With IT budgets under tight control and the need for efficiency stronger than ever, hotel technologists must ensure that any IT investment can show ROI, but is that easier said than done? In this Q&A exclusive, Hospitality Technology sits down with Scott Gibson, CIO and SVP of Distribution for Best Western International, for a candid perspective on when, where and how hotels can invest for greatest returns on guest satisfaction and on their bottom-line.
HT: What lessons can the lodging industry learn from the recession about how to be
better hotel companies?
SG: The thing that most organizations should have learned is the need to stay very focused on what is actually important in terms of meeting guest expectations, but also what's important organizationally from the standpoint of ensuring your business stays successful. If you look at what the hotel industry has done in the last few decades, we tend to overestimate the pace of adoption of technology. A great example would be going back to the first rush of hotel companies to the Internet. The expectations were that there would be a very fast pace of adoption and a fast transition of the buying public from call centers to the Internet. Today, for most of us, the Internet is the number one source of revenue for our businesses, but certainly it took much longer to get there than people predicted back in the beginning.
I think you see that phenomenon again, if you look at the current attention that mobile phone technology is getting. Mobile technology is going to be huge, but it's helpful to stop and consider that today it's 2 percent of online booking volumes. If it's helpful from a customer satisfaction standpoint to deliver a solution for mobile booking and you can do it at a relatively low cost, that makes a lot of sense. If it's your expectation that you're going to generate a lot of incremental revenue from that in the very near future, that's probably the wrong reason to do it.
HT: Talking about mobility, Best Western has an iPhone app, and in fact was second to
market with its app. What was the philosophy there, and how is your iPhone app performing?
SG: It's a thing that we did because we do think it's important. Two percent of the market is a big piece of the market. We were able to do it with relative low cost and relatively quickly. If it had been a big expensive undertaking, you'd have to scratch your head and ask, not, "is this something we should do?" but rather, "is this a good time to do it?"
So far in 2010, the iPhone business is about 70 percent of all of our mobile business. The pace of adoption on the iPhone is very fast. From a revenue standpoint, it's probably well below 1 percent of total online revenue in 2010. It's not a big piece of revenue yet, but as to shopping activity, the iPhone has the biggest piece of it. Since we launched [in late December 2009] we've had about 8,000 people download it. I think we need to give it some time and see how people use it and what they make of it.
HT: What can you offer as a "tech reality check" from the standpoint of where hotels have been focusing that perhaps they shouldn't be?
SG: There is a sense that in-room entertainment technology has the potential to become a significant revenue generator for hoteliers. While I wouldn't rule that out, I think that, again, in some cases the pace of adoption isn't going to be nearly as fast as hotels would like it to be because the cost of deploying in-room entertainment technology is going to be very high on a per-room basis. But I also think that very quickly it will become the cost of doing business. People generally don't pay extra for premium channels in hotel rooms. They expect to get premium channels. In the mid-scale market, they don't pay extra for Internet access in hotel rooms, they expect to get it. I think that with some of this other technology it will quickly become commoditized in that people have the expectation that it will be there.
HT: Does that mean hotels shouldn't be focused on some of these in-room technologies? Or that they should be seeing it as the cost of doing business as opposed to a revenue stream?
SG: Beyond saying "the cost of doing business," it will become necessary to meet guest expectations. That's a revenue generator in the sense that if you don't meet guest expectations, you shouldn't expect to generate very much revenue. We tend to approach these things with the expectation that there is incremental revenue we can generate from every hotel stay from these things. I think that all too often, when there is, it's relatively short-lived and then for most customers it becomes part of their basic set of expectations.
However, while you can't generally charge incremental fees for these improvements, it is a mistake to think they don't bring value to the bottom-line. If you don't keep up with guest expectations about what kind of innovation they find in the room, you won't be satisfying your guests and those guests won't return. There's a real bottom-line impact to that! As a brand you have to remain relevant. It's more about what is the pace at which hotels companies should be moving to adopt.
HT: If it's a question of pace, what insight can you offer for timing your in-room investments, and how to go about it?
SG: They have to fit it to their market. You're already seeing a great many consumer electronic product innovations in the upscale sector and over time it will trickle down into the midscale and eventually even into budget and economy at some level.
Any hotelier who wants to raise their game on in-room technology should examine their rooms with an eye towards how the guests will use them. Consider your own family, and look around the room. Are there enough power outlets? Given the number of personal devices, laptops, game consoles, or personal DVD players that travel with families these days, chances are there aren't enough power outlets free to go around.
