30 Years in Hospitality Technology - Article by Larry Chervenak CHAE

Other concerns were based on the fact that the hardware involved was something called a "mini computer" from a small Californian company called EECO (Electronic Engineering Company of California). Our assignment was to visit long enough to determine whether the installation had any real chance of success, and, if not, to report (gently) that it should be removed.

On arrival, we were confronted with proprietary hardware, proprietary software and incomplete documentation. The good news was that EECO's Carroll Lund was on board to deal with programming issues.

That "brief" visit lasted several weeks. By the end of the first day, we felt confident that the design and programming were in good hands, but what was missing were dozens of operational details (late-stay reporting, room share, etc.). Each evening, we listed some of the missing items, and the next day Carroll Lund added them to the software. Eventually, the original EECO installation worked sufficiently that we reported to Rockresorts' headquarters that the system should be kept.

A format for tracking technology's growth in the lodging industry was established in 1969, when Bob Richards, general manager of the American Hotel & Motel Association (AH&MA, now AH&LA), suggested that we conduct a survey of AH&MA members to determine what was happening in hotel technology.

A detailed survey questionnaire was developed, distributed to AH&MA and the International Association of Hospitality Accountants (IAHA, now HFTP) member hotels and hotel chain headquarters, and supplemented by on-site visits to hotels in test cities to validate responses and obtain further details.

That first survey elicited responses from 336 individual properties, and from chain and franchise operations representing 1,415 properties and 343,000 rooms in the selected size category of more than 100 rooms. The published report appeared in 1970. The first survey also set the pattern for more comprehensive surveys in 1976, 1980 and 1983, all of which provided documented statistics on the lodging industry's progress in the use of technology.

1970 Technology Survey
The 1970 survey showed that the lodging industry had only begun. The key area of interest was the comparatively "new" field of hotel data processing, but the survey results forced the comment, "America's lodging industry seems clearly behind many other business fields ..."

For the vast majority of lodging properties, the only direct exposure to data processing was the computerized central reservation systems. Holiday Inns and Sheraton had nationwide networks, and five independent companies were offering computerized reservation services (American Express, International Reservations Corporation, National Data Corporation, Reservation World and Telemax). All five pioneers are now out of the reservations business.

Most of the top 20 hotel chains did not have any in-house data processing capability. Only 51 individual hotels reported having on-site installations, all of them in batch processing of limited accounting functions.

The manual keypunch was the standard device for data entry, with 86 percent of hotel computer installations reporting its use. Others reported use of paper tape perforators or key tapes, with only four properties reporting that they were entering data through a new device called a "CRT display terminal."

The 1976 Survey
Important advances in technology occurred in the six years between the first and second hotel technology surveys, but most of them had not yet begun to have a significant impact on the lodging industry. The 1976 survey results produced this comment in the survey report: "Many types of hotel automation have been discussed for years, but for a long time there was more talk than action. In fact, in 1976, most hotels and motels still made relatively little use of available technology."

Despite that negative assessment, the survey report noted that the seeds of change were being sown. Samples:

Of the top 20 lodging chains, the number with headquarters data processing capability had risen to 13. Five of the other chains were making at least limited use of data processing service bureaus.

Between 1970 and 1976, 12 computer companies spent almost $30 million in developing software for properties that wished to install their own data processing equipment. The report noted that, "This heavy investment has created interest, but has not yet resulted in extensive market penetration. Only about 105 American hotels and motels have installed or ordered comprehensive data processing systems."

The volatility of the market in turnkey property management systems had already started to surface, since three of those 12 vendors had already withdrawn from the market by the time of the 1976 survey.

A major problem with the PMS software packages that developed during that period was the limited range of properties that could afford their use. They were simply not cost-justifiable for most properties under 300 rooms. Yet, most of those turnkey systems experienced serious degradation in response time in handling the transaction volumes of properties above 500 rooms.

EECO and the Motorola Inn-Scan systems were industry leaders in terms of the number of installations at that time. Of the 12 pioneer PMSs, none remain.

Keypunch machines were still the most common data entry devices at hotel chain headquarters, but CRTs had become the leading input mode in data processing installations at individual hotels.

The 1973-74 Mideast oil embargo made energy costs an important factor in every lodging property's net profitability. The 1976 survey report indicated that there was active interest in energy control technology, but still relatively little actual use. Among the few properties that had installed legitimate energy control equipment (e.g. power demand controllers, load cyclers), results were reported to be generally good.

