Strategies Tactics and System in Selection

Strategies and Tactics

in SystemSelection

Developed by

American Hotel & Lodging Association’s Technology Committee


in SystemSelection


in SystemSelection

Developed by

American Hotel & Lodging Association’s Technology Committee

This guide was written by Mark Haley and developed by the TechnologyCommittee of the American Hotel & Lodging Association with a grant fromthe American Hotel & Lodging Educational Foundation.

Technology CommitteeChairman Darrin Pinkham, CHTP Director of Technology

Loews Hotels at Universal Orlando

Vice Chairman Carol Beggs, Vice President TechnologySonesta International Hotels Corporation

AH&LA Staff Liaison/ Richard J. Jackson, Vice President/CIOProject Manager American Hotel & Lodging Association

AH&LA Officer Liaison Kirby D. Payne, CHA, AH&LA Past ChairmanPresident, American Hospitality Management, LLC

ISHAE Representative Paul Hartgen, Executive DirectorNew Hampshire Lodging & Restaurant Association

Members Robert Bennett, SVP Property Systems and ServicesPegasus Solutions, Inc.

Kathleen Pearl Brewer, Ph.D., Associate Dean for Academic Affairs

University of Nevada Las Vegas

Dan Connolly, Assistant ProfessorUniversity of Denver

Brian Garavuso, Chief Technology OfficerInterstate Hotels and Resorts

Dan Garrow, Chief Information OfficerMohegan Sun Hotel & Casino

Mark Haley, CHTP PartnerThe Prism Partnership

Danny Hudson, Vice President Sales & MarketingNewmarket International, Inc.

Jon Inge, President` Jon Inge & Associates

Sherry Marek, Vice President of MarketingDatavision Technologies, Inc.

Joseph Martino, Vice PresidentIDeaS, Inc.

Gary Mesich, Vice President IR Business ServicesMarriott International

Andy Ross, Chief Information OfficerJC Resorts LLC

Richard Siegel, President and PublisherHospitality Upgrade/Siegel Communications Inc.

David Sjolander, Vice President HotelInformation Systems

Carlson Hospitality Corporation

Victor L. Vesnaver, PrincipalV2 Consultants

Acknowledgements

American Hotel & Lodging Foundation Research andProject Funding Committee

Carol Beggs, Sonesta International HotelsEditorial Review

Dan Connolly, University of DenverEditorial Review

Brian Garavuso, Interstate Hotels & ResortsEditorial Review

Sharon Guzman, Educational Institute Project Coordination

DesignDrew Banks, Senior Graphic Designer, AH&LA

DisclaimerThis guide is intended only as a general guide concerning Strategies andTactics in System Selection and does not purport to be, nor should it be usedas a complete description of system selection problems or solutions.Companies should not rely upon this guide for other than general informationand should consult their employees and attorneys before implementing anysuggestions or procedure or using any forms contained in this guide. AH&LAdoes not warrant the accuracy of the guide, the accuracy of completeness ofthe procedure described in this guide, the effectiveness of such procedures orthe effect of any forms contained herein.

©2003 American Hotel & Lodging Association. All rights reserved.

TABLE OF CONTENTSSTRATEGIES AND TACTICS IN SYSTEM SELECTION . . . . . . . . . . . . . . . . . . . . . . . . 7

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Selection Process Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Baseline System Selection Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Buyer Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Alignment with Business Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Standardization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Best-of-Breed vs. Integrated Product Suite . . . . . . . . . . . . . . . . . . . . . . . .13

Darwinian Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

System Selection & Deployment Timeline . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Role of System Selection Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Ethical Issues in System Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

NEEDS ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Data Gathering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Functional & Operational Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Data Communications Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Equipment Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Capacity & Sizing Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Strategic Alignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Existing Infrastructure and Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Timeline Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Budgetary Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

TOOLS TO EVALUATE THE MARKETPLACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

USE OF REQUEST FOR PROPOSAL TOOLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

Reference Checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

Vendor Site Visits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

HOTEL TECHNOLOGY 101

Strategies and Tactics in System Selection 5

©2003 American Hotel & Lodging Association6

REQUEST FOR PROPOSAL CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Timelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

Attach Response Document to Contract Documents . . . . . . . . . . . . . . . . . . . . .32

Include Everything . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

Negotiate Now, Not Later . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

Control Communications With Vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

