Bottom Line Weighs Heavy On Technology Investment

By Staff -- HOTELS Magazine, 6/1/2006

As hotels age, progress marches on, and every few years, hoteliers are faced with a range of potential back-end technology upgrades or investments. At the same time, as the latest and greatest guest-facing innovations hit the market, decisions must be made about exactly what constitutes necessary spending. How are such decisions made? According to New York University/PhoCusWright joint research on the effects of emerging technologies on the travel, tourism and hospitality marketplace, “travel companies are making decisions about technology investments with clear goals in mind and, in most cases, an established system for evaluating effectiveness.” The research shows that these decisions are made by a variety of individuals, but most often it comes down to the executive management team or the chief technology officer / chief information officer. Still, it’s never that simple—often there are conflicting priorities between brand, owner and property manager. And in the end, it’s all about who pays, as the No. 1 barrier to implementing new technology is budget, according to the NYU / PhoCusWright research.

To explore this decision-making process further, it is necessary to differentiate between technology refreshes and new projects. In terms of a technology refresh, a brand will often make capital recommendations that must be funded by hotel owners. “We draft a packet looking at individual technology components: the server for the property management system, desktops in the hotel. We provide expected lives for these technologies—say every 3-4 years, expect to fund replacements,” says Robert Bansfield, assistant vice president of information technology for Hyatt Hotels Corp. “We send [the packet] out every year, but also put out a 10-year forecast every so often. There are always surprises—the cost of PCI compliance, for example. But corporate Hyatt puts reserves of capital aside [to help] with unanticipated expenses.”

As for new technology projects, Bansfield says Hyatt has an IT steering committee with representatives from operations, marketing, finance and IT who evaluate brand-wide proposals. The usual process involves a plan being presented and a case being made that includes costs and expected returns. “We look for hard return on investment (ROI) numbers—not leaps of faith,” he says. Once a decision is made to move forward from a brand perspective, the next step is convincing franchisees to add the technology, which often requires a capital investment by the hotel owner. Because of this, the brand must make a compelling case showing the rationale behind the decision, including why the technology is valuable and what the ROI will be, Bansfield says. The ROI component is key, as some 84% of NYU/PhoCusWright survey respondents cited ROI as the most effective metric for evaluating the effectiveness of their technology.

Kenneth Barnes, vice president of systems for White Lodging Services Corp., sums it up from a franchisee perspective: “We don’t want to be on the end of the curve, the last to implement brand technology. We want to stay consistent with the brand, but we need communication and a case for why it is important—like guest scores for building satisfaction, loyalty and revenue.”