By 1976, Bell's competitors had established themselves as viable alternatives, and were capturing a steadily increasing share of the market. The first electronic telephone switches had been introduced, but both Bell and non-Bell products were chiefly cross-bar or cross-read systems.

The first call accounting system in an American hotel, a Western Telephone Equipment system, was installed in a California hotel. It tracked local calls only, since government regulations still prohibited its use for long-distance calls.

Among the audio-visual systems tracked in the 1976 survey were the first large-screen TV projection systems, and the first guest-room movie systems. The survey tracked the guest-room movie systems of seven different suppliers, none of which used satellites for delivery of their programs.

The year before the 1976 survey, widespread publicity on the Connie Francis rape case helped to focus the lodging industry on the need for better guest protection. The survey report indicated, however, that all but a few properties were depending strictly on standard locking systems and personnel security procedures.

It was between the 1970 and 1976 surveys that the decision was made for IAHA to sponsor a dedicated technology conference, now known as HITEC.

The 1980 Survey Report
Because of the growing complexity and rate of change in hotel technology, only three years separated the second and third surveys, with the report published in 1980. Among the findings:

• Data processing installations at corporate headquarters of hotel chains and management companies increased significantly. More than half of the multi-property survey respondents indicated that they had some headquarters data processing capability.
• There had been an increase of several hundred percent in the number of data processing installations in individual hotels, and more than 90 percent of the new installations were turnkey systems.
• A downward trend in price made hotel data processing more cost-justifiable for properties in the 200-room range, but most new systems were still not able to effectively handle properties of more than 500 rooms.

The market volatility in PMSs continued. Of the 12 systems available in 1976, only three were still marketed in 1980. Of the 32 new systems released between 1976 and 1980, only 21 were still on the market at the time of the 1980 survey.

Mini computer-based systems dominated the market. No micro-based systems were available.

The switch in data input techniques was complete. The 1980 survey validated the fact that the use of keypunch in hotel data processing had become almost as obsolete as the bustle or the spittoon.

In PBXs, the survey report tracked a continuing trend toward using systems acquired from companies other than the telephone company, and also found that 1979 was the first year in which more electronic than non-electronic PBXs were installed in lodging properties.

The survey traced the use of call accounting systems in several international hotels, but found fewer than 25 installation in U.S. hotels and motels. Only two systems were in the U.S. market, and their offerings were limited by government restrictions.

Although no lodging properties reported the use of private (non-Bell) networks for transmission of phone calls, the 1980 survey report noted this was a logical future extension of telecom options.

The 1980 survey traced the use of 12 categories of energy control technology, but only a minority of reporting hotels had installed any technology beyond water flow restrictors and automatic timers.

The security section of the 1980 survey focused on four types of technology. More than 200 vendors were reported to have provided one or more types of security technology to lodging properties, but the majority of reporting hotels said that they were using no security technology. In fact, fewer than one percent of the hotels reported using cardkey guest-room locking systems.

A maze of new, and often conflicting, fire codes, plus a spate of killer hotel fires, caused sufficient interest in fire safety technology to include that category in the 1980 survey. Interest was reported to be high in the five types of fire safety technology included in the questionnaire, but only a minority of lodging properties reported actual installations. Even guest-room smoke/fire detectors were in use in only 13.2 percent of the reporting hotels.

During the last quarter of 1979, Holiday Inns started to install the first of its satellite earth stations, but the potential impact of this pioneer effort had not yet reached the headquarters of other hotel chains and management companies. Only four percent of the respondents from multi-property headquarters reported they were considering actively using earth stations within the next year. Cable TV, needless to say, was scarcely a gleam in Ted Turner's eye, and the Internet was a long way down the road.

The 1983 Survey
Between the 1980 and the 1983 surveys, AH&MA founded its committee on Information Processing and Related Technology to focus not only on data processing, but also on other technology areas with which computers interface, or which are integral parts of multiple-purpose systems. AH&MA also took a leadership role in promoting hotel fire safety. Point man was Ray Ellis, CHTP, CHE, CLSD, then AH&MA's director of research, who preached fire safety and loss prevention almost everywhere hoteliers held a meeting. He continues to advocate fire safety and security in academia, at the University of Houston's Conrad N. Hilton College.

During this period, the FCC eliminated phone call resale restrictions on interstate calls, and made it possible for a hotel's telecom department to resell phone services to guests. Further reason for reselling arrived at midnight on the last day of 1983, when the Bell System quit paying hotels a 15 percent commission on their guests' long-distance phone calls. This also marked the starting date for AT&T's divestiture, and thus the beginning of a whole new era in telecommunications.

