Property Management Systems: Centralization Offers Advantages, Savings

By Derek Gale, Associate Editor -- HOTELS Magazine, 4/1/2006

Centralized systems, also known as application service provider (ASP) systems, hosted systems or software-as-a-service, where users access applications that exist off-property, are all the rage today. Why? Many reasons. First, they save hotels money on hardware, from servers to workstations. “Since centralized systems only require a browser or thin client application instead of a full PC software suite, workstations can be simpler and less expensive,” notes Jon Inge, an Edmonds, Washington-based consultant specializing in

property-level technology. In addition, they save hotels money on maintenance: With less equipment and off-site systems, fewer IT managers are needed. Not to mention that these systems—housed in vendor or vendor/third party joint data centers—often provide greater reliability, more consistent performance, better vendor support and better

security. And for multiple-property operations, the benefits of such systems are even greater, including major improvements in data consolidation and reporting, the ability to more quickly integrate new properties and even further cost savings. “A centralized approach allows resources to be

concentrated providing a more supportable and reliable environment with better data and

operational standardization,” Inge says.

For these reasons, InterContinental Hotels Group (IHG), Atlanta, opted to go with a centrally hosted property management system for its

Candlewood Suites extended-stay brand, choosing MICROS Systems Inc.’s OPERAXpress multi-property solution with extended-stay functionality. “We evaluated the best way of putting a new property management system into [the Candlewood Suites hotels that we manage,] and we determined that an ASP solution would be the right thing to do,” says Gustaaf Schrils, vice president of hotel technology services, Americas, IHG. “We realized that because of the scale (more than 75 hotels), we could save roughly US$15,000 per hotel if we deployed the system in an ASP environment. From maintenance, hardware and software, form and upgrade, and cost-effectiveness perspectives, it’s a great

environment to set up.”

But it’s never quite that simple. Because “a good ASP requires a great network,” IHG engaged AT&T to assist with its network design, Schrils notes. AT&T deployed a Multi-Protocol Label Switching (MPLS) network for IHG that prioritizes data traffic between the hotels and the property management application, ensuring application performance and uninterrupted communications. It also features an Internet Protocol Virtual Private Network (IP VPN) backup, so that “should anything happen, it will fail over using the VPN over the Internet,” Schrils says. The result is a highly reliable and secure network. “With the rapid expansion of broadband coverage, encryption and the adoption of virtual private networks, many centralized hotel systems work very well over the Internet,” Inge notes.

Another advantage of the IHG setup is that front-desk workstations at

individual properties now can have Internet access without compromising security, thanks to a built-in firewall and the latest anti-virus and definition files to keep the system safe. “Using AT&T’s advanced networking solutions and technical expertise, we have developed a highly efficient network platform that will likely become a model for the industry,” Schrils says. “The architecture we put together is the most cost-effective method of maintaining a secure environment while creating environment of flexibility for our operators.”

Rocco Forte Hotels, London, is another group ready to reap the benefits of a centrally hosted property management system. “Three years ago, we recognized that we had to make a move—we weren’t satisfied with our existing system,” says Richard Power, managing director, operations & brand marketing. “We saw

centralized hosting as a big opportunity.” A centralized application is more cost-effective, he notes, while also allowing for a higher-level of service through centralized data and guest profiles. After narrowing provider options to a short list, a team of about 15 front desk employees evaluated different systems, and the company chose protel’s multi-property edition based on its functionality, customizability and the company’s after-sales service promise, Power says. Rollout began in November, and more than half of the 11 Rocco Forte properties are now on board, with the full rollout expected to be complete by summer’s end.

As for the network architecture, “The central hardware sits in Milan with our supplier, and then we have a virtual private network that links all networks and key locations together,” Power says. “So we’re not reliant on a third-party telephone supplier.” The VPN is the company’s own that it set up previously to transmit data between all the hotels. “We have our own system, with a high degree of security, and our reserve system is through a third party, which most companies would buy as a first resource,” Power says. “A secure network is absolutely essential to central hosting because the box of tricks is a long way from the customer.”

Dealing With Franchisees

For large hotel brands, making the case for

centralization may not be the issue. The more

important question could be how to drive centralization to franchisees. “Our centralizing effort is mostly on managed hotels for IHG,” Schrils says. “Adding

franchisees is a real problem. Connectivity is key in an ASP environment for franchisees.”

Barry Shuler, senior vice president and chief technology officer, Marriott International, agrees. “Key is an on-property tier-able broadband network,” he says. As for selling franchisees on the centralization concept, “It reduces franchisees’ capital outlay. That’s good,” says Robert Bansfield, assistant vice president, information technology, Hyatt Hotels Corp. Adds Nick Price, chief technology officer, Mandarin Oriental Hotel Group, “It’s going to get more and more difficult to find, hire and retain IT people at the property level. It makes sense to say, ‘I’ll buy [this] as a service.’”

Direct comments to: derek.gale@reedbusiness.com