Line Item Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

Competition Between Distributors and Vendors . . . . . . . . . . . . . . . . . . . . . . .34

Get Sales & Maintenance Agreement Documents . . . . . . . . . . . . . . . . . . . . . . .34

Require “Best Price First” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

Long-lists and Short-lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

Negotiate an Acceptance Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

KEY ELEMENTS TO CONSIDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Functionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

Other Elements of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

Elements of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

Elements of Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

One-Time Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

Recurring Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Sample Worksheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

Sample PMS Equipment Configuration . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

Sample Accounting System Weighted Feature Comparison . . . . . . . . . . . . . .46

Sample PBX Proposal Price Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . .47

Sample Reference Check Protocol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

Sample Generic RFP Outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

Sample PMS Project Timeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

STRATEGIES AND TACTICS IN SYSTEM SELECTION

Welcome to the AH&LA Technology Committee’s guidebook, “Strategies andTactics in System Selection.” The AH&LA Technology Committee is pleasedto present this manual for acquiring hotel technology in a structured andconsistent manner. This guidebook is one of a series designed by theTechnology Committee to familiarize hotel owners, operators and developerswith the fundamentals of technology in the hotel environment.

This guidebook provides an overview of the range of strategies and tacticsthat one can employ when selecting various computer and communicationsystems for a hotel or hotel company. The content does not assume any specific prior knowledge in either technology or accepted purchasing practices and corporate requirements. Many of the principles and strategiesoutlined in this document apply to buying other products for your hotelcompany as well as technology.

OverviewDoing a good job with system selection matters to your hotel company andto your career. Technology, and the competent selection, installation andsupport of it, continues to play a more central role in guest expectationsand hotel operations. As technology plays more of a part in daily life andbusiness activities, its importance increases in the hotel environment. This increasing value of technology means increasing consequences of inadequate or faulty selection processes. The stakes are higher now. Usingthis guidebook, you will learn what the key dimensions are for system selection and how to maintain control of the process.

Every hotel and hotel company buys many things every day. Some are inexpensive items of low value, such as pens and notepads. Some are costly with a long-term impact on the guest experience, such as a telephone system. Almost all hotel systems fall into the “more costly” and “long-term impact” categories. Many directly affect guests and their perception of the hotel.



The essence of any product selection effort is to get the right product withthe right services at the right price from the right vendor at the right time.Sounds a lot like the classic definition of Revenue Management, doesn’t it?Seriously, this definition is particularly important for purchasing systems inthe hotel environment, for several reasons:

❚ When you buy a system, you have it for a long time. That meansyou live with a mistake for a long time.

❚ When you replace a system because of a poor decision, it is muchmore expensive than merely buying new hardware and software. Thedisruption to established processes and staff retraining are verycostly in both hard and soft dollars.

❚ You are frequently spending someone else’s money. Very often,ownership and management are separated in hotels. When manage-ment buys a system, it is usually spending ownership’s money. Apoor purchase decision by management is a breach of the fiduciaryduty to the owner.

Clearly, the consequences of a flawed purchase decision are significant.Conversely, the economic and operational benefits of a strong decision aremany and equally significant. This guidebook will give you the basic tools tohelp you realize those benefits.

A structured selection process will help you to maintain a business-likeapproach to the buying decision. Sometimes, the decision can become highly subjective and emotional rather than pragmatic and disciplined.

Selection Process ObjectivesAs noted above, one definition of a selection process is “to get the rightproduct with the right services at the right price from the right vendor atthe right time.”


Let’s analyze each of those clauses in a little more detail:

❚ The right product. You might get a great deal on, say, a propertymanagement system (PMS), with installation services and every-thing else. But if the system you got for such a great deal lackscomplete group functionality and you host many bus tours, youhave a problem. If the PMS doesn’t have an interface to the newPBX you just bought, you have a problem. If the high-speedInternet access (HSIA) solution you bought doesn’t support virtualprivate networks (VPN) and you have a large mix of corporateguests, you have a problem.

Getting the right product means knowing your operation, what yourrequirements are and what the necessary functions are for that system to service your operation. Your job is to go through a needsanalysis to uncover those requirements and functions.