When the 1983 hotel technology survey was completed, it was evident that in the previous three years, the pace of technology development and change had increased significantly:

This was the period when the personal computer (PC) crept into the lodging market. At the time of the 1980 survey, the PC was unknown, but the 1983 survey indicated that more than 600 were in use or on order in American hotels. (Who could have predicted that virtually every department in a hotel, every business and most homes would now have at least one PC?) Most of those early PC installations were for limited-scope usage, but three small software companies were developing turnkey PMSs aimed at smaller properties.

Constant change continued to characterize the marketplace. Of the turnkey PMSs, telephone switches, advanced electronic locking systems and point-of-sale systems being installed in the lodging industry in 1983, most were not even on the market at the time of the previous survey.

Electronic switches had virtually taken over the market in hotel telephone systems, and accounted for more than 96 percent of the previous year's installations.

Constant change continued to characterize the marketplace. Of the turnkey PMSs, telephone switches, advanced electronic locking systems and point-of-sale systems being installed in the lodging industry in 1983, most were not even on the market at the time of the previous survey.

Electronic switches had virtually taken over the market in hotel telephone systems, and accounted for more than 96 percent of the previous year's installations.

The 1983 survey showed that more than 2,500 electronic call accounting systems of at least 41 companies were installed in American lodging properties, but only 30 of those companies were still in business. More American lodging properties had ordered call accounting systems during a two-year period than had ordered data processing systems in all history. (Now, of course, almost every hotel uses both.)

Within the previous three years, more than half of the remaining electro-mechanical guest accounting machines, cash registers and back-office accounting machines had been replaced by electronic equipment. There had been a 50 percent increase in the number of properties using in-house data processing.

Stand-alone word processing systems were finally reported in 1983, but they subsequently disappeared with the rise of desktop computers.

The 1983 respondents showed increased sophistication in energy conservation techniques, and that interest continues to the present in the wake of the energy crisis in California and elsewhere.

In hotel security technology, closed-circuit television had a large reported increase in usage. New electronic locking systems made technical advances, but in 1983, they had not yet gained more than token market acceptance, a situation soon to change.

Almost every type of fire safety technology traced in the survey showed a dramatic three year increase in usage. More than four times as many guest rooms reported having smoke detectors.

Videoconferencing started to edge into the lodging scene as the result of exploratory projects undertaken by heavy hitters like Hilton, Hyatt, Marriott and Sheraton.

A fourfold increase in installation of guest-room movie systems and the expansion of cable networks and pay-per-view systems meant that in-room services were growing in importance. Several companies reported testing new TV-based guest-room services such as shopping, messaging, video games, in-room checkout and others.

We ended our survey career with the 1983 report, but continued to track hotel technology through our technical consulting assignments, and via The CKC Report...the Hotel Technology Newsletter, started in 1984.

In the last 30 years, we have tracked the early attempts to use the PC as the platform for hotel property management systems and the rest of the "micro revolution," including the fluctuating number of PMS software vendors — up to a high of 92 of which only 12 survived from the 1983 survey report.

The prime tech-based security tool was the electronic guest-room locking system, but acceptance was relatively slow until July 18, 1991, when the lead article on the front page of the Wall Street Journal triggered a multi-media campaign which helped focus the attention of America's lodging properties — and America's travelers — on the importance of adequate hotel/motel security.

The Wall Street Journal headline blared, "Unwelcome Guests: With Cut-Rate Inns Scrimping on Security, Criminals Move In." A subhead noted, "Rapes, Robberies on the Rise."

Media attention continued throughout July and August, and caused a number of lodging organizations to take a serious look at their security programs. Industry action was almost immediate. Electronic locking systems began to be mandated by large and small chains and management companies, and they are now used in more than 80 percent of the rooms in lodging properties of 100 or more rooms.

In fire safety, more stringent fire codes have led to everything from flame-retardant, low-toxicity bedding and room materials to faster-responding sprinkler systems and central communication of smoke detectors.

Energy conservation is still important, and hotel organizations have come to understand that managing energy use properly adds dollars to the bottom line. In fact, if your property has not had a thorough audit of its energy systems or major equipment replacement in the last two years, it is a good candidate for substantial bottom line savings.

I became a believer in videoconferencing when I delivered the keynote speech, highlighting key trends in hotel technology, to the Scandinavian Hotel Technology Conference via a video-conferencing link between New Jersey and Stockholm. The following year I addressed the Australian Hotel Association Conference from New York City via a videoconference link to Sydney. Handling questions from the audience was especially effective, since a zoom lens permitted me to see the person more closely than I ever could from an auditorium stage.

