Self-Service's Future Comes into Focus

By Rory Gardner, Analyst, VDC Research | March 03, 2010

Over the past year, hospitality has drastically transformed from one of the hottest markets, to one of the most uncertain and dangerous ones for automation technology vendors. As the recession seized control in late 2008/early 2009, hospitality operators were rudely introduced to a new type of consumer; a consumer hampered by a limited amount of disposable income and empowered by enhanced access to information in real-time. Such characteristics have officially redefined consumers as we knew them, as well as the way in which they want to interact with enterprises.

Moving forward, these time- and income-starved consumers are looking for personalized and expedited interactions that will leave them feeling fulfilled and promote repeat usage. Despite this obvious challenge, there is a unique opportunity for further investigation and investment in self-service technologies within hospitality.

In Vol.2: Hospitality of their 2009 Self-Service and Customer Interaction Management Solutions study, VDC Research (www.vdcresearch.com) identified and analyzed the key now- and near-term opportunities and threats impacting the North American hospitality market. Leveraging input from more than 175 hospitality operators and self-service vendors, VDC estimated that less than 15% of Tier I and Tier II hospitality organizations had implemented self-service solutions in 2008. That being the case, the self-service market (i.e., hardware, software and services) within North America hospitality surpassed $540 million last year. Hospitality's immediate future remains extremely challenging, but over the course of the next five years the market is expected to experience a compound annual growth rate (CAGR) of 11.3% as penetration and adoption rates improve across this highly fragmented market.   

Here are some high-level findings from Volume 2: Hospitality from VDC's self-service study.

1. Budgets do exist, just smaller

Annual spending on self-service or other automation technologies within hospitality experienced a contraction in 2009. That being said, spending is anticipated to remain tepid over the next twelve months, but it will not shutdown. Leading hospitality operators shared an investment strategy centered on solutions that can improve operational efficiencies, enhance stakeholder experiences, reduce costs, and improve their ability to compete. This robust list of characteristics maps almost perfectly to the value propositions associated with self-service solutions. In 2008, the vast majority of self-service hardware investments was for interactive kiosks; a trend that is anticipated to continue.  

2. Kiosks are the foundation
Simply stated, kiosks are the preferred self-service delivery platform across the market. Such solutions have been able to cement their position due to improving end-user demand and the impressive application(s) they support. However, the continued success of these solutions is quickly aiding in the evaluation and adoption of other complementary technologies such as digital signage or micro/mini kiosks (i.e., in-room, at-table).  

Hospitality enterprises are expected to augment their installed bases of automation technology through the addition of such technologies over the coming years. In addition, these technologies are finally being leveraged as vital touch points that allow enterprises to obtain, manage, and react to the informational or transactional exchanges occurring between the organization and their stakeholder communities. Some of the most prevalent examples of these interactions are driven by the following applications: check-in/check-out, event/vacation itinerary planning, order entry, time and attendance, corporate HR, and inventory management.  
 
3. Deployments focus on multiple stakeholders
Self-service deployments within the hospitality vertical market are no longer deployed solely for interaction with customers. As enterprises continue to demand more robust solutions that are aligned with market requirements, they are attempting to support multiple stakeholder communities (i.e., customers, employees, and enterprise partners) via the same or similar solutions.  

Currently, 60% of hospitality enterprises support their customers through self-service solutions, while 53% support their employees, and 26% support their enterprise partners. A self-service delivery platform's ability to support multiple stakeholders and applications makes it easy to identify why such solutions are quickly becoming 'must haves' for hospitality enterprises.

4. Self-service is becoming a 'must have'
Vendors have been able to effectively communicate the multiple value propositions associated with self-service technologies. In fact, suppliers and channel organizations have done such a good job, that 54% of enterprise end-user respondents indicated that they currently viewed self-service as a 'must have.' In addition, 40% viewed self-service as 'nice to have.'  

It is becoming increasingly clear that diversity of benefits and the multi-dimensional value propositions associated with such technologies are resonating with enterprises and driving investment. However, adoption and deployment is still heavily reliant on a number of specific drivers.

5. Cost reduction and operational improvements drive self-service adoption
The top adoption drivers cited by both hospitality enterprises and channel organizations during the first half of 2009 were cost savings (average score of 3.85 out of 5), operations improvement (average score of 3.8) and customer empowerment (average score of 3.5). These drivers reflect a 'back to basics' management strategy that is being adopted across the market.  

The operational objectives associated within such strategies remain focused on four core criteria: reduction of costs, growth of revenue streams, retention and creation of customer base, and overall enhancement of operations. The most successful self-service deployments to date are those that are capable of tying such criteria to the enterprise's overarching financial, operational, and strategic goals through advanced analytic and management capabilities.

Despite its immediate future, the hospitality vertical market is expected to rebound within the next few years, offering some great opportunities for self-service solutions. The hospitality market continues to offer some of the most revolutionary self-service applications. What's more, this industry is comprised of hotel and restaurant enterprises that will continue to evaluate and adopt automation technologies that will aid in their ability to improve operational procedures and reduce costs, and will continue to be driven by a redefined customer base that is constantly migrating toward self-service enabled environments.
 

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