Industry Outlook

By Abigail A. Lorden, Editor-in-Chief | February 21, 2012

Tech is experiencing an innovation boom, and many in the hospitality industry are ready to replace the “slow to adopt” mentality with strategic IT investments. From cloud computing to mobile devices, hotels and restaurants are monitoring, testing and deploying new solutions that improve the guest experience, streamline operations across vast franchise networks, and bring greater security to their enterprises.

To get insight into some of the specific areas that hospitality operators are — and should be — focusing on, Hospitality Technology consulted its Editorial Advisory Board. This diverse group of hospitality executives represents a variety of industry segments, from QSR to fine dining; from the independent hotel owner/operator to major corporate brands.

The Board talked about areas for easy improvement (what we called “low hanging fruit”) emerging technologies of significant interest, major challenges the industry is facing and more. Hospitality Technology offers a sincere thank you to the members of its Board for their willingness to discuss important trends and provide candid advice. Here’s what they had to say.

Steve Barrow, VP of IS, Luby’s Inc.

Where is the low-hanging fruit for improvement in your industry?
In certain segments, guest WiFi has become a customer expectation. With the explosion of iPads, smartphones and tablets, operators will soon be at a competitive disadvantage by not offering WiFi. While security concerns cannot be ignored, WiFi can be added into a connected restaurant for a very small incremental cost.

What emerging tech do you think will be particularly useful to your company?
I believe a mobile payments standard such as Google Wallet or NFC on smartphones is an emerging technology with profound implications. The service will allow a customer to access all of his account balances and payment methods (i.e., gift card, credit card, loyalty points, etc.) through one interface on the smartphone. This would relieve POS vendors from writing interfaces to every platform that the merchant might desire and free the consumer up to use alternatives payments currently not available for most merchants, such as PayPal.

Steve Brooks, Dir. Mission Control & Business Analyst,
Tumbleweed Restaurants      
          


Where is the low-hanging fruit for improvement in your industry?
Low hanging fruit for us centers around loss prevention. We can take business intelligence exceptions to help us locate opportunities for up-selling, tip declaration, beverage sales, menu engineering and fraud. Fraud has the largest ROI. If we can minimize or eliminate fraud with business intelligence, there is very little investment. Our new loyalty vendor has fraud reporting that we can use to red-flag suspicious gift card activity. This year we plan to roll out a better display of exceptions and reporting on smart phones.

What IT projects are on your company’s priority list in 2012?
Our top project for 2012 is implementing a loyalty program. We have picked our partner for this and hope to have it up and running by the end of the first quarter. Our objectives are to increase guest frequency and guest counts by at least 4%. Part of the program will be based on points for purchases, with points good towards dollars off future meals. We also plan to surprise our guests with unexpected offers that will get them to visit and talk about us. Other projects include upgrading POS equipment and evaluating the next wave of mobile POS.

Mike Dickersbach, VP of IT,
Thayer Lodging 
        
                    

Where to do you think IT innovation is lacking in your segment of the industry?
The property management system today is one of the most archaic systems we have in our hotels. Most major brand systems, whether built in-house or off-the-shelf, were not built with social media and interaction in mind, and some didn’t even have Internet in mind. I have seen some next generation hotel management systems that are truly cloud-based (no thin client installs). They have the ability to integrate with social media outlets, CRM and all the other major management modules, allowing the guest to ultimately have a better interaction with their online hotel profile and booking abilities.

Tell us about a “wish list” technology, and how you would most like to see this tech applied for use in the hospitality industry.
Consumer and enterprise mobile devices will be the hardware platform going forward. I fully expect, especially with Windows 8 around the corner, that tablet hardware will be the form factor of choice for most people, even corporate environments. With that, all major software in the future will be, more or less, the “app-based” model, with easy install and de-install, and they will be touch-based.

I would expect apps to be available to give the guest a new, unique experience to their guest room, not only from the booking side, but also the experience once they have entered your hotel; much more than just a booking widget. I would like to enter a room and control the room from an app, know what hotel I just walked into, know the capabilities the hotel has, and offer me ways of making my stay more convenient.

Brian Garavuso, EVP, National Marketing & CIO,
Diamond Resorts International    
  
             

Share some insight regarding a critical challenge facing your industry.
Several key issues are present in the timeshare segment: First, there’s no viable enterprise/scalable product. All major timeshare companies have home-grown systems. Also, due to the nature of timeshare and homeowners associations, there is no funding to improve guest room technology or any kind of real innovation. And third, there’s a lack of understanding of the timeshare segment and business model by hospitality technology vendors, many who don’t have financial models that fit our segment.

