Mr. Kohlmayr

Technology

Why Investing in Hospitality Technology is Investing in Good Business

By Klaus Kohlmayr, Senior Director - IDeaS Consulting, IDeaS Revenue Solutions

As the wider hospitality industry continues to face a slow recovery, savvy hotel owners and managers should be looking inwards during this time with a view to ensuring that the technology they use to help run their facilities are best suited for the roles they have to perform.

Whilst many international hotel organisations have used the economic downturn to adequately plan for the future through improved levels of technology and staff investment, many others are not heeding the warning signs and are instead shedding costs wherever possible – which can lead to disastrous consequences.

No one knows for sure if the current ‘green shoots’ being reported in the media will lead to a rapid or sustained economic recovery, but all pundits agree that there is definitely some recovery and eventually the situation will improve. Will markets return to normal? The question to ask is what’s normal in the post GFC era? ‘Normal’ in 1996 meant something completely different to ‘Normal’ in 2006.

Progressive hospitality organisations that have currently heeded the warning signs that dynamic markets and changing industry requirements are part of the new ‘normal,’ and have taken the time to update or invest in the right technology and training, will be better placed to effectively conduct business in the market place of 2010, 2011 and beyond. To quote Bob Dylan ‘The times they are a changin.’ Hoteliers across the globe need to ask themselves - what are they doing to position themselves for this?

In consideration of how investment in hospitality technology can support business growth, rather than being an added cost, or unnecessary financial burden, to a hotel – it is important to look at what operational efficiencies the technology can bring, including any improvements in staff activities and morale that can be delivered and how the technology will ultimately benefit the hotels revenue performance.

There are many technologies that tick all of the above boxes, including:

• Energy Management Systems
  
• Revenue Management Systems
  
• Property Management Systems
  
• In-Room Technology
  
• Sophisticated Telco Systems

Consider Revenue Management Technology: This technology is used in a wide variety of industries. In hospitality it is used to provide analytics that will increase rates and occupancy, track historic data, forecast future demand and set room and package pricing. These systems have a strong track record of significant revenue and efficiency improvements. ASP (Software as a Service) delivered Revenue Management (RM) systems for hotel groups, chains and independent boutique hotels, an opportunity to improve their market position, reduce their carbon foot print, bind together the organisation with a deeper understanding of organizational goals, become more knowledgeable of market trends in the industry and ultimately improve their bottom line.

Equally as important, when considering whether to invest in new technology within the hospitality sector, is the need to recognize that technology is constantly changing and improving. Decision time frames are shortening. International hoteliers that have a good view on the future, realize that the technology decision they make today will only be relevant for the next 3-5 years at the most and are already planning next generation migrations. There is an onus on the vendors to also re-invent themselves and re-invent their technologies. The concept in 2009 – 2010 of having something ‘future proof’ is both outdated and naïve.

IDeaS experience in many regions to date is that there are many technology vendors in hospitality that fail to acknowledge the above reality. We are seeing more hotel groups gravitate to some of the international technology providers, which is also an emerging trend in developing economies like China.

As the hotel industry continues to move towards a more dynamic and inter-connected environment it is vital that the correct technology infrastructure is in place to meet this challenge. Technology must enable a seamless flow of process and procedure and decisions through all aspects of the business, thereby enabling a philosophy of managing by exception rather than on a day to day tactical basis.

It is also important to recognize the importance of managerial experience in rate-setting. Revenue Management Technology itself, while providing results, can be maximized by educating staff in the most effective ways to use it. A study conducted by Dr Lewis Lim at the Cornell-Nanyang Institute of Hospitality Management (CNI) in Singapore compared different styles of hotel revenue management. One viable style of revenue management involves actively employing data-driven IT tools, while insisting on human influence in rate-setting decisions.

Dr Russell Arthur Smith, Interim Dean of CNI states that, ‘While there’s merit to applying sophisticated technology to rate-setting, hotels should not neglect the value of human judgment and insight.’ Dr Lim elaborated that ‘Hotels make better rate- setting decisions when they effectively combine technology and human inputs. Besides being receptive to technological innovations, hotels need to be more nimble and experimental in pricing, and learn to deal with non-quantifiable concerns in price decision making.’

Importantly, hoteliers also need to realize that the hospitality industry is constantly changing and a lack of up-to-date technology and older strategies will not always be applicable to new, unique situations. For instance, with the increase in choice of distribution channels for a hotel, it is no longer appropriate to expect a Reservation or Revenue Manager to handle a multitude of manual Extranets to ensure revenue management and pricing integrity. Hoteliers are faced with the choice of having key resources spending hours per day updating these channels manually or create an environment where the implementation of any pricing decisions is largely automated and thereby freeing up these resources to focus on strategically important issues to enhance a Hotels performance.

Hotels that haven’t properly invested in updated technologies can find themselves under-prepared for the increased workload that comes with having to manually update rates according to information being received from multiple channels. In light of an increasingly technologically dependant operating environment, hotels that still manually alter room rates and various revenue strategies rather than having the right technology in place to do this for the, can find themselves lagging behind the competition - both in terms of meeting their revenue potential but also in their ability to deal with different periods of patronage.

Those hotel groups that fail to recognize the speed of change in technology and what this can bring to the business will find themselves significantly under prepared when the market starts to strengthen. While “its never too late” to act – there is a significant opportunity cost in doing nothing or worse still, cutting technology out of the day to day operations. For a hotel to effectively operate and ensure it is maximizing its incoming revenue, the right technologies needs to be in place. Through investing in the right technology at the right time, savvy hoteliers will be ensuring that their facility(s) are able to effectively maximize their ongoing revenue capability now and into the future.

Klaus Kohlmayr currently holds the position of Senior Director - IDeaS Consulting for IDeaS Revenue Solutions, the global leader in Hospitality Revenue Optimization. (www.ideas.com) He is responsible for leading and growing the revenue management consulting and advisory division assisting clients in the Hospitality and Travel sector worldwide to develop, implement and enhance best practice revenue optimization, pricing and forecasting strategies and tactics. Mr. Kohlmayr can be contacted at 612-840-3301 or Klaus.Kohlmayr@ideas.com Extended Bio...

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