Study: Hotels Are Behind The Technology Curve

<B> Study: Hotels Are Behind The Technology Curve</B>

By Lynn Woods

A new study suggests that corporate travel buyers may be faced with a new type of hotel surcharge in the near future to cover the rising costs of Internet connectivity.

Sixty percent of the "several thousand" hotel executives responding to the survey said toll-free access to the Internet is having a negative impact on revenues from telephone surcharges--and a third said they believe they can recover the cost of providing Internet and digital connectivity by adding new charges for the service this year. Another 20 percent said they plan to do so in year 2000.

Entitled "Hospitality 2000: The Technology," the study is the third in a series of hotel surveys sponsored by Arthur Andersen LLP, New York University's Center for Hospitality, Tourism and Travel Administration, and the international trade association Hospitality Financial and Technology Professionals.

As a whole, the study reveals that the hotel industry "is behind the curve in technology development," said Roger Cline, head of Arthur Andersen's hospitality consulting group.

Twenty percent of respondents reported their companies had upgraded phone lines in guest rooms to allow for high-speed Internet access. But an equal number said they had no plans to upgrade--now or in the future. Eighty-two percent acknowledged the negative financial impact of the outdated, closed-architecture automated systems that predominate in the industry.

On the positive side, the hotel executives seemed committed to change. Hotel spending on technology, which has hovered at about 3.5 percent of total revenues during the past three years, is expected to increase to 4 percent--a third more--of overall spending, Cline said. With industry revenue projected to reach $110 billion in the United States in 2000, technology spending therefore would represent a total of $4.4 billion, or $1,200 per room.

Study results were based on detailed questionnaires mailed to thousands of hospitality industry executives around the world, though the bulk were in the Americas. Fifty percent of respondents are responsible for a single property, while 44 percent oversee multiple properties. Eighty-seven percent of respondents are responsible for investments in technology and 39 percent representing global or regional chains, with 34 percent working at companies with revenues over $1 billion.

According to Cline, the majority of respondents ranked installation of new or upgraded property management systems as the top priority for their IT spending, followed by revenue management systems, electronic reservation systems, sales and marketing, e-mail and Internet, database marketing, point of sale, food and beverage, the guest room and checkin/checkout kiosks.

The fragmented nature of hotel systems, offered by multiple technology vendors, has been a persistent problem in the industry, Cline said. There are, for example, 85 different types of property management systems in use today. But approximately three out of four respondents expect these vendors to consolidate over the new few years, becoming single source providers offering integrated solutions.

The integration of property management and central reservation systems, and the development of data warehouses into fully integrated customer information systems, are the top priorities. Currently, 39 percent of respondents said all of the properties within their company have PMSs integrated with the CRSs, while 48 percent said they plan to have all of their hotels connected to the CRSs by next year.

Hotel companies have been developing customer information systems at a much slower rate. Only 13 percent of respondents said they have installed such a system, though another 11 percent said they planned to implement one within the next three years.

A third of respondents said their organization has a data warehouse, though only a third of those are linked to an executive information system. Sixty percent said their company was using a yield management system. Of these, nearly two-thirds are integrated into the organization's property management system, while 41 percent are connected to the CRS. A quarter of the participants plan to implement a revenue management system, 76 percent of them within the next two years.

Among technologies aimed at improving the customer experience, the most widespread clearly is voicemail, already implemented in 84 percent of guest rooms, followed by on-demand movies (68 percent), dual telephone lines (66 percent) and in-room dataports for Internet access (57 percent). Less prevalent were fax/copier/printer machines (38 percent), interactive television (26 percent), cordless telephones (17 percent) and e-mail (16 percent).

One trend noted by the study's sponsors is an integration of the computing and telecommunications functions, giving hoteliers the ability to obtain all their telecom needs--local, long distance and 800 number services, cellular, in-room entertainment, data service and Internet access--from a single vendor. The end result for hotels ultimately should be lower unit pricing for these services, the study said.

Meanwhile, hotel execs are moving toward more direct links with their customers. Only 33 percent of respondents said customers can directly access their internal systems via the Internet, but nearly twice as many (62 percent) plan to offer direct access in 2000.

Forty percent of the hotel companies surveyed offer travel agents direct electronic access to the reservation system, a figure expected to increase by 56 percent next year. Most hotel companies have local area networks, but less than half are connected by wide area networks or intranets. Fewer than a fourth offer extranets to link to networks of suppliers or customers.

While fully 90 percent of respondents have a Web site, less than half of these (39 percent) can take reservations on a real-time basis. And while only 4 percent of all reservations are channeled through the Internet, this is forecast to grow to 11 percent by 2000.

"With the industry moving rapidly toward Internet offerings, the relative importance of distribution channels is set to change dramatically in the coming years," said Dr. Mark Warner, director for graduate programs at the NYU Center for Hospitality, Tourism and Travel Administration.

Hotel companies also plan to maximize use of their Web sites as a source of customer data. Only 19 percent of respondents said they obtain customer profiles from online users, but more than half (68 percent) expect to do so by year 2000. A minority of respondents, 28 percent, have single-image room inventory available to all users, with another 20 percent expecting to have the feature in 2000. Last-room availability is included in half of the respondents' CRSs, and is expected to be included in another 10 percent by next year.