Tell us about a “wish list” technology, and how you would most like to see this tech applied for use in the hospitality industry.
I would like to see the payment card industry provide applications and interfaces that can be integrated into our technology; that completely remove the need for all the extra work for PCI compliance. I fully support the need for credit card data protection. However, the payment card industry has created a significant amount of rules and regulations, which are costing companies huge amounts of money. The payment card companies, meanwhile, have contributed nothing to solve the initial problem.

Jeff Gengler, VP of BusinessTechnology,
Papa Murphys   
           


Where to do you think IT innovation is lacking in your segment of foodservice?
The lack of standardized, secure, inexpensive, and innovative payment platforms continues to be one of the most productivity-impacting constraints we deal with in the restaurant and hospitality industry. The amount of resources put forth to maintain and enforce compliance, especially in a heavily franchised environment, directly impacts our ability to provide more strategic efforts to increase operational efficiencies, grow our customer base, and improve the guest experience. A cost effective, secure and very standard payment technology, which minimizes or essentially removes PCI exposure, would allow us to divert those resources back to the customer-obsessed efforts our businesses are ultimately asking us to provide.

Are there any lessons learned from an IT project that you can share with peers?
Creating and maintaining a very engaged team is the key to success. Engaging executive sponsorship, effective champions, change management, and a solid core team will usually keep one from having too many lessons to share. Despite having a great team, one lesson we learned while initially testing the POS, take out, and back office modules of our enterprise solution was that our corporate locations had a much higher tolerance for troublesome issues than our franchise partners. We completed our first few in-store pilots only in corporate locations, finding out that they were much less inclined to report issues than the next few very vocal franchised location tests. This set us back a few months due to the issues uncovered, but on a positive note, we have since successfully tightened the management of our testing and upgrade process to include eager and excited franchise partners who will gladly provide us with that much-needed very early feedback.

Michael Hassell, Director, IS,
China Grill Mgmt.      
                    


Where is the low-hanging fruit for improvement in your industry?
We will be tapping into social media and the opportunities those viral markets offer. While our younger customer base has a firm grasp of this medium, we find it interesting that as the age demographic increases, the willingness to participate in these social media environments decreases. The latter being a good portion of our guests, we are exploring the possibilities of companies like Linkedin.com and other business-oriented social sites that can facilitate access to that particular niche.

Tell us about a “wish list” technology, and how you would most like to see this tech applied for use in the hospitality industry.
I am most interested in quick response code (QR Code) technology. I believe we could integrate it into our operations. This would be a great opportunity to exchange information with our guest. If you look around, you can’t walk more than 10 feet in a public space without seeing someone on a smartphone or other web-enabled device. When you stop to think about how quickly and efficiently we can provide information to our guests and in turn receive information from them with the same ease, it simply boggles the mind as to all the possibilities.

David Lehn, VP of IT,
Noodles & Company   
                                   


What emerging tech do you think will be particularly useful to your company?
We are using iPads in a few of our restaurants, in conjunction with our online ordering system, as a line-busting device. But where we are most excited is the possibility of a tablet being the sole computing device for our operations area managers (above-store managers who oversee upwards of 12 locations). The touch screen capability in a highly portable device to access various forms we have built out on SharePoint has been very well received. Our executive team has also widely adapted to, and in fact demanded, these devices as a supplement to their existing tech arsenal. They’ve proven especially handy for the frequent, short business trips when quick, easy access to email and other documents is the name of the game.

Tell us about a “wish list” technology, and how you would most like to see this tech applied for use in the hospitality industry.
POS in the cloud: I want a secure, always-available enterprise class POS that can accommodate all of our business needs. The players that would be most successful with this offering will also provide an open API to facilitate the myriad of integration points required in a modern restaurant environment, to include digital menu boards and signage; online & mobile ordering options; real time analytics; and frequent feeds to/from those systems both upstream and downstream to the flow of data. I would expect that in a shared-services cloud model, the costs should be no more, and arguably less, than what it costs for a single operator to manage all of this within their own data center.

Rocky Lucia, Director of IT,
B.R. Guest Hospitality    
                


What IT projects are on your company’s priority list for 2012?
Two major objectives are to create and intranet and to consolidate many of our servers to virtual servers. With the intranet, we need to be able to securely share information, increase workflow and productivity and increase our communication, to name a few. This initiative will be critical as we continue to grow. With virtual servers, as we retire old server hardware, we will consolidate many of our servers onto just a few servers using VMware. This will reduce the amount of hardware to support, save money and improve overall performance.

