HOTELS' 2001 Worldwide Technology Survey, Part 2

By Staff -- HOTELS Magazine, 6/1/2001

In Part 1 of the HOTELS’ 2001 Worldwide Technology Survey, a

follow-up to a similar study published in 1998, we offered a look at

how hoteliers worldwide are using technology to enhance customer service.

When we surveyed hoteliers almost four years ago about their use of

technology, we discovered the industry’s IT professionals were

aching to make great gains. By 2000, many boasted the system-wide implementation

of technologies that improve customer and employee experiences. However,

not all properties and companies advance at the same pace. Differences

in location, in particular, have influenced the rate of adoption of

new technologies throughout the past decade. And while three years ago,

we noted disparities—at times large ones—between Asian,

European and North American technological adaptations,

the gaps are closing.

“The great divide that we had between North America, Europe and

Asia is narrower,” says John Burns, president, Hospitality Technology

Consulting, Scottsdale, Arizona. “We are in a world now where

the hospitality technology electronic newsletters are reaching everyone’s

desks simultaneously. The people who are allocating budgets understand

where the priorities are.” So here, in Part 2 of this two-part

series, we look region-by-region at how far the industry

has come in its efforts to use technology to assist with its efforts

to offer consistently excellent services around the globe, and we look

at how much further it will go.

About The Survey

The survey was conducted by the research department of Reed Business

Information, publishers of HOTELS magazine. A panel of 420 corporate

hotel chains and 1,534 individual properties were selected at random

to represent the worldwide hotel industry from international industry

association mailing lists and in-house databases.

Each participant received one of two four-page questionnaires and US$1

in payment. One survey was tailored to the corporate-based respondent

and one survey was tailored to the property-based respondent. Each questionnaire

asked 23 questions.

A total of 1,954 questionnaires were mailed between September 11-15,

2000. A total of 333 usable questionnaires were returned by December,

yielding a 17% response rate.

Results have been compared to those of a similar survey performed in

1997, the results of which were published in the February 1998 and June

1998 issues of HOTELS magazine. For that survey, 314 corporate hotel

chains and 1,820 individual properties were selected at random to represent

the worldwide hotel industry from international industry association

mailing lists and in-house databases. Again, each participant received

one of two questionnaires, tailored to corporate- or property-based

respondents, and US$1 in payment. A total of 2,134 questionnaires were

mailed on September 29, 1997. A total of 575 usable questionnaires were

returned, yielding a 27% response rate.

As we review responses by region in the text that follows, it is important

to note several points. Respondents vary in terms of market segment

and property size, and these differences can help to explain some variation

in spending patterns and types of technology used by hoteliers or offered

to guests. In Europe, for instance, 34% of hotels were independent,

while in North America 29% of hotels were independent. Independent hotels

do not receive the benefits of cost-reduced technology that the economies

of scale achieved by large hotel chains provide to their members. Nor

are they required, as many chain-affiliated hotels are, to offer certain

standard amenities, such as electronic locks. So, while European and

North American hoteliers report adopting guestroom technologies at different

rates in some categories, a fraction of the difference may result from

differences in property segment or size.

Note, however, that these character differences are largely the same

as those that typified our regional respondents when we surveyed them

in 1997. Therefore, the year by year comparisons reflect fairly accurate

changes in technologies offered, regardless of market segment or property

size.

North America Plays Catch-Up

North America lagged behind Asia and Europe in 1997 with respect to

the adoption of e-mail and the Internet. A mere 64% of respondents in

the United States used e-mail and/or the Internet for business purposes,

while 70% of Europeans and 81% of Asians reported using these systems.

In terms of Internet reservations capabilities, in 1997 U.S. respondents

gave a weak performance. Eighty-nine percent (89%) of survey respondents

from Asia already took reservations over the Internet or planned to

do so by 1999, while for Europeans the figure was 83% and for U.S. respondents

the number was 77%.

John Cahill, chief information officer, Manhattan

East Suite Hotels, New York, attributed the U.S. lag to a prevalent “telephone culture,” whereby

ubiquitous, inexpensive telecommunications rates from

domestic phone companies encouraged customers and employees alike

to phone first, rather than log in. Additionally, hotels had too much

invested in their PBX and GDS systems to advocate a switch to an alternative

product. Asian and European hoteliers, however, were eager to adopt

technologies that brought reprieve from astronomical long-distance

telephone rates and insufficient telecommunications infrastructures

that offered unreliable service. Furthermore, for independent or small-chain

hotels, more common in Europe than North America, even GDS services

were cost prohibitive, encouraging hoteliers to seek alternative means

for reaching a wider office.

