Lodging Magazine

Much Ado About Technology

June, 2002

By Robyn Taylor Parets

Assessing hotel automation in the post-dotcom era

There's no denying that technology evolves rapidly. In the hotel industry, some systems have made such major transformations that many companies have had to completely re-adapt their business plans— or go back to the drawing board altogether.

Over the last 18 months, the industry has witnessed massive changes in the areas of high-speed Internet access, e-procurement, reservations, database management, and more. While some chains, like Wingate Inns, continued to include all sorts of technological bells and whistles, others have chosen, or been forced to, scale back their offerings.

The new "high-tech" hotel brands, such as Matrix eSuites Hotels and InternetInns.com, have backed off their aggressive initial development plans. Last June, Matrix said it hoped to have 30 hotels within two years; it has broken ground on nine properties, and its first hotel is scheduled to open next March. InternetInns.com, which envisioned having 50 properties under development by December 2001, has one property open, plans to open a hotel and convention center in Bethany, Oklahoma by next year, and expects to announce its next 14 hotels soon. The company has also abandoned plans to franchise—at least for now. "We're not jumping headfirst into franchising. All of the hotels will be under our corporate umbrella," says founder David Littlefield. Both of these mid-market offerings plan to feature an array of standard tech-focused amenities, including high-speed Internet access, in-room computers, ergonomic work stations, and more.

Reasons for the retrenchment include the economic downturn and the bursting of the dotcom bubble, but lodging experts say technology is already showing signs of rebirth.

"Technology for technology's sake has withered," says Carl Cohen, vice president of broadband business at Starwood Hotels & Resorts Worldwide. "Investments are being reviewed more carefully for economic returns and the impact on guest experiences."

Perhaps the best example of a technology that has undergone growing pains is high-speed Internet access. Four years ago, high-speed access from guestrooms and meeting space was the talk of the industry: vendors were popping up left and right, wiring hotels across the country.

Things sure have changed. Although high-speed Internet access is still a top priority for hotels, the way in which they're approaching the business differs vastly from just a couple of years ago. There no longer are dozens of vendors offering high-speed and wireless installation services. Many of these companies have gone out of business or have had to restructure, says Rich Jackson, AH&LA vice president/CIO and staff liaison to the association's industry-wide technology committee. Some of the largest high-speed companies, including CAIS Internet (now called Ardent Communications), pulled the plug and refocused on selling DSL connectivity to other industries.

So what was the problem? According to lodging executives, a number of high-speed providers—and their hotel clients—expected road warriors to immediately begin plugging in and paying an average of $9.95 daily in access fees. Most of these providers installed the networks for free and expected to earn their money on a revenue-share basis, says Mike Kistner, CIO / vice president of Best Western International.

"There was tremendous promise, but these companies were coming to major hotel groups with business models that didn't make sense," Kistner says. "They didn't really know if they were going to make money. It's been a real mess for everyone." And, adds Pegasus Solutions' senior vice president of property systems and services Robert Bennett, "High speed never really exploded the way everyone thought it would."

Part of the reason travelers weren't taking greater advantage of high-speed access was that they often needed to configure their laptops for compatibility or weren't able to access their corporate networks.

Michael Squires, president of hospitality consulting firm Softscribe Inc., agrees. Two years ago, high-speed access "take rates" were less than 5 percent. "Guests either didn't want to pay the $9.95 or there were too many issues to make it work with the protocol."

Carlson Hospitality rolled high-speed access out to 100 hotels in early 2001, only to cut them off early this year when its high-speed and videoconferencing provider, VirtualLinc, went out of business, says David Sjolander, Carlson's vice president of hotel information systems. Carlson promptly went back to square one and selected two preferred providers (GuestTek and Goldentree Communications) for its 700 primarily franchised properties. This time around, Sjolander says, Carlson is recommending that franchisees build the access fee into the room rate.

And even companies that didn't have to start over again have amended their relationships/agreements with vendors. Marriott International was pleased with the service provided by STSN, which "was fast, easy-to-use, and guests could plug-and-play with no reconfiguration," says Lou Paladeau, vice president of technology business development. But when the free-installation model started to crumble, Marriott stepped in and changed its deal with STSN. Today, Paladeau says most hotel companies either participate in the initial capital outlay or work with the vendors under a lease agreement.

High-speed access is readily taking off with Marriott's guests, even though the hotels still charge a $9.95 daily fee. Other hotel companies are now teaming with vendors to aggressively rollout high-speed service and other features like in-room billing and video on demand. Hilton Hotels Corporation recently announced that it has selected Montreal-based TravelNet Technologies' DataValet as the high-speed solution for its North American properties "because it provided Hilton with a comprehensive communications platform," says Stuart Broster, president of Hilton Canada.

Other companies, like Starwood and Fairmont Hotels & Resorts, have opted to partner with networking giant Cisco Systems to build out their broadband infrastructure. Both are members of the Cisco Mobile Office, an initiative that provides travelers with secure, high-speed network access via in-room ports and wireless access from public spaces like lobbies and restaurants.

Balky Start for E-Commerce

E-procurement is yet another concept that has experienced mixed results. Two of the larger companies, Zoho and Hsupply.com, folded. Some of the larger survivors which provide e-commerce software and services so chains can offer online buying services to their hotels include PurchasePro and Avendra. (Avendra, which was started as a joint venture between Marriott, Six Continents, Hyatt, ClubCorp, and Fairmont, is now privately operated.)

The problem with e-procurement was not only the fact that many of the e-commerce companies didn't make enough money to cover their capital costs, but that suppliers realized that they were going to lose their relationships with hotels by selling to a third-party aggregator versus selling to multiple properties, says Scott Anderson, president of High Country Hospitality, a hotel management and technology consulting firm, and chairman of AH&LA's Technology Committee.

"As a result, some major vendors have created their own password-protected intranets, where hotel employees can log on and buy direct," he says. "On the flipside, the stronger e-procurement companies will likely survive, including Avendra, GoCo-op, and PurchasePro. But not without growing pains."

Besides flawed business models, many hotel operators didn't factor in the time and money necessary to train employees in the operation and use of e-procurement systems, says Julian Sparkes, managing partner of Accenture's Travel Services Industry Group. Executed properly, e-procurement can save a hotel both time and money, he says.

Best Western, for example, implemented BestWestern-supply.com in October 2000. Fueled by PurchasePro, the system offers the chain's members 30,000 items, complete with product descriptions and photographs, says managing director Rich Bennett. "We've had great success in the last couple of years in growing our sales to members," Bennett says. "Our charter is to leverage the buying power of the world's largest hotel chain. The more people use it, the more they see the time and money they can save."

Rolling Right Along

Despite the tight economy, some technologies have forged right ahead. Web-based reservations, integrated property management systems, and in-room entertainment technologies seem to be gaining ground daily.

"We have found the least amount of disillusion is the whole area of distribution and the way we sell rooms through the Internet," Sjolander says. "That never slowed down. We try to concentrate our inventory on our website and on other travel sites. We want to be everywhere the guest wants to buy."

Marriott has likewise watched its online bookings increase dramatically. Last year, the company generated more than $900 million in online bookings, up from $570 million in 2000. Bookings on Marriott.com jumped from $430 million in 2000 to $715 million last year. And customers booked more than five million room nights through the company's website in 2001—nearly double the amount booked in 2000.

Robyn Taylor Parets is a contributing editor of Lodging who writes frequently on technology.