More joy of tech
What's the problem?
According to HTNG, there are three fundamental problems with technology and hotels:
- Hotel companies don't acknowledge the importance of technology, and that has led to poor adoption of new systems.
- Suppliers don't work together enough to allow disparate systems to connect seamlessly with one another.
- The way hotel groups pay for technology causes many large technology suppliers to stay away from the industry
Just when the hotel industry thought it had enough problems to deal with, along comes another. Hotels, according to a new report, are so far behind comparable industries in their use of technology, that they are simply throwing money away.
The report, A Path to Achieving Next Generation Technology for the Hotel Industry, was written by a panel of consultants and experts known as Hotel Technology - Next Generation (HTNG), and was published in June. The group describes the report as a White Paper for the future of hotel technology, and a call to sort out a dilemma that has dogged the industry for years.
Dissatisfied
It begins with this bleak statement: "The hotel industry is fundamentally dissatisfied with the effectiveness of its current technology options and their ability to satisfy future business needs."
Considering that the hotel industry spends an estimated $25b (£16b) a year on technology, a lot of money is being spent on equipment that doesn't do what it should.
So what exactly is the problem? The report sums it up with three simple points: a lack of understanding is leading to a poor take-up rate of new technologies; the way hotels finance technology is flawed; and companies that make the stuff are all working separately, so linking different systems with another is tricky.
"We're just not moving forward as an industry," says consultant Mac Smith, one of the report's authors. "Hotels have invested a lot of money in technology, but it has been very fragmented. Consequently, they haven't really got the benefits from it that they should."
Smith describes the typical implementation of hotel technology as "DIY". A hotel buys a property management system from one supplier, a reservations system from another, a switchboard from another, and so on. All work in different ways and it's up to the hotelier to get them to interact.
"Interoperability of systems, with a few notable exceptions, has been an elusive goal," sniffs the HTNG report.
Hilton International vice-president of IT, Jim Farrow, remarks: "It's all about the way vendors supply the technology, and the industry's unwillingness to adapt and deploy it. Over the years, we haven't collaborated as other industries have to manage the vendors proactively as a group, rather than as individuals.
"We all thought we were big enough to influence the suppliers from within, rather than band together to get general standards all suppliers could write to. What we've done is end up with a lot of fragmented systems that don't easily connect together."
The answer is in developing common standards, says the HTNG report. If hoteliers and suppliers get together and agree a common set of rules and technical standards, then hotels get the functionality they want and suppliers get to sell more.
It also seems that the hotel industry is not alone in experiencing problems; other industries have been through the same difficulties but have managed to solve them. Banking, for example, is a highly fragmented business, yet customers are able to withdraw cash from their account using a different bank's ATM in another country.
Similarly, the retail industry is made up of small outlets, franchises and managers - just like hotels - yet there is consistency across technologies, such as electronic point of sale and supply systems. Both banking and retail have achieved consistency by developing industry standards with the support of technology suppliers. Now products made by competing companies connect easily with one another. And that, says HTNG, is exactly what hotel industry needs to achieve.
So does the answer lie in bringing in experts from these areas? Hilton's Farrow has mixed feelings: "We all need to recognise that other industries have moved forward quicker than us," he says. "But there have been occasions when experts have been bought in from other industries and they have suffered because standards such as those being proposed don't exist. We need more external input, but must be careful in how we use it."
Paying the price Developing standards and working with suppliers to build systems everyone can use is all very well, but there's another hurdle hotels face when it comes to technology: paying for it.
The fragmented nature of the business means acquisition is uncoordinated. Most technology is paid for as a capital expense and spread across multiple budgets, meaning the purchase needs approval of owners, managers, franchisers and so on, all of which will have conflicting priorities.
This naturally puts off any supplier who fancies getting into the hotel market, as it's very difficult to pull off big deals that cover an entire organisation. Going to each individual hotel in a chain is just not cost-effective.
As the HTNG report points out: "This structure has led many of the largest technology players [IBM, EDS and Accenture], which have huge presences across many other industries, to abandon their attempts to establish a significant presence in the hotel industry."
The fact is that technology is expensive. To upgrade a single hotel can cost thousands of pounds, so it's hard to see how it can be anything other than a draining capital expenditure, especially if decision-makers have had their fingers burned by poor technology choices in the past.
But if industry standards are introduced, will technology start to be seen as an investment, rather than expenditure? "The person who is in charge of technology should report to board level, but often you find them reporting to the finance department," says Iype Abraham, head of IT for Radisson Edwardian.
"You always have this underlying matter of ‘who's paying for it?'. That really has to change for things to improve substantially. The question is, where does technology stand within the organisation and what value is put on it?"
In other words, the business argument for technology investment needs to be made, and that must start with the suppliers, according to Mark Selawry, vice-president of management services for Hilton & Ireland. "We need to help vendors make the business case," he says.
"Any supplier who's thinking of entering the hotel space would make great headway if it helped present the business case and properly defined the return on investment. It really does require us as an industry to work with vendors to try to tap into the right model."
The future
The HTNG report sets out criteria (see left), which both hoteliers and suppliers can develop together to move the industry forward. But that requires the support, some of it financial, of the companies involved.
"Organisations such as ours need to accept the need for this approach and buy into it on a very senior level for us to create enough resource to contribute proactively," says Hilton International's Farrow.
He adds: "There is evidence from other industries that shows improvements can be made by working together as an industry."
The HTNG as a body was set-up to put down on paper what the problems were and suggest solutions, rather than implement any change.
"If, for the next five to 10 years, we do what we've done for the past five to 10 years, then we will not have helped our industry at all," says Mac Smith. "It needs the hoteliers, not the IT men, to say ‘if I'm investing that amount of money, we need to make sure we're spending it in exactly the right way'."
And as the report concludes, the real answer is a very personal one. "We simply need to do it."
What the hotel industry needs to do
The HTNG report points the blame at the hotel industry for its own problems. "Many of the challenges in the hotel technology arena have been created by policies and practices of hotel companies themselves," it says. But it contains a number of detailed actions the hotel industry needs to take to alleviate its technology problem. These include:
- Hotels need to improve the way they measure how much they need to spend on technology. For example, many of the costs are buried within the budgets of different departments and need to be classified by category (for example, infrastructure, sales, guest rooms) rather than the department that funds them.
- Companies need to create reserves of cash to spend on technology in the same way they do for physical infrastructure. They need to spend money on an ongoing basis to ensure a stable but evolving technology environment is not optional, but a cost of staying in business.
- Hotels need to budget for technology infrastructure independently of the applications that use it. The infrastructure is the wiring and workstations that will be shared by different applications, such as the central reservation system and the property management system.
- Recruit and employ qualified IT staff. There are many reasons why hotel technology has failed to deliver to its potential, but some may have been avoided if qualified IT personnel were on hand to maintain and repair it
Hotel Technology - Next Generation
Hotel Technology - Next Generation was set up in June this year by a group of nine industry technology experts representing hotel companies, consultants and academics. It discussed the state of hotel technology and came to the conclusion that "the current system is severely dysfunctional".
HTNG is a non-commercial organisation and is actively seeking endorsement from the industry to establish a list of technical standards that can be used across all hotel technologies.
A full copy of the group's report, A Path to Achieving Next Generation Technology for the Hotel Industry, can be seen on the HTNG Web site, www.htng.org.
