Market Update: POS Terminals
Each year IHL Group (www.ihlservices.com) studies the POS market in five areas of hospitality: bar/restaurant, QSR/fast food, lodging, entertainment: casino and cruise, and entertainment: theme park, theater and sports. While the aforementioned segments all have significant differences, they are similar in that the POS system in each is a central component of the customer experience. Additionally, while there are other retail segments that have a higher percentage of PC-based POS systems installed (supermarkets, drug stores, department stores, etc.), hospitality outpaces them in terms of growth, thereby representing the single largest new POS opportunity for many vendors.
Hospitality is perhaps the bellwether segment in terms of measuring the health of the nation's economy. Almost as soon as economic uncertainty takes hold, Americans stop dining out. This trend was in full effect in 2008 and 2009, which accounted for the brutal drop in POS shipments in both of those years. Particularly hard hit was the bar/restaurant segment which suffered a 19 percent decline in shipments in 2009. Often, during tough economic times, diners move from table service restaurants to quick service/fast food restaurants. This was seen once again in 2008 and 2009, meaning that while POS shipments certainly suffered declines in '08 and '09, the impact was that the QSR/fast food segment saw the slightest decline of any in hospitality. While all segments suffered declines or flat shipments over the last couple of years, all hospitality segments look to rebound nicely in 2010, with modest growth in each segment.
Barriers to entry
Often, IHL is asked to examine the barriers to entry for POS vendors. To that end, hospitality represents one of the most open retail verticals for vendors. With the exception of cruise ships, new vendors have virtually limitless potential. While all of the hospitality segments tend to be open to embracing new vendors, some attention does need to be paid to the heavily franchised nature of the restaurant industry. While some franchisees have the freedom to choose their own vendors, most receive some guidance from the corporate office. This means that the number of people involved in the POS decision-making process might be larger than in other retail sub-verticals. Vendors need to be cognizant of that fact and plan accordingly for lengthy sales cycles.
Emerging and ongoing trends in hospitality POS can be summed up in three words: wireless, sophisticated and durable. Hospitality establishments are always looking to expand the opportunity for sales and speed up the transaction process. To fulfill both of these, IHL anticipates seeing more and more companies move to wireless POS technologies. For resorts or theme parks, the benefit to having mobile POS is obvious. For restaurants, there are several potential benefits to going wireless. Not only can restaurants now sell drinks or appetizers on a patio or in a waiting area, but fast food restaurants with drive-thru service can utilize mobile POS as line busting units. Additionally, when paired with a runner system in a table service restaurant, wait times for drink and appetizer orders can be significantly reduced.
Also not to be discounted is the added level of peace of mind for the consumer. When it is time to settle the bill, the credit/debit card remains in the owner's possession and speeds up the settlement process. Sophistication refers to the fact that more and more is being expected of the POS. No longer are they simply computerized cash registers; they are often the central system in an establishment. These systems, combined with the software that runs on them, tend now to be very graphical, intuitive, and more and more often are running on faster processors and newer operating systems. Finally, most hospitality settings are not generally known as hardware friendly in terms of environmental conditions, so providing a solution that is durable is absolutely essential.