The big picture
If the chiefs of Hilton International want to know average achieved room rates, sales per employee or profit per guest across their entire portfolio, all they have to do is hit a button on their computer. No longer is collecting data from the company's various computer systems and analysing it a major operation.
The change is thanks to a software-driven technique called enterprise resource planning (ERP). Borrowed from large-scale manufacturing sectors (notably motor manufacturing and chemicals), ERP was developed in the early 1990s and is now being used by hotel groups such as Hilton International, Queens Moat Houses and Granada.
The ERP software automates the previously laborious job of pulling together all the performance data for an accounting period and allows management to view the whole business. This means, for example, that the chief executive and operations directors will be able to see a full set of trading accounts on their screens when they log in. General managers at individual hotels will see their hotel's results in detail, and managers in different departments will see what they have spent and the profits they have been making.
Until the advent of ERP, hotels had a good idea of what the guest was doing by pulling together information from the front desk, the bars and restaurants, minibars, in-house films and leisure facilities. But it would take weeks for the real impact on the hotel's bottom line to become apparent.
Reconciling the sales information from rooms and food and beverage divisions against the payroll and bought-in costs was historically a long job.
Ian Graham, director in the hospitality division of Arthur Andersen, rates the hotel industry's performance as "appalling" when it comes to bringing together financial results in a form that is accessible and useful to management. "We've got lots of small systems dotted around the business and data is held separately, and not necessarily complete. It might be pulled together once a month, if that," he says.
ERP does that job fast and efficiently, and has a host of added benefits. For example, it informs managers when payments need to be made and allows them to make purchases via the screen.
At the beginning of May, Queens Moat Houses implemented ERP in its UK and German hotels, using a system from German-based company SAP. Before that, it took QMH about a week to get company-wide accounts for all 80 hotels after the close of a month's accounting period.
"At the end of September, the results for UK and Germany were done in three days. We had draft group accounts in four days and the whole thing was finished in five," says Andrew Le Poidevin, finance director. His aim is to have hotel accounts completed accurately in two days.
Hotel chains don't disclose what they are spending on ERP, but it is likely to be at least £50,000 per hotel. Le Poidevin expects the SAP system in Queens Moat Houses to pay for itself in four to five years.
The benefit to Le Poidevin and his colleagues of having information collated so quickly is that the business as a whole can be managed more efficiently. And when a finance director talks about efficient management, he means control on costs and fast information about revenue.
Because it pulls together transactions from different departments, ERP can be tailored to individual company needs. Le Poidevin doesn't see any benefit, for example, in incorporating human resources information in ERP, so QMH will continue to outsource UK payroll to a bureau, ADP. But he does want to bring all food and beverage transactions and stock control into the system. "This is an area where we have to use the information to be more competitive," he says.
While Queens Moat Houses is using SAP software to pull together the information from all its applications into an ERP solution, Hilton International is building a solution by linking together its applications. Nigel Underwood, Hilton's senior vice-president for information technology, explains that the company has standardised the main application software it uses worldwide: Rezsolutions, supplied by Anasazi, for central reservations; Fidelio as the property management system; Oracle for its back-office finance systems; and a yield-management package from Ideas. The Oracle software is used to pull the information together.
Hilton's approach perhaps reflects another set of aims. "We see Hilton as being one global business, and all our processes should be adding value from a guest perspective. Every time we duplicate or check an activity, that adds cost rather than value," says Underwood.
When a guest telephones the central reservations office to reserve a bedroom, for example, it shouldn't be necessary for his details to be typed into the computer system more than once. Instead, guests' details go simultaneously into the central reservations system and the system of the hotel in which they will be staying.
"When they check in, their information is already there. When they check out, the information gets copied straight into the central financial system. And if they are corporate clients, their information goes into a corporate account so that if there's a bill to be paid the invoice goes to the company rather than their home," explains Underwood.
Having the information well organised is one thing. Using it effectively is when ERP comes in. As Underwood points out: "We want integration, but not at a lowest-common-denominator level - we want to be able to use it cleverly. For example, if we didn't know a particular guest's length of stay, it would impact on the yield that we get from the central reservations system and the property management system. It would affect the way we decide whether to take a particular reservation or not."
Because the information about each guest is copied both to the individual hotel system and a central database, it allows the sales and marketing department to target guests with offers of that they are likely to want, based on past experience.
ERP gives Le Poidevin or Underwood a quick snapshot of the whole of his company as it is now. In the next five years, Underwood sees Hilton giving suppliers and customers access to selected parts of the system, which he describes as "the virtual company".
Already some customers are collecting a good deal of the information about their next stay with Hilton via the Internet, and, although they like the human touch, he reckons many "would prefer to do 80% of the dialogue on-line". In some parts of Europe Hilton is doing some of its purchasing via the Internet and that will probably happen in the UK at some point.
The next stage is a big leap forward: let the suppliers into the system via the Internet and let them do the whole job. For example, Coca-Cola knows how many cans of Coke and Diet Coke should be in the minibars in Hilton's bedrooms. It's only a matter of time before Hilton delegates to Coca-Cola the job of monitoring their consumption and replenishing the stock.
