By Nick Price, CIO, Mandarin Oriental - 02/14/2011
If we might loosely call the 1990s the decade of ‘electronic distribution,’ and the 2000s the decade of ‘in-room technology,’ I would suggest with some certainty that in ten years we will be calling our current decade ‘the decade of the cloud.’ In fact, I will go further: I believe we will come to see our hospitality industry as the ‘poster child’ for cloud computing because of its unique structure and unique challenges.
Explosion of technology
We have witnessed an explosive growth in technology – digital technology – over the last two decades. Hotels are now connected to a myriad of global distribution systems necessitating real-time access to hotel systems and, with labor costs increasing, we have looked to technology to introduce workforce efficiencies while maintaining service levels for our guests. But it is the application of digital technology to the ‘replicated unit’ – the hotel room – that has truly moved our industry out of its comfort zone. Of course, we do not want our guests to interact with technology at all, and we rightly regard technology as incongruous with traditional hotel guest experiences, but the facts speak for themselves: there is much more technology than one might think, and hopefully that the guest will ever see. Door locks, mini-bars, light switches, HVAC systems, TV are all digital technologies today that sit on IP networks and that are integrated and interfaced. We also have the obvious guest-facing technologies such as HSIA (High Speed Internet – wired and Wi-Fi) and Aux panels (jack packs) that are increasingly in demand by the modern technology dependent traveler.
One thing that has not changed however, or not changed nearly enough, is the on-property IT skills needed to keep things running efficiently and smoothly without interruption in our 24/7/365 hotel environment. Today, we see an on-property skills gap that is widening year-on-year and hotel companies of all sizes are looking for solutions, one of which might be to get rid of the technology itself. To where? To the cloud, of course.
Emerging markets and legacy applications
Emerging markets represent a clear opportunity for the expansion of international hotel brands. How to meet the IT needs in these emerging markets, however, is not so clear. Current hotel technologies are mostly a poor fit. Large flag hotel brands, for example, often use legacy systems that are Anglo-centric and US-focused, and these systems often cannot even be used across the pond in Europe, let alone farther afield. The installation of third-party localized solutions has been a stop-gap solution until now, but it has fragmented the IT architecture and represents a serious drawback for a chain considering international expansion.
Many hotel CIOs today consequently are wishing for globally available IT solutions supported by major independent software vendors (ISVs) that can be deployed quickly and easily with the minimum of fuss via ‘the cloud.’ Which of course raises the obvious question: What exactly is ‘the cloud’? This is a question probably best answered by stating clearly what it is not. While many ISVs today apply the ‘cloud’ label liberally to their solutions, these claims are often no more than modern ‘marketing-speak’ disguising legacy technology and thinking, and the applications themselves are often the very same legacy client-server applications of the past accessed by some remote terminal model. Even if legacy remote terminal access doesn’t put you off, moving hotel applications to individual vendor-managed data centers and thereby significantly increasing the complexity of integrating hotel applications inter-networked over the public Internet probably will, or at least it should. Luckily, most hotel company CIOs see past the marketing speak and realize all too well that these ISV-hosted technology offerings do not readily serve the needs of global hotel chains that require global consistency, scalability to hundreds or thousands of hotels, fast deployment, proactive management and, as importantly, few if any IT maintenance and support technicians in the field. A cloud solution therefore is something else, something new and hopefully something that can help address these requirements and possibly some of the issues associated with the next point – CAPEX.
CAPEX vs. OPEX
One interesting oddity about the hotel industry is that hotel brands rarely own the hotels that carry their names. These ‘asset-lite’ strategies – the divestment of the physical hotel asset – have allowed global hotel chain brands to flourish, but have also introduced their own set of issues, the most important for the hotel company CIO being the difficulty of coordinating a system implementation or upgrade across multiple hotels having different owners. The property owner agreement required to spend CAPEX creates an ‘OPM’ (Other People’s Money) issue that limits the agility of hotel brands to execute comprehensively and quickly. Moving technology out of the hotels and delivering it as a ‘cloud service’ potentially provides the opportunity to move some spend to operating cost which is generally considered easier to coordinate at a brand/hotel operator level. An opportunity for our industry? I think so.
What’s to come
Next-generation multi-tiered modular applications defined through web-services today are scarce in our industry, but they are very much needed and they are thankfully coming. A select few ISVs are making the required investments in people and technology skills to embrace this new opportunity. For me and many other hospitality CIOs, this can’t happen soon enough. What hotels need, and what they unfortunately do not have today, is the ability to move applications en-masse to a single external neutral hosting platform that provides global reach, scalability, continuous availability, inherent security and reliable service levels – and that can be trusted to store the information data-sets of the hotel companies, including those of their guests. Such a globally present platform represents a multi-billion dollar investment, or put another way, a multi-billion dollar bet on the future, one that requires deep pockets, abundant capability and, above all else, the guts to pull it off. Potential cloud platform partners are few but their names are familiar. Google, Amazon, Salesforce, HP, Oracle and Microsoft are the familiar names with seats at the CIO’s cloud table and many of them already generate substantial revenues from business activities delivered through the cloud.
Microsoft (www.microsoft.com), because of the breadth of its cloud technologies developed over many years and the familiar Windows programming model embodied within them, stands out with its Windows Azure cloud platform as being technically capable, globally present and, equally important, here today and trusted. Mandarin Oriental (www.mandarinoriental.com) has used Microsoft technologies for over ten years and has benefitted from the integrated Microsoft ISV ecosystem that has developed over that time. And today, we are working with our application software providers and Microsoft to jointly architect Mandarin Oriental’s next generation cloud-based business systems. The pitfalls are many, but the opportunities also are compelling. I believe our industry’s move to the cloud is inevitable and I fully expect Mandarin Oriental’s future hotel applications to be cloud-enabled.
The hospitality industry is the ‘poster child’ industry for the ‘cloud.’ To me this is abundantly clear. The distributed nature of our industry, its fragmented ownership structure and its need to re-architect technology solutions for rapid deployment in emerging markets make this industry perfectly suited for cloud computing. The opportunities are compelling. Cloud vendors, sit up and take notice!
When senior leaders at Arby’s were investigating various innovative strategies for driving growth and profitability, one idea suggested was developing smaller footprint stores in more urban areas, where demographic data suggested more opportunities.
This strategy presented several cha