Keeping up with tech changes comes at cost
09 DECEMBER 2015 7:28 AM
Hoteliers spent big on technology in 2015, and they aren’t likely to spend any less in 2016. The question is where the dollars will go.
GLOBAL REPORT—In 2016 hoteliers will continue to invest heavily in key technology areas such as high-speed Internet infrastructure, mobile integration and data security, in addition to the perpetual tweaking of back- and front-end systems. For many in the industry, these are the spots where multiple questions remain, with few inexpensive answers.
According to sources who spoke with Hotel News Now, hotel tech spending remains steady, and in many cases is on the rise. And because the places where IT investment dollars are ultimately funneled seem to perpetually multiply and expand, so, too, will tech budgets, in both 2016 and beyond.
“Our observation is that the requirements for technology investment have been increasing,” said Martin Pinsker, director of investments for American Hotel Income Properties, a Vancouver-based real estate investment trust spending on everything from high-speed to Internet to accounting systems to cloud-based computing.
“Guests’ tech needs certainly have changed over time,” Pinsker said. “‘Telephone’ is no longer an operating department. Keyless entry and bypassing the front desk could easily be the norm for 50% of travelers this decade.”
For starters, experts say budgetary complications continually arise from the fragmentation of the hotel industry and its many brands. Executing IT projects can be a relative breeze for some brands—usually the newer, smaller flags—while older, larger, full-service properties might struggle to keep up, requiring massive reconfiguring, and investment, in order to implement the same tech.
“If you’re at Starwood (Hotels & Resorts Worldwide), maybe all things are well and good at Aloft—all your owners are bought in and ready for the next experiment—but for Sheraton or Westin, that might be a really different dynamic,” said tech consultant Robert Cole, founder and CEO of RockCheetah. “When it involves tearing out all your doors, for example, suddenly that might not be such a great solution.”
One particular cost center that continues to drain tech budgets and appears to only be worsening is the infrastructure required to keep up with soaring bandwidth demands. Spurred by the myriad wireless devices guests now carry on trips, many hoteliers have had to beef up bandwidth recently just to try and keep up with the strain. This can range from simply adding more Wi-Fi access points to a complete network overhaul. Balance sheets everywhere are feeling the effects.
“Our technology spending is up … about 2%,” said Navin Shah, chairman of Atlanta-based Royal Hotel Investments. “A primary reason for increased spending is to increase bandwidth. Guests have more gadgets that they are using more often, so we must be able to accommodate them.”
That mandate comes at a price. According to Pinsker, last year AHIP spent $250,000 on Wi-Fi upgrades. In 2016 another $225,000 will go toward further improvements, while $600,000 also is budgeted for “Wi-Fi enhancements for connectivity to guests’ devices, who are utilizing the latest Wi-Fi technology,” Pinsker said.
“All of our branded hotels will be utilizing fiber optic by year-end 2016. This upgrade will greatly improve the guest Internet experience,” Pinsker said. “Expectations are at an all-time high for (Internet) quality. Guests want to have their home experience in their guestrooms.”
Security, system strains
Yet as hotel networks grow and expand, incorporating both an increasing amount of internal systems as well as guest-level connectivity, the need for better security also increases. Thus, hotel companies are spending on measures to avoid joining the ever-growing list of hacking victims, but the effort intensifies as hotel networks become more complex.
“(In 2015) we increased the network security of our internal networks by further segmentation, and improved network security appliances,” said Alan Zaccario, VP of IT for New Castle Hotels & Resorts, adding that more security features will be implemented in 2016. “Without getting into specifics for security reasons, tokenization and encryption are going to be the major focus in the first half of the year.”
Mobile connectivity also has pushed hotel operations into new, often unanticipated directions. In 2015 hoteliers worked to embrace the newest breed of mobile apps, many offering features such as remote check-in, guest-to-staff interaction and keyless room entry. In some cases, the process required changing and/or modifying internal operating procedures to meet the mobile demand.
“The popularity of e-check-in has grown dramatically,” Shah said. “A year ago, about 5% of our guests were using it; now about 30% of guests are using it, and usage is growing daily. The challenge for hoteliers—especially housekeeping—is to be sure rooms are ready when the guest arrives, so we don’t disappoint.”
To achieve this, Shah said his company has increased the amount of computers connected to the back of house at its hotels. These include PCs recently installed in its various housekeeping departments, specifically to help meet the demand created by mobile check-in.
“It is connected to the central reservations system and it sees everything that the front desk sees, including new reservations,” Shah said. “This enables us to better manage housekeeping, so the right rooms are ready for the right guest, right when the guest arrives.”
The need for IT dollars isn’t likely to curtail, either. Although one’s tech priorities might change over time, hoteliers say that, in the end, there will always be something new—and perhaps totally unexpected—from the digital realm that will require further investments.
“If there is one thing we have learned from the past, it is that there is no way to future proof,” Zaccario said. “During that stretch of building boom in the early to mid-2000s, we thought we were future-proofing by running CAT5 cabling and some fiber where we could.
“Unfortunately, we now find ourselves in need of replacing some of that wire in favor of CAT6e for the demand of higher throughput. Technology by its very definition is constantly changing and evolving. No sooner have you bought the latest and greatest than it becomes obsolete in light of the next big thing.”