Telecommunications are still cheaper in the United States than they

are in Europe or Asia. But the rapid, global adoption of the Internet

has shown hoteliers that they have no choice but to get online, wherever

they are based. As a result, almost 81% of North American hoteliers

in 2000 reported using e-mail and/or the Internet for business purposes,

compared with 89% of Asian respondents and 88% of European respondents.

And 75% of North American properties now report using the Internet to

take reservations. This compares to 72% of Asian hoteliers presently

taking Internet reservations and 75% of European hoteliers who report

taking Internet reservations. North America has caught up with the competition.

North American hoteliers have also made gains in their use of guest

history and database marketing systems. Among U.S. respondents in 1997,

only 58% used such systems, versus 68% in Europe and 78% in Asia. A

vast improvement in the ease of data collection made possible by the

Internet, however, has led to the increased use of customer recognition,

guest history and database marketing systems across the globe, and North

Americans have made gains in using these systems, reporting adoption

rates of 63%. Simultaneously, though, privacy concerns throughout the

world are increasing as more savvy customers recognize the value of

their personal information. Recognizing this, European governments have

passed laws restricting the collection and use of customer information,

thereby slowing the adoption of these types of systems on that continent,

with 70% of European respondents now reporting use of guest history

databases.

Asia still outpaces the pack, however, with 85%

of hoteliers there reporting the use of customer information and database

marketing systems. The reasons behind this, says Fraser Hickox, group

general manager, The Hong Kong and Shanghai Hotels, Ltd., Hong Kong,

is that Asian hoteliers, “perhaps

place greater emphasis on guest service technologies rather than management

efficiency technologies. Asia is much more service oriented and guests

need to be treated with greater respect, which is a cultural thing surrounding

face.” Hence, Asian hotel employees are more likely to be expected

to recognize guests and provide services in accordance with each individual

guests’ preferences, a practice made easier with the help of a

sophisticated guest history database.

Gains Around The Globe

In only three areas of technology use did U.S. respondents rank higher

than Asians and Europeans in 1997, and those categories were their use

of property management systems (PMSs), electronic locks and revenue/yield

management systems. In terms of PMSs, U.S. respondents were slightly

ahead of the Asians, with 87% and 82% use reported from these two groups

respectively. European respondents reported a 67% usage of these systems

in 1997, a figure that could have reflected the higher percentage of

independent and small-property operators in the region. By 2000, North

America was still ahead with 95% of respondents using PMSs, while curiously,

our findings show that 78% of both European and Asian respondents have

employed these systems. A change in the respondent population could

account for the majority of the drop in use demonstrated in these categories.

As the PMS systems and other types of operations-oriented

software installed by those hoteliers who have opted to employ them

become increasingly advanced, the type of operating systems hoteliers

use has shifted somewhat. A full 40% of both Asian and European respondents

were DOS users in 1997, as were 34% of U.S. respondents. In 2000,

those figures had dropped, with 26% of Asian, 17% of European, and

19% of North American respondents using DOS. Hoteliers shifted toward

Windows NT-based systems, widely perceived as more user-friendly—key

during times of high turnover and tight labor markets, when few can

afford extensive training sessions for new or inexperienced employees.

In 2000, fully 64% of North American, 63% of Asian and 59% of European

respondents reported using Windows NT operating systems, compared

with figures of 29%, 42% and 37%, respectively, in 1997.

Among users of electronic locking systems, U.S. respondents reported

66% use in 1997, versus 58% in Asia and 42% in Europe. Many U.S.-based

chains mandate the use of electronic locks, which could have explained

the higher rates. But the number of Americans traveling to other continents

and carrying their service and technology expectations with them helps

to explain the increase in these systems throughout Asia and Europe,

as well. Now fully 80% of North American respondents cited the use of

electronic locking systems at their properties, while 61% of both European

and Asian respondents noted the systems were operating at their properties.

Another 13% of Asian hoteliers stated they would be installing electronic

locking systems at their properties within 12 months.

