Back to the Future [of Hotel Technology]

At innRoad, we believe strongly that our industry is at a major inflection point in its technology and we’re intently focused on doing our part to lead the way forward. But as good stewards of the future and to understand where the industry is going, we need to first understand the past. So this week we’ll start by looking back at the history of hotel technology over the years in an attempt to do just that and follow-up in next week’s post to take it forward.

The History of Hotel Technology

From the beginning, it seems hotel technology has always been an afterthought. In fact, the very first systems to manage hotel inventory weren’t even built for hotels — the Global Distribution Systems (GDS) were originally built for managing airline reservations and only later adapted for hotel inventory. Then Online Travel Agencies (OTAs) sold airline tickets at the start, but now profit almost exclusively off hotels: in particular, independent hotels.

Even today’s Property Management Systems (PMSs) have outgrown their original purpose. The first PMS systems automated the posting of room charges and settled guest folios. Yes, refrigerator sized calculators. These legacy PMS systems have stubbornly held and even gained ground; they are sometimes referred to as the hotel’s central nervous system and or as “Guest Management Systems”.

… BUT DON’T FALL FOR IT. Ask yourself, how many hotel guests relish the opportunity to spend more time at the front desk?

…And Then Came the Internet

50% of all travel research today is done exclusively online, meaning no other source of information is even considered; full stop. “What about the other 50%?” stubborn laggards exclaim. While this 50% is ultimately consummated offline, even then most of this research is initiated online. The consumer shift to the internet has been consistent, thorough and perhaps most importantly, transformative.

In 2013, if you add up all room nights sold online (that is, on hotel websites, OTAs and the GDS) one out of every two room nights are sold and delivered electronically. This doesn’t include Voice through your CRS, which is sold on the phone, but also delivered electronically.

Now consider these statistics… Smartphones already outnumber PCs and Tablets will surpass PCs by 2015. Today mobile internet traffic just makes up about 20% of all web usage, but will rise rapidly, as will mobile eCommerce. Changes in how consumers consume and interact with data will necessarily change how hotels receive, interpret and deliver data.

The More Things Change, the More They Stay the Same

Yet, what hasn’t changed over the past decade are the systems hoteliers use. Most current Property Management Systems (PMSs) are in their teens. Here’s the reason why… for hotels reluctant to move forward, the internal processes around reservations haven’t changed much. Most Front Desk managers still see their roles as managing approximately the same number of reservations and guests per day, only different in that they arrive by new modes, namely email and fax. Their perceptions must change.

We’ve all seen the negative effects of manual data entry as reservations come pouring in through the faxes, emails and over the telephone; employees race to keep up. Guest facing resources get allocated to back office activities, front desk employees spend more time transcribing reservations, and moments of true customer service become less and less a priority.

An increasing number of front office staff sit in back rooms, up to their necks in reservations, ultimately leading to under-resourced front desks and missed opportunities, frustrating both guests and staff. (read more) And instead of reviewing the arrival list to identify VIPs, third shift duties are now spent identifying merchant and opaque reservations, followed by imperfect attempts to suppress guest room charges. What does your PMS system know about merchant or opaque reservations? (learn more)

But hotel managers attribute these problems to the increasingly fractured online distribution network created by an increasing number of online channels and focus new technology purchases on Channel Managers which aggregate these networks. This is a mistake.

Consumers are online, Hotels must be too

Hotels must meet guests where the guest wants to be, not where the hotel wants to be. The guest wants to be online, on their device, regardless whether they are home, at the office, or at the bus stop. In order to capture today’s opportunities, hotels need systems that are untethered from the front desk.

But instead of modern, intelligent and connected systems, hotels owners have just added more systems. They add layers of complication across disparate technologies and acronyms proliferate in abundance (think PMS, CRS, IBE, RMS, CMS) and they’re now adding Channel Managers… CMX anyone?

The PMS has become a giant repository of data – often with a tenuous interface to some systems and at worst it stands all alone, a relative black box of semi-actionable information. Finding relevant information in there is tough, but acting on that information in an efficient manner is often impossible, because those actions are unnecessarily spread across several other systems.

And beware of smoke screens; the PMS is a relic and has outlived its useful purpose. If your strategy for the future revolves around your PMS vendor’s new love for “the cloud”, then your likely swimming in a shallow pool, when you were promised the ocean.

But it’s not just about the PMS, why in the world does a hotel need to have FOUR(!) different reservation systems – even if they can be interfaced? (That’s right, most hotels piece together a PMS, a CRS, an internet booking engine and a Channel Manager — each managing rates, availability and reservations.) (learn more)

Follow the Data

Until recently, the daily amount of data a hotel managed was limited to the processing of approximately 33 new reservations per day (based on the typical: 100 rooms, 66% occupancy and 2 night lengths-of-stay). Additionally, maybe some related management activities, such as check-ins and check-outs, room assignments, and settling folios. Since their existing systems did these things, they’ve kept them.

Their largest technology challenges seemed to be upstream in managing inventory updates to new online channels, so they gave their Revenue Managers a Channel Manager. While this improved data propagation, it also bifurcated reservations data and worse, completely disconnected the reservation record from the guest record.

Ultimately, the industry saw this amount of data growth as a small problem and disparate systems as a necessary evil they could live with. But consumer behavior and the rise of the Internet Meta Layer is about to change all that.

Social Media is rushing hotels towards a tipping point. Websites like Trip Advisor, Facebook, Twitter and Foursquare have crowd sourced the job of sharing information about hotels to the consumer. Meaning more data will be in more places, and it will be more relevant, more transparent and more timely… And this will dramatically heighten the data management challenge for hotels. Hotels who don’t change their systems now will find they have brought a knife to a nuclear arms race.

This is the context of the future hotel technology and it will require all new technology, based more on connected platforms than separate systems. But with these challenges comes opportunity. Next week we’ll discuss why “the cloud has a silver lining for independent hotels”.

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