What emerging tech do you think will be particularly useful to your company?
An emerging technology to us is hosted voice over IP (VOIP). I’m in the process of planning a complete cutover from PBX to VOIP. Even though this has been around for years, there are some good companies out there hosting this product. This will be very useful to us as we can use our existing infrastructure, and get rid of expensive phone lines and PRI circuits; another great plus is we can manage all phones and users ourselves, which eliminates the need to call a PBX vendor to add phones, program, etc.

Mark McBeth, VP of IT, North America,
Starwood Hotels & Resorts     
 


Share some insight regarding a critical challenge facing your industry.
Visa has announced that all U.S. acquirers and processor service providers must be able to support Chip and PIN transactions by April of 2013. They have also announced an initiative to accelerate the adoption of contact and contactless Chip transactions by merchants in an expansion of their Technology Innovation Program (TIP) to the U.S. Visa has agreed to eliminate the annual validation of PCI compliance for any merchant that has at least 75% of their transactions originating from Chip and PIN terminals. This should act as incentive for us to move quickly with our acquirers and processors. However, it won’t completely eliminate the need for PCI Compliance assessments and reporting.

What emerging tech do you think will be particularly useful to your company?
In 2011 the term Hotspot 2.0 became a popular tagline the for much anticipated 802.11u WiFi protocol. This protocol enables a WiFi network to detect and auto-authenticate a connection to your smartphone or tablet. It allows for seamless transfer between the carrier cellular network and a hotel’s WiFi network, giving users the ability to roam between the two networks without manual authentication, which is often cumbersome and complicated. This would also permit a carrier to offload data traffic from their overburdened macro cellular network onto the hotel’s WiFi infrastructure, and ultimately on to the carrier’s robust terrestrial network.

The carriers love this idea since it solves one of their major customer service issues brought on by the explosion of smart devices and data consumption. This creates an interesting paradigm. Since the carrier’s data is riding the hotel owner’s infrastructure, impacting guest and administrative traffic, there should be justification for creating a revenue stream for the building owner (or infrastructure owner). To properly optimize this, the hotel will need a way to identify and meter this traffic through application layer monitoring devices or HSIA gateways, and then apply a price tag to the usage. APs will need to support the new protocol, which could result in significant network upgrades and cost, which further justify the revenue stream. The carriers are going to be the catalyst for advancing this protocol and their requirements to offload data are going to increase. Hoteliers should consider adding this to their new build and renovation projects as well as any legacy infrastructure upgrades.

Brian Pearson, CIO,
Stacked Restaurants
                                       


Where is the low-hanging fruit for improvement in your industry?
I still see way too many organizations not using kitchen display and management solutions, and table management solutions. I know of many people who will scoff at the notion that they are “achievable without significant effort,” but when you look at the return, the effort pales in comparison. Increase order accuracy, reduce comps/increase profitability, speed table turns, lose fewer guests due to inaccurate quote times; these are just a few of the major benefits that are easy to quantify for your shareholders. Not having these systems is as close as you can get to not having a POS solution. It really is the other half of the coin.

What emerging tech do you think will be particularly useful to your company?
NFC: While it’s been out there for awhile, we are finally beginning to see manifestations that are concrete enough to plan and prepare for its integration into our environment. For example the ability for a customer to sign-in to iPads in our restaurant, pay for their meal, and affiliate with the brand in many other ways. With the inherit insecurity of credit cards, and the broad backing it has from major retailers like McDonald’s, Walmart and 7-11, we see leading organizations with implementations already; this will grow in 2012-13 and become mainstream within the next three-to-five years.

Darrin Pinkham, VP of IT, Benchmark Hospitality International                                     

What IT project(s) are on your company’s priority list in 2012?

We’re moving entirely over to cloud-based virtualized servers, which increase TCO/ROI of property application requirements for everything: PMS/GMS, POS, reservations, spa, golf, activities, CRM, mobile, web, etc. We’re prioritizing having fully integrated websites with marketing messaging and alerts, which caters to our properties’ seasonality requirements and specific demands and changes. We will have the ability to make on-the-fly special offerings to guests for quick business need periods and demand opportunities.

Where is the low-hanging fruit for improvement in your industry?
There are several areas: enterprise-encrypted backup solutions in the cloud are much cheaper than premise-based tape, media and/or server-based backup solutions; next, increase bandwidth, both for your admin and guest networks; also, increase free-to-guest channel line-up offerings with more HD content; finally, Web-based mobile applications, instead of downloadable apps which can be very static and seldom reused.

