever is going to happen.
Cahill: If they do not emerge in the next year or so, then it is going
to be somebody who is already there. The entry cost is going to be too
high.
Heintzeman: Brands will play a huge part in this. There is no question.
Brands are key to this working properly, but it will be much simpler.
Wassing: There is still a place for branded, trusted parties who will
deliver our preferred products. The customization, one-to-one marketing
will be shared by these companies. Compare it with planning a trip.
Each one of us could plan a trip today and book it ourselves, but do
we? We ask a secretary to arrange it for us.
Hickox: That is our generation. What about the next generation?
Wassing: I think there will be fewer secretaries in the future, but
if somebody had a secretary, that secretary would still book the trip
because the problem with the alternative market is that there is nobody
to go back to when something goes wrong.
Grimes: But that is actually a problem today with
all applications and products out there. There
is a huge complaint of different products and services being brought
online, but if you have a question or problem, there’s nobody
to go to. That is something that obviously has to be solved.
Q: Is there more that the industry should do to support and promote
technology?
Tinner: I think it is important that our association sends exactly
the same signals to IT professionals or the technical community within
the industry, as well as to CEOs and CFOs within the industry. The technology
community within the hospitality industry has learned to articulate
ideas in business terms. And all parties need to understand the strategic
importance of information technology for their business because there
is more to it than just the technology. Aligning technology with the
rest of the business is the key issue.
Q: Any final general thoughts?
Hickox: We can only travel as fast as the guests will let us. Technology
is fantastic, and all of us are excited by the new things we see and
hear about. But we must be careful about putting the guests in the corner
and making them use technology in an environment they do not want to
live in. We have to travel at their speed. They are the people who are
paying the bills.
CynterCorp consists of a group of companies specializing in various
technology services for the hospitality industry. Cyntergy provides
professional services on a worldwide basis for multiunit clients in
the implementation, training and support of unit-based systems. CynterCon
provides technology consulting services to the hospitality industry.
CynterPubs publishes technology newsletters, and CynterShows is a company
that produces tradeshows.
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