❚ The right services. Most technology systems come with someamount of services, either from the source vendor or a third-partyinstaller. Installation, integration, training and testing are typicalservices at the initial implementation. You also will require ongoingservices such as software upgrades, staff retraining or guest support for the HSIA application.

Specifying all of the services you will need is crucial to having asuccessful implementation. Skimping on or not presenting essential services is a tactic that some vendors exploit to maketheir quoted cost appear lower than your actual total cost.

❚ The right price. No business ever wants to pay too much for a product or service. As a general rule, underpaying is not a goodidea either, running the risk of “getting what you paid for” oralienating the vendor, perhaps tothe point of reducing the vendor’scontinued viability. At that point, you have bought an “orphan”product, a problem outweighed by getting what looked like a great price.



The most effective way to get the right price is to understand thevendor’s business model and to compare and contrast the pricingreceived to like pricing from other vendors. Then you need tounderstand and account for, the differences based on quality, service levels or business model variations.

❚ The right vendor. In some ways, the “right vendor” variable ismuch like the “right product.” It comes down to a thorough needs analysis and matching the needs of the customer to the vendor. Inother ways, it is a very different analysis, matching the size,sophistication and expectations of the client with the size, cultureand capabilities of the vendor. Evaluate the vendors’ futureprospects as well. Do they have the capability to grow with yourorganization, and enable your hotel company to do more in thefuture than it can now? Often, there can be more than one rightvendor for a given customer.

It is often comforting to select a product because the vendor is the biggest or best known in its space (“Nobody ever got fired forbuying Cisco.”). However, a smaller customer with unique needswill sometimes find a better fit with a smaller, niche vendor or distributor. Conversely, a giant customer can overwhelm a smallvendor with its demands and marketplace muscle.

❚ The right time. Obviously, a product that isn’t delivered in a timelymanner (say, before the hotel opens) presents an operational problem. This is true of carpets and case goods as well as computers. Technology systems are subject to all of the same timehazards as other hotel products, including manufacturing delays,shipping problems, damage in transit, thefts from storage and soon. Additionally, new or upgraded systems are subject to delays insoftware development, quality assurance and just plain makingthem work.

Understand precisely what your tolerances for delays are and thepotential for your vendor to miss deadlines in any time-sensitiveimplementation.


This issue is particularly acute for new hotel openings or seasonalreopenings. Have a “Plan B” for any brand-new system that has notbeen delivered and installed elsewhere.

Sometimes, there is value in deferring a system selection. As technology in a given area rapidly evolves, a decision made latercan be superior to one made earlier. Balance this value against thechallenges created by compressing all of your system selectionefforts into late in the cycle.

If the objectives of the system selection process are the right product, services, price, vendor and time, what are the supporting strategies toachieve those objectives?

Baseline System Selection StrategiesMany larger hotel companies have explicitly articulated system selectionstrategies that are formalized in a strategic planning document. Other hotelcompanies may lack the customized binders, but they usually have some setof strategies guiding their selection efforts. Let’s examine some of them.

Buyer Control

First and foremost, the buyer must remain in control of the purchasingprocess. If the hotel company cedes control of the process to the vendor(s),the company earns a less than optimal outcome. Management’s primaryresponsibility in the selection process is to maintain control of it.

Maintaining control of the process includes the following:

❚ The hotel company defines the functionality, type, number and sizeof products requested.

❚ The hotel company defines the services requested.

❚ The hotel company defines the payment terms, contract durationand other critical variables.

❚ The hotel company strictly defines the response format, especiallypricing detail.



Keeping control of the process and the content is essential to ensure com-parability of pricing and terms. If you allow four different vendors to makefour different pitches to you, you will find it very difficult to compare themeffectively. But if you seize and keep control of the process and dictate tothe vendors what the configuration, service levels and pricing format mustbe, your efforts to compare and contrast them become straightforward.

Maintaining control of the process is important on another level as well:reminding the vendor whom the customer is. You cannot allow the vendor todrive the process. That is your job.

Alignment with Business Strategies

The most important thing for any technology-related strategy, includingselection, is to be tightly aligned with the enterprise’s business strategies.If the hotel company’s culture and fundamental business strategy is to cen-tralize key functions and take costs out of property operations, you mustmake supporting technology decisions. If the business strategies drivedecentralized operations and managerial autonomy at the unit level, youwill buy very differently.

