By David Lund
Our industry is ripe for all kinds of disruption. The two big disruptors today are online travel agents and home sharing services. If we look back, we see all kinds of “other” disruptors that seemed on first glance to be negative. In many cases, they ultimately helped solve a problem we could not master. Or, they ended up being better at the task than we were.
The first and largest one that comes to mind is in food and beverage operations. The disruption comes in two forms: pure outside competition and internal desire.
The outside disruption—the free-standing restaurant—has been prolific and its effects are debatable, like many aspects of our business. We do not have to go too far back in our history to find hotels with multiple outlets that were busy and chock a block with patrons. I remember the 1980s and 1990s. We had the best facilities, the kitchen brigades that could cook their way into the hearts of our clients and the service staff.
For a long time, the real action in the food and beverage world was largely hotels. As we all know that has run its course and what surrounds our city hotels today are a wide range of restaurants and bars that attract our hotel clients as well as other urbanites. You cannot go into a suburban market and find a hotel that has been built in the last 20 years that is not flanked by chain restaurants. They pop up like pimples on a teenager’s face.
So, hold the tissue box. This food and beverage restaurant and bar proliferation have a double edge and when we examine it closely it does not look so cutting. We all know that even a hotel that shows a healthy F&B profit on their statements, in reality, makes none or very little money. The way we report F&B operations in hotels are misleading and the reality is, for almost all hotel restaurants, we are trading dollars at best. For some hotel restaurants, we may as well hand out $10 bills at the door and send the customers across the street. Wages, unions, benefits are all substantially higher and we cannot compete with the small business lack of overhead and nimbleness. Not to mention that in many cases they have the products and services our customers are looking for. We are a product of our own success. Complacency and the simple truth say that outsourcing our F&B restaurant business has not all been a bad move.
To the contrary. Once we have seen the impact of closing outlets, the F&B profit picture in many cases gets better. We have kept the profitable banquet and catering piece and inadvertently outsourced the less than profitable outlets. All of this happened to ultimately show us it is a good thing. Even to the point where today in many hotels we are looking to get someone to operate the outlets that are left. In some hotels, this is a no-win proposition for any operator and, yes, even some of those outlets are closing. Owners and asset managers do not buy the line that we need those outlets to support room rates. Breakfast still works in most hotels, cocktails in the lobby can still survive, but in almost every other case the profit from F&B outlets is backward. Thank you for the disruption.
Now back to the title of this piece: PMS connection
If you operate a hotel today, you know how much of a cluster your PMS system is. Getting service for the never-ending upgrades and even the smallest of changes is like trying to get into a Rolling Stones show. On top of the lack of response from vendors who think they have a monopoly, they charge an arm and two legs for their crappy products and appalling service. I better stop here.
Well, shall some disruption enter to help us along? If you Google the words, "free hotel PMS app" you will find vendors who have developed products that are free! Yes, free. One that jumps out at me is called Softmogul. All they want is to provide you their free property management and restaurant software in exchange for your credit card processing business at competitive rates. Now, I know what some of you are thinking. Where is the hook? Surely they will hold us ransom for double the processing fees soon enough. I say it is high time someone sees the value we currently pay on every credit card transaction as a totally disreputable ingredient that is calling out for attention. Why didn’t anyone in our industry see this opportunity? What would 2-3 percent of the $600 billion hotel industry be worth? What about 2-3 points of all the standalone restaurants? How much better service do you think someone who wants your card processing would provide compared to what you receive today?
A product like this might not be ready for a 1,500-room Hilton today but think of the small hotels that struggle with a legacy system or bounce along without any current or integrated systems. Think about what the world could look like if a large credit card processor overnight developed a PMS in conjunction with a vendor. What if they made that platform so integrable that it is as simple as it is today to sign up your hotel on an OTA. Disruption can come and go in a variety of directions. Hotels are notoriously late to the game and that means others get to clear the land first, build the dream and then hotels scream it is not fair.
When will we learn from the lessons of the past? When will we see disruption as part of the business and lead the charge and not follow it after the fifth inning?
What else in our industry are we simply overlooking because we are still operators and not developers with a little entrepreneurial flair and why can’t we be both?
