Strategic Hospitality Technology Investment Chapter 11 Interview Hospitality industry is like the transportation industry: perishable inventories, narrow margins, and high guest service standards IT reporting to marketing or to the CEO (elevates it in terms of perception, prestige, and responsibility) Trend: Technologists incorporating higher-level business skills IT needs to be a horizontal resource that permeates throughout the entire company Metrics on technology are the same as the hotel business in general Walls between IT, operations, and marketing should be broken down (too often there is conflict) Talk to customers – What does the customer want? Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Interview Mike DiLeva Head of Hospitality Division Unisys Background in both operations and IT Technology needs to be looked at more strategically Hotel metrics can be applied to IT Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

1. Introduction It is not nearly as important to get “lots of functionality” as it is to get “the right functionality for your business.” Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

2. Reducing Expenses and Increasing Profits Reduce Cost Increase Revenue Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Decreased Expenses Staff reductions Cost of maintaining systems Eliminating waste Periodic maintenance systems Power control systems Fixed costs don’t usually go down, they are a unique cost structure, and some guest service requirements are not negotiable. Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Increased Gross Profit Not gross revenue Directly attributed to the new system Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

3. System Examples Yield management Restaurant menu management Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

4. Cash Flow and Costs ROI = (Increased Profits + Decreased Costs)/Investment Adjust for time and the cost of capital Additional costs of a new system Costs associated with the project Intangibles or “soft” benefits Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

5. System Selection Process Conceptual design for the enterprise Functional and system requirements Request for proposal (RFP) Vendor short list Solicit proposals Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

5. System Selection Process (cont.) Assess proposals against criteria Visit reference sites Vendor demonstrations Final selection Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Conceptual Design for the Enterprise Each application should fit into overall plan Functional operations (i.e. matrix) Eye towards the future End product: A list of component applications that will be required to create the entire information infrastructure and a solid ideas of the system architecture. Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Functional and System Requirements Don’t let management pick the new system Don’t automate inefficient processes Involvement from multiple departments or business units Clearly define exactly what you need Do some research Keep expectations in check Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Building Consensus Similar system installations in similar business units Refer to enterprise design Speak informally with vendors Master requirement list Think outside the box, but there are limits Prioritize Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Request for Proposal (RFP) Do not do “customization” on a fee basis Numbered outline (matrix) or format Clearly defined timetable Support issues Historic and forward-looking build schedule Cost information in the same format Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Vendor Short List Credibility Be careful about databases Request for information (RFI) Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Solicit Proposals Be realistic in regards to the time frame 8 weeks (4 weeks of just getting to know you) Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Assess Proposals Objective Scale: Each functional and system requirement Individual grade (independently) Sensitivity Analysis (Larger/Complex Projects) Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Visit Reference Sites Bring your prioritized requirements Install in accordance with schedule Supplied system in accordance with specified requirements Software and maintenance fees Reliable support Migrating and/or scaling Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Vendor Demonstrations Scripted with freestyle Don’t waste vendors’ time and money Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

Final Selection You have to be willing to walk away. Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

6. Implementation Project manager Set a schedule Establish a training system Meet with vendor (Steps 1-3) Stop and analyze (contingency plan and contact all stakeholders) Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

6. Implementation (cont.) Start implementation in one department Stop and analyze (monitoring all systems) Move on to the next department Stop and analyze again Rollout the system property wide Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458

7. Summary Business and Technology understanding needed New systems must either increase revenue or reduce costs ROI and RFP Follow process Technology Strategies for the Hospitality Industry © 2005 Pearson Education, Inc Nyheim, McFadden, & Connolly Upper Saddle River, New Jersey 07458