Next Generation Hospitality IT: Upgrading and Restructuring Enterprise Systems

Aberdeen Group defines a property management system as software that automates the operations of a hotel / motel / resort, restaurant, casino, or cruise line. This automation includes the integration of front-office applications and back-office applications to allow for complete management of the entire property or restaurant location. The key operational areas impacted by the property management system include inventory management, workforce management, revenue management, CRM, customer loyalty, and business intelligence. In order to operate at full operational functionality, these core elements need to be integrated into a central system, providing enterprise-wide visibility.

Continued Growth and Differentiation Remain Top of Mind

According to Aberdeen data, the top two business pressures facing hospitality executives today are the need to ensure continued growth and expansion, and the need to improve the product and service value proposition to counter competitive loyalty programs (Figure 1). In today’s economy, with historically weaker domestic and international travel and hospitality demand trends, hospitality organizations are doing whatever they can to hold on and ride out the storm. By working smarter, organizations can continue to grow by taking a more refined and holistic view of optimizing property management systems or restaurant systems. Reducing manual tasks that can be automated through the property management system is one way in which organizations have been able to grow during these tough times.

As the data shows, Best-in-Class organizations are 30% more likely than all other organizations to feel the pressure to improve their product and service value proposition. In uncertain economic times, the value proposition of an organization to its customer base is of utmost importance. Best-in-Class organizations have recognized this fact, and are making strides to stay ahead of the competition by making these improvements a core business focus. Utilizing the property management system to generate improved operational efficiencies such as revenue or margin per customer and overall guest experience will have a direct correlation to the product and service value proposition for hospitality organizations.

Best-in-Class Strategies

Figure 2 below shows that leading hospitality organizations emphasize enterprise-wide visibility and proper planning procedures as a key to their business processes. Our results signify that Best-in-Class organizations are twice as likely as all others to provide real-time visibility into sales and service levels across all properties. Real-time visibility into sales allows managers to check the performance of the organization in real-time, measure the performance against daily / weekly goals, and make the requisite decisions, such as pricing promotions or other perks, to impact their overall sales. For a hotel, this can result in agile decision-making on discounted room rates to increase occupancy during slower times, while restaurants are likely to have daily specials, improved meal selections, and aggressive couponing programs to drive more traffic. Managers are also able to identify problems with service, whether that is under or over-staffing in a specific location, and make the necessary adjustments immediately.

Figure 2 above also shows that Best-in-Class organizations are 1.5-times more likely than all other organizations to improve inventory planning and allocation. By improving inventory planning and allocation, organizations are able to better service the customer while lowering their costs. For a hotel or resort, this can include room availability and inventory levels of items at a gift shop, restaurant, and business center. Looking at the example of room availability, hotels must allow for last minute bookings, as these are the rooms that will bring in the highest margin. Those rooms that are booked months in advance, especially through third-party agencies, are the least expensive for the customer. However, as the supply goes down and last minute demand goes up, the prices become more beneficial for the hotel. Proper inventory planning allows for higher margins without risking high vacancy rates.

Organization Capabilities

From an organizational standpoint, two capabilities emerged as best practices from Best-in-Class organizations: data collaboration between headquarter functions and cross-departmental inventory visibility (Figure 3). Best-in-Class organizations are nearly 30% more likely than Average and Laggard organizations to ensure data collaboration between headquarter functions. These functions include accounting and financial reporting, inventory planning and replenishment, revenue management and optimization, and customer management, amongst others. As organizations are able to collaborate across the enterprise, and make these processes more visible and transparent, there is a better system of checks and balances.

Collaboration and workflow visibility also allows multiple departments to work as a whole and improve the process workflow of the organization.

Best-in-Class organizations are nearly 1.5-times more likely than Average or Laggard organizations to develop cross-departmental inventory visibility. For a hotel, this aids in the effective revenue planning specifically for the booking occupancy and revenue generation process. As there is more visibility into room availability, it allows for more aggressive and targeted marketing promotions. For a restaurant, this makes replenishment scheduling more efficient. With more visibility into inventory levels, managers are able to better determine the level of on-hand inventory needed, which will aid in preventing under-stock or – the more dreaded – over-stock situations.

Recommendations

As a company tries to improve its performance in enterprise property management, the following actions will help spur the necessary performance improvements:

• Utilize business intelligence dashboards for real-time performance reporting.
• Upgrade materials management tools and applications to improve inventory quality control.
• Improve collaboration of data and process sharing with trading partners and suppliers to ensure streamlined inventory replenishment.
• Integrate a CRM system into the property management system to incorporate customer insights into the business.

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Authors: Chris Cunnane, Senior Research Associate, [email protected]

Sahir Anand, Research Director, [email protected]

Chris Cunnane
Research Associate - Retail, CPG, and Hospitality
617.854.5370
AberdeenGroup