The decades since the last technology survey have seen the rise of the fax machine, hotel-oriented voice messaging, guest-room amenities such as electronic safes and bars and expanded TV-based services.

Yield/revenue management has finally become an effective industry tool. Two technically strong companies are even testing net-based forecasting and revenue management. Meanwhile insidious telephone scams bedevil hotels. High-definition TV (HDTV) made slow progress through the '90s, and its wide deployment is now just around the corner.

The proliferation of new online reservation options has given hotels a variety of means for capturing new reservations.

We have all become accustomed to overhearing cell phone conversations on the street and shuddering at the sudden intrusion of ringing phones everywhere, from restaurants and theaters to trains and busses. As a result the revenue in hotel telecom departments has declined as cell phones proliferated.

People are hunched over their Palm Pilots and other electronic devices, and we wonder how long it will be before wireless is the absolute monarch, and wired buildings are mere fairytale structures that we tell about to our children.

Most of all, we have watched the rise of the Internet and e-mail which have changed the way we work, play, buy, sell, learn, make new friendships and maintain old ones. The demand for high-speed Internet access from the guest room spawned a host of companies dedicated to providing that service, and some of them survive, while others have fallen by the wayside.

That 30 year pattern of problems and progress in the application of hotel technology provides some indication of the awesome technology advances in our future. A few examples:

• The Internet. Internet2, a not-for-profit consortium of nearly 200 U.S. universities with participation of a number of major corporations, is developing and deploying advanced network technology and applications. Next Generation Internet (NGI), a federal initiative, is working with the Internet2 consortium in many areas. The goal of Internet2 is to accelerate the diffusion of advanced Internet technology, particularly in the commercial sector, as well as to benefit the education community. The advanced technology is certain to find applications in the lodging industry which is steadily becoming more involved in e-commerce. (And Internet3 is already in the planning stages.)
• Nanotubes. Last year IBM announced break-through transistor technology with carbon nanotubes, tiny cylinders of carbon atoms that are 500 times smaller than today's silicon-based transistors and 1,000 times stronger than steel. Nanotubes will allow computer chips to be made smaller and faster than is possible with silicon — and the result will be smaller and faster computers — the "wearable" PC's you can carry on a belt or wrist. Every kind of computer will be smaller, with speeds that surpass what's available today.
• Storage. Researchers from IBM and at least seven other companies are also making great strides in expanding storage capacity with innovations in many areas, particularly in magnetic hard-disk drives, and alternative storage technologies. Again, the ability to store much more information in much less space is key to building tiny portable computing devices.
• Fibre Channel. Fibre channel is a high-speed interface designed for multiple disk drive systems. It offers several benefits over the commonly used SCSI Wide (LVD) interface, such as higher bandwidth, ability to support over 100 more drives, and improved redundancy. This new technology will be used on web servers, central reservation systems, and any other application where uptime is critical.
• Fusion. Sometime in the next decade the most significant breakthrough may come from fusion energy. Princeton Plasma Physics Lab, the Lawrence Livermore National Laboratory and other research facilities are devoted to creating energy by heavy-ion fusion using accelerators. The physics involved is complicated, but if fusion energy becomes a reality, it could eventually provide all the low-cost, non-polluting energy the world needs.
• 3-D. New 3-D technology has a range of applications, and will be welcomed by hotel marketing departments to capture the attention of guests.

Separate from the technology are a variety of other factors that will impact the value of hotel technology. For example:

• The strong trend toward standardization of PMS and a growing number of other items. Michael Leven pioneered that approach when he was president of Holiday Inn. Since then, the Choice and Cendant chains have standardized over 10,000 properties.
• The fact that today, everyone from kindergartners to adults is familiar with computers, and the kids are likely to be more computer literate than general managers were 30 years ago, and far more eager to accept new technology.
• The hotel market will be impacted by strategic alliances among hotel chains and management companies to create a strong competitive edge.
• To meet that challenge, some suppliers are forming their own strategic alliances to serve the hotel industry effectively. Overall, it will be a tough market for single-product suppliers and a challenging one for independent hotels.

The next thirty years won't be dull.

Larry Chervenak, CHAE, is president of Chervenak, Keane and Co. Chervenak is an inductee of the HFTP International Hospitality Technology Hall of Fame and a member of the 2002 HITEC Advisory Council.