Systems in Harmony

28th February 2007 (Last Updated February 28th, 2007 18:30)

Hotel managers are failing to retrieve information on guest behaviour, simply because their IT systems cannot communicate. Peter O’Connor, Essec Business School, finds out what is being done to improve the situation.

Systems in Harmony

Computer systems have traditionally been considered problematic by many
hotel managers, who see them as expensive, difficult to use, ill-adapted to
hospitality operations and unreliable. Despite this, the use of IT in the hotel
industry has increased dramatically, and today almost every department has its
own system.

Property management systems (PMS), yield management systems and types of
reservation systems have helped increase front-office efficiency, while recipe
costing systems, EPOS and purchasing systems are making F&B management
easier. Guest services have been improved with telephones, televisions and
IP-based systems, which also generate extra revenue. And there are a variety of
accounting, personnel and marketing systems to support back-office and
administrative-support areas.

The hotel industry is becoming increasingly high-tech, with electronic
innovations from handheld computers to wireless communications now
commonplace.

TOO MANY COOKS

Although hotels have been quick to adopt leading technology, most are
standalone systems. This means that their full potential is not being realised.
All this IT capability would be much more powerful if it was connected to share
information. For example, recipe costing would be more accurate and useful if
up-to-date prices could be accessed from the stock control or purchasing
system. Similarly, security would be enhanced if auxiliary systems, such as
telephones and electronic door locks, were linked directly with the PMS.

While such benefits are fine in theory, they are difficult to achieve in
practice because each system uses a different technical standard. To overcome
this barrier, interfaces have been developed by PMS vendors or third-party
systems integrators. However, this results in expensive custom programming and
delays implementation. Interfacing problems cost the hotel industry millions of
pounds each year, without taking into account the frustration of getting them
developed.

An example by Dick Moore, formerly of the Cornell School of Hotel
Administration, illustrates the problem. When replacing the PMS of a
200-bedroom hotel, the hardware and software costs might cost around
£40,000. However, if the PMS is connected to several auxiliary systems,
then customised interfaces need to be developed for each system.

This can cost several thousand pounds each, which means connecting the
system can be as expensive as purchasing the system. And even when interfaces
have been developed, their reliability is questionable and problems are
difficult to resolve. The solution is to select a system where all the
components are provided by a single supplier. While this reduces the interface
development/ reliability issues, it also prevents hotels from selecting
best-of-breed applications and is thus not a popular strategy.

Vendors have been slow to resolve this problem, preferring to blame each
other when their systems do not communicate properly – and by locking
purchasers into a particular set of standards, they are guaranteed future sales
of upgrades, peripherals and support, as few customers are prepared to
relinquish their existing system to start all over again.

However, recent industry initiatives may help systems interface more easily.
The Hotel Technology Next Generation (HTNG) project, set up by a group of
international system vendors and hotel companies, is developing global
interface standards for hotel system communication, which will eventually
reduce the need to develop custom interfaces. Its aim is that vendors will
voluntarily conform to these standards.

This will allow any HTNG-compatible system to seamlessly exchange data with
any other. If this can be achieved, the dream of a fully integrated hotel
system may come true.

TURNING DATA INTO INFORMATION

The hotel industry has an almost unique level of access to customer data.
During the guest cycle, it collects vast amounts of data about where customers
come from, what their spending habits are and their likes and preferences. The
industry has been good at making use of this raw data.

” The hotel industry collects vast amounts of data about where customers come from, what their spending habits are and their likes and preferences.”

For example, the Ritz Carlton and the former Savoy Group have used excellent
guest-history systems for decades, determining the travel patterns and revenue
contributions of each guest, so that managers and staff can provide a highly
personalised level of service to frequent customers. And applying technology to
the system has made it a more efficient and cost-effective process.

Such access to high-quality guest data, coupled with low data storage costs
and the increased processing power available on the desktop, means hotels have
the potential to do much more than they did in the past. For example, instead
of recording the number of visits and total spend of frequent guests, many
hotels are now recording and analysing all guest transactions – a process
known as full folio storage – allowing accurate profiles of different
types of guests’ spending patterns to be established. This information
can be used in planning and implementing precisely targeted direct marketing
campaigns.

Hotel companies are also consolidating this data on a chain-wide basis to
gain further details about operations. Hilton Corporation’s OnQ system
integrates property-level PMSs, yield management systems and accounting systems
into a chain-wide database that improves performance by providing the company
with an accurate picture of how it is performing.

Every transaction that happens anywhere in the company is immediately
reflected in the centralised system, allowing managers to quickly adapt to
changing market conditions. It is this responsiveness, coupled with the
accuracy of its marketing campaigns, which will give Hilton a powerful
competitive advantage over other hotel companies in the future.

Although full, seamless integration is some way off, it is a goal worth
working towards, because it will not only eventually reduce IT implementation
costs and enhance system reliability, but also pave the way to greatly improved
data management.