Evaluating Hotel and Hospitality Management Software
By Ahmed Mahmoud , Founder of Revenueyourhotel.com
Hotel and hospitality management software performs essential financial, organizational and operation functions for hotels, motels, resorts and bed & breakfasts, as well as condos, and other forms of lodging. These functions include reservations, front office, revenue management, employee scheduling, accounting, property/maintenance management and customer relationship management.
The growth in the world economy and the hospitality industry has resulted in a clutter of new Hotel Management software companies vying to increase their footprint around the market. This has not only started a price and promise war amongst the new entrants, but has also been creating immense doubt and confusion in the minds of the IT Managers and decision makers in order to differentiate between many. Besides this, the assumption that the value of a Hotel Management Software is obvious and can be rarely defined either in abstract or practical terms fuels the confusion further.
The result of this confusion created a market fragmentation. Because of the relative ease of developing software, there are lots of new companies entering the hotel management software market. Many of these come from Canada and Europe and are now looking to enter into the U.S. market. Though this will no doubt lead to better costs and quality in the long run, at the moment buying decisions may be even more confusing than they were a few years ago.
For all hotels, resort or Inn and in order not to get confused when deciding to purchase any management software please consider the below 12 steps:-
- Select the Project Manager.
- Determine the budget and get sign off.
- Select the Evaluation Team.
- Define the property type and identify who the guests are.
- Identify business needs and identify guest needs.
- Drill down and identify specific needs in relation to the property management system.
- Research property management system vendors that offer the majority of features that match the needs assessment.
- Create a potential vendor list.
- From the potential Vendor list, break it down to a short list of 5 or less PMS Vendors.
- Arrange and participate in system demonstrations by Vendors from the short list.
- Make the decision.
- Ask for references and contact them.
But before we go in details we need to calculate the Total Cost of Ownership (TCO) and Return on Investment (ROI) as both of them comes as a handy solution to combat this – a two-pronged approach, as both these parameters are quantifiable and therefore accurate.
1- ROI: The expected Return on Investment provides the cost justification and motivation for investing in hotel management software. There are quantifiable as well as intangible benefits associated with such an investment decision. The quantifiable benefits have a bottom-line impact on profitability, asset turnover and a potential effect on stock value. A critical evaluation of the software is required to ascertain whether the software has the necessary features and functionality to achieve broadly the benefits or not i.e. increase hotel revenue, Improved Customer Service & Sales, accounting control …….etc .
ROI analysis determines the financial significance of the software and the speed of payback. Once you have a good business case with regard to ROI, conducting a TCO analysis helps to conclude the analysis. A thorough TCO analysis will pinpoint where the differences are in solution costs, over a multi-year timeframe. This two-pronged approach ensures that you will not only get a good return, but that you ultimately will work with the most cost-effective solution.
2- (TCO) - Total Cost of Ownership is a commonly used calculation designed to help businesses assess the direct and indirect costs associated with information technology purchases. By doing a TCO analysis, one can make more informed purchase decisions.
When evaluating the TCO of software, one should not restrict the calculation to the initial cost of purchase, but should also calculate the cost of managing the software to its complete life and should incorporate the following points in their calculations.
- Cost of initial deployment and employee training.
- On-going fees for maintenance, software updates and upgrades as well as help-desk support.
- Costs associated with downtime
- Cost associated with the business process re-engineering.
In calculation of the TCO some of the parameters are untold and unexpressed. For Ex: - Does the software under consideration have a good user base in the market? What would be the cost of hiring and training an employee on the new software? How soon can a position be filled with trained personnel, if an employee quits?
Hence a lower TCO and higher ROI are the defining criteria for the right software choice, which emphasizes that not only the quantifiable benefits but also the intangible need is to be considered before making IT investment decision for your hotel.
Market Trends to understand
Property management systems have made great advances in the hotel industry. Clouds based PMS has streamlined the booking process and has helped many small and mid-sized hotels come out of the abyss. With reduced amount of manual processes, business has freed up for more vital tasks and hotels have a bright chance to grow. In this rapidly changing industry, hoteliers should always look for property management tools that will ease operations, automate procedures, reduce the risk of human errors and give hoteliers enough time to attend to guests.
As a hospitality sector business, you would like to stay in-sync with the latest trends in the global hotel industry. This is rather important since trends that are increasingly engaging attention soon can become a standard demand from your guests.
As technologies advance, the old clears a path for the new. Some individuals may be inclined to hang on to what they are comfortable with, but they won't advance if they don't make room for the best and brightest. With property management system (PMS) in the hotel business, there has been a notable shift to the new and improved cloud-based system from the old legacy system.