When technology strategies diverge from the business strategies, weencounter a well-known disconnect between the business and the informa-tion technology function. Preventing and resolving this disconnect is theprimary responsibility of whoever leads the technology function. Whetherthis individual is the Chief Information Officer (CIO) of a Fortune 500 firmor the general manager of an unflagged limited-service hotel, the responsi-bility for strategic alignment holds.

Standardization

One typical selection strategy is standardization, selecting a single or limit-ed number of products in any category for use throughout the entire busi-ness. Requiring a standardized PMS and voice-mail system, for example,ensures consistent guest experiences across the brand.


Standardization also reduces support costs because the entity providing sup-port is familiar with the products in place across the organization. A prob-lem with a standard product only needs to get solved once in the companyin order for that knowledge to get transferred, at least in theory.

Limiting the number of PMSs, for example, reduces costs and challenges indeveloping and maintaining central reservation system (CRS) interfaces.Reducing the number of CRS/PMS interfaces supported creates revenueopportunities as well, in that the hotel company can focus on improvingand enhancing those few interfaces, thus driving the revenue generationpotential.

Further benefits of standardization include the following:

❚ Increasing the company’s leverage in negotiating price, terms andservice with the providers.

❚ Increasing the portability of employees, where they know the systems as they transfer from property to property and do not need more training.

Standardization brings some risks with it. These risks include increaseddependence on those fewer vendors and possibly missing out on a cycle ofadvancement or development in the space if the vendor misses a step.Standardization also eventually decreases your leverage or bargaining poweras the vendor knows you won’t want to move off your standard. Ideally,however, your increased value as a larger customer balances this.

Standardization typically occurs at the brand or ownership level. We suggestthat even unflagged single properties could benefit from standardizing onspecific product lines of desktop computers and networking equipment tominimize maintenance and increase compatibility and part-swapping.

Best-of-Breed vs. Integrated Product Suite

Best-of-breed selection strategies refer to the practice of buying the singlebest product for any given application (e.g., PMS, point-of-sale, sales andcatering) and then relying on either simple or complex interfaces to allow



the systems to communicate. An integration selection strategy drives theselection of an integrated suite of applications from a single provider. Thesesuites are sometimes integrated at the database level; others come withproven, tight interfaces among the modules supported by the singleprovider.

Strong arguments can be made for or against either approach. Selecting theright one for your hotel company requires an explicit understanding of theoperation today and in the future. Review the table below for examples ofthese arguments.


SELECTIONSTRATEGY PROS CONS

BEST OF BREED

Single best application for thebusiness purchased

Must purchase and maintainnumerous interfaces

Robust interfaces often yieldsame benefits as integration

Vendor “finger-pointing” when something fails

Minimize investment in lesscritical applications

Must maintain multiple vendorrelationships

Maximize investment in applications critical to the business

No commonality of user interfaces and logic acrossapplications

Usually requires more serverhardware, operating systemand database licenses

INTEGRATED PRODUCT

SUITE

Single vendor relationship Must invest in a platform thatsupports the whole package

Fewer or easier interfaces to maintain

Most suites have a weak link,one application not as strongas others

Integration at database levelcould yield an enterprise viewof all guest activity

Sharply increased dependenceon the single vendor

User interface and logic might be consistent acrossapplications

The universe of integratedapplications is smaller than the total marketplace, result-ing in reduced choice and competition for your business

More integrated application families are coming onto the market. Mostexperts consider them still an emerging category. Evaluating one entailsexamining what integration really means in that product family. Some “integrated suites” are in fact dissimilar applications created by differentorganizations but marketed by a single firm that grew by corporate acquisition.

Darwinian Competition

Sometimes known as “the spaghetti test,” the Darwinian Competitionapproach to system selection encourages buying diverse applications andseeing which ones survive. A company may install three each of three dif-ferent systems in nine different hotels and see what happens. For a limitedtrial of finalists in an evaluation exercise, it can make sense for a largecompany. It is a very expensive way to make a decision and you always endup with an orphan product somewhere once you finally do pick a winner.

System Selection and Deployment Timeline You must have a clear picture of the timeline for the selection process,including implementation, from the beginning. Sometimes there is a fixeddate establishing the endpoint of the process, perhaps a hotel opening dateor a seasonal soft period. Then work backward from