R.P. Rama, VP & CTO, JHM Hotels     

Tell us about a “wish list” technology, and how would most like to see this tech applied for use in the hospitality industry.
Payment security systems have to be of utmost importance in the industry and a solution has to be created where the data is not stored in any system at the business unit. For that to happen, it may require some kind of device that would be biometric in nature where one can prove the guest was at the hotel and approved the charges that were incurred. Once that is done, there would be no need to have any credit card information. The guest then would access a cloud-based subscriber portal to review the charges online. Customers would input their default credit card numbers, attach them to the biometric signature, and going forward they would use the biometric tool to make all payments. It would resolve any issues with stolen or lost credit cards or even getting duplicate cards. Hand held devices would be placed at each profit center, or in hands of servers, to get guest approval for charges and transmit data to the cloud for processing.

Also, I’m interested in a communication device that can work within a hotel infrastructure to send instant messages, and also be able to talk to staff members while on site. When one leaves the hotel, that same gadget could become a cell phone and still continue to function for communication with the hotel staff member when not on site. This system can send out any kind of alerts and can track all communication on a central portal as to when the message was sent, received, opened, read, or responded. The switching from an internal wireless system to wireless carriers outside the building is the key to this device.

Dan Sheehan, Sr. VP & CIO,
Dunkin’ Brands
                                     

What emerging tech do you think will be particularly useful to your company?
I don’t believe this is emerging per say, but utilizing tablets (iPad or Google) out in the field to be more productive will be important. We are looking at operations, marketing, development, construction and franchising to all benefit from using tablets. There are a number of field-based applications that better utilize the tablet’s foot print (camera, content management, ease of use, etc.). We are piloting a number of these and measuring productivity gains.

Tell us about a “wish list” technology, and how you would most like to see this tech applied for use in the hospitality industry.
I want to see POS vendors move to the cloud, fast. I want to virtualize the POS so there is less hardware at the restaurant, less failure and less the restaurant managers have to worry and get involved in fixing POS failures. Yes, I realize that POS hardware will fail, but I want to get to a place where it’s a plug-and-play mentality for our restaurant managers. With a cloud-based POS, if there is a failure, you grab your back-up POS in the manager’s office, unbox it, plug it in and it starts configuring itself. Within 15 minutes, it’s ready to start taking orders.

Joe Tenczar, VP of IT & CIO,
Hard Rock International 
   
                            

Where to do you think IT innovation is lacking in your segment of foodservice?
I still believe payment at the table is a fairly simple problem to solve, but it is slow to get traction with the large POS vendors. In 2011, I visited only three restaurants in the U.S. that offered payment at the table. In Europe, it was hard to find one that did not offer it.  Verifone, Magtek, and others offer mobile secure hardware payment solutions, so why no broad adoption? It’s possibly just a current lack of demand from our consumers. I think it is just a matter of time before our guests start expecting this or before PCI-DSS mandates it.

Tell us about a “wish list” technology, and how you would most like to see this tech applied for use in the hospitality industry.
I hope to see a single mobile device be your unique and secured identifier for everything from loyalty programs to payment transactions, to hotel room entry. This might be NFC or something else. Such a large percentage of our guests are carrying mobile devices, we should be able to identify them uniquely and have them authorize the sharing of this information for multiple purposes. Personally I hate having to carry 30 cards in my wallet for varied functions. I know there are multiple vendors doing some facets of this chip-based ID, but the entity that standardizes and creates buy-in from consumers will be huge in the future of hospitality and retail markets.

Scott Wise, CEO,
Scotty’s Brewhouse                                     


Where to do you think IT innovation is lacking in your segment of foodservice?
I believe our POS systems are a part of what keeps us behind. If I see a tech innovation and have an idea for how we could implement it into our restaurants, it seems like our POS company is always the first to say, “that won’t work,” “we are working on it and it will come out in eight months to a year,” or “you can have another company do it; but, we won’t support it when you integrate with our systems.”  There are a few companies and restaurants out there that are doing it right. I’m excited to watch Stacked Restaurants and where they go; they are the future and I believe have the market to themselves right now.

What emerging tech do you think will be particularly useful to your company?
QR technology is not emerging… and there is probably more innovation to come with its use, but I don’t think these codes are being leveraged enough right now, in the right applications or processes. We are using them on our coasters. When scanned, they take you to an up-to-date list of the 30 beers we have on draft. We also put them on the top of our guest receipts and, when scanned, they go to a mobile-friendly, quick comment form for feedback. Without them, our online comments were at about 40 per month. In the first 30 days of using them on our receipts, our comment usage went to 800 submitted (a 4,000% increase). In the next 30 days, we had 1,400 submissions. We just introduced four different restaurant carryout menus (32 pages worth of printing costs and environmental trash) onto one marketing piece with four QR codes linking to all of our restaurant menus. Like most tech innovation and restaurants, I think that your own creativity is the only limitation to usage and
idea implementation.

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