I looked at a survey recently where consumers were responding to the question, "What were their top technology needs in hotel rooms?" The number one technology need in the hotel rooms is, "a power outlet I can plug into." Whenever you talk about technology innovation in hotel rooms, you have to remember where we're starting from. If there's no place to plug in the technology you brought with you, it speaks to the fact that that particular hotel room is not well-prepared to deal with your technology needs.
HT: Good point! How is it still the case that hotel rooms are not adequately equipped with enough power outlets to satisfy guests' needs?
It's a great question. I think it speaks to how relatively quickly guests' needs in a hotel room have evolved. There are a lot of hotel rooms out there that were not originally built with the idea in mind that guests would arrive with a great many things they needed to plug in. Then you add in that hotels themselves are offering more products and services for guests in the rooms that need to be plugged in. Outlets get placed where they'll be used by the services that the room itself is providing, so quite often you can't get to those outlets even if they're there.
One of the things you see more often are power strips in rooms that have been done very well. From the standpoint of appeal, I'd hate to see your standard home power strip dangling from a wall for someone to plug into, but there are lots of ways to do it. You see the ones that are in lamps, you see the ones that are mounted in the desks; there are lots of ways to do it that are effective.
HT: Let's talk about an area that does make sense for IT investments. The Best Western web site did particularly well in 2009, outpacing the industry average, despite the recession. To what do you attribute this?
Over the last three-to-four years we've been very focused on delivering a high-quality consumer experience on the web site (www.bestwestern.com
). A big part of that has been a focus on the reliability and usability of the site, and on response time.
Between the end of 2006 and now, we've improved the web site average response time by 50 percent; we've reduced system down time from about 300 hours per year, down to about 30 hours per year and we've substantially redesigned the site based on customer input. As a result, we've seen the web site grow from 31 percent of our business in 2006, to more than 50 percent of our business today. And, in 2006 we generated $315 million in revenue through our web site versus more than $450 million in 2009.
HT: Those results are impressive. How did you do it?
The old fashioned way. We invested a lot of capital, a lot of time and energy in identifying the places in the process where the code and databases were inefficient, where the architecture wasn't right. We spent nine months on an effort of re-architecting the site and re-writing a lot of the code, and redesigning a lot of the processes. We're getting ready to do that again. When we first did it, we were really happy with the results. As in all things, I'm not nearly as happy today as I was when we first did it. I think it can be faster, and we're going to take another run at it and see if it can be improved even further. We did comparable things on the reliability side. We're consistently ranked among the top travel sites in terms of transaction success rate and again it was focusing on the things that didn't work well and fixing them.
Now we're in the middle of a lot of performance and reliability-related improvements for the website for the GDS connections. We see that shopping behavior (the number of transactions that we get through our own website, through GDS connections, through our direct-connect with many partners) goes up 50 percent per year, even if the number of resulting reservations doesn't go up. As everyone improves their technology in a way that's meaningful to the consumer, the consumer is being presented with more information. To get that more information, those sites are doing many more transactions. Every year you have to handle more and more transactions to get the same number of reservations. We're on a pretty aggressive cycle of constantly improving the technology and the throughput for all of our electronic distribution to ensure that we can handle the volumes.
HT: Are there other major technology priorities for Best Western in 2010?
There are a couple of things we've been focused on: the first one is very much around information and credit card security. One of the things we're doing in that area now is really trying to facilitate a better solution for online booking and advanced purchase and payment. Most of the time when people book a hotel room, they guarantee the hotel room to a credit card. What that means is that the hotel will hold onto your credit card until you either show up or don't show up. Nine times out of ten, they're never going to use that information because when you actually come to the hotel you're going to present a credit card. There's an awful lot of added risk in that process because they have to keep the card on file, but most of they time they don't actually need it.
We're trying to look at if there's a different model that works for consumers that is similar to the models that the airlines and online travel agencies use. Are consumers interested in getting a discount in return for paying for their stay up-front? If they pay for their stay up front, we don't have to retain a credit card and the associated risk goes away. The consumer gets a discount on their stay, which they want, and the hotel company and the consumer all benefit from the higher security model.
What we're trying to do today, and it's a relatively complicated undertaking, is to set up the ability, from our website, in our call center, through our GDS connections, to process a credit card settlement for an advanced purchase and deliver it to a merchant account that belongs to the hotel where the stay is being made. In that case, we're not even collecting the money, the hotel is collecting the money; they're just doing it through our web site. That may sound like a simple thing, but when you have 4,000 hotels in 70 countries and you want to have individual merchant accounts for card processing for every one of those hotels in all of those countries it's a pretty big undertaking.
Advance payment reservations are our fastest growing plan in North America, and already in Europe more than 30 percent of all brand business is booked this way. It is another way to meet the customer's needs, keep the customer loyal to your hotel or your brand, and reap the long-term revenue benefits, all powered by technology and integration.