U.S.-based respondents marginally outpaced Asian

and European hoteliers in 1997 with their use of revenue/yield management

systems, reporting a 40% usage rate of these systems, compared with

38% by Asians and 34% by Europeans. Hotel size, undoubtedly, explained

the lag, as only the largest hotels had integrated these systems.

But with usage of these systems rising, more hotels are compelled

to adopt them simply to keep up. This trend is mostly noticeable in

the United States, however. Hence, 34% of European hoteliers in 2000

reported using revenue/yield management systems, 41% of Asian respondents

reported using the systems, and North America, with 45% reporting

use of the systems continued to lead the way. This shows that intention

doesn’t always result in action,

as in 1997 a significant percentage of hoteliers’ reported that

they intended to install the systems—27% of Asian respondents,

25% of Europeans and 20% of Americans. Expectations dropped

somewhat, perhaps to a more realistic level, among those surveyed in

2000. Stating they would install the revenue/yield management systems

in the coming year were 17% of North American respondents, 26% of Asian

respondents and 14% of European respondents.

The technology that topped the wish list for hoteliers was the electronic

purchasing system. While few hoteliers reported possessing these systems

in 2000 (28% of North Americans and Asians, 13% of Europeans), 28% of

Asians planned to add an electronic purchasing system within one year,

while 22% of North Americans and 8% of Europeans revealed similar plans.

Europeans respondents surveyed here may be less interested in the programs

because, to a greater degree, they represent smaller, independent hotels.

The spirit of hospitality that defines the industry was strikingly

apparent in the 1997 rankings hoteliers assigned to factors they considered

to be most influential upon technology purchasing decisions. Respondents

across the board, in Asia, Europe and North America, ranked guest demand

the number one most influential factor. By the year 2000, however, the

tide had shifted somewhat, with only European hoteliers continuing to

rank guest demand as the top influence on technology purchasing decisions,

a trend that may continue with economies softening. The potential for

revenue generation, the second-place category for European hoteliers,

was the top influential factor among Asian and North American respondents

in 2000. Guest demand was a close second among those respondents. Cost

was the third most influential factor determining technology purchasing

decisions among respondents in Asia, Europe and North America, while

system compatibility was fourth, and physical infrastructure, certainly

an issue for operators of historical properties hoping to install wiring,

was cited as the fifth most influential factor.

Purchasing Patterns

Technology purchasing patterns have shifted somewhat,

influenced by several factors. “Asia-Pacific has slowed down because of the

soft economy in the Far East,” Burns says. “North America

has paralleled the soft economy,” he adds, but technology spending

patterns in 2000 had not yet shifted to reflect that

change, showing, instead, a slight increase. Fewer Asian and North American

hoteliers report spending levels in the highest categories on our survey.

While in 1997, 34% of property-level respondents in Asia had budgeted

more than US$100,000 toward technology spending for the next year, in

2000, 20% reported budgeting that much toward technology. Among U.S.

respondents in 1997, 28% budgeted US$100,000 toward technology, while

in 2000, that percentage was 33%.

The slowdown in spending on technology in Asia

could have greater implications than one might expect because Asian

hoteliers must also contend with higher technology costs, says Hickox. “The

concept that everything in Asia is much cheaper than the West is often

incorrect. The costs are still the same and in some cases higher.

We for example have to pay our senior engineers higher than a western

counterpart, but in return we gain greater output.”

Mitigating some of the effects of decreased spending

at the highest level is a decline among hoteliers reporting spending

at the lowest levels listed in the survey. While 27% of U.S., 23%

of Asian and 33% of European respondents at the property level in

1997 budgeted less than US$25,000 toward technology expenses, by 2000

those figures had decreased somewhat, with 19% of North American,

20% of Asian and 28% of European hoteliers reporting budgeting at

the less-than-US$25,000 level. At the corporate level, spending in

lowest category, less than 1% of budgets, decreased in Asia (from

27% in 1997 to 15% in 2000) and North America (from 41% in 1997 to

22% in 2000), but increased slightly in Europe (from 6% in 1997 to

10% in 2000). The responses suggest that while hoteliers may not be

willing or able to spend vast portions of their budgets on technology,

they are increasingly spending more on this important resource that

allows them to offer more consistent, efficient service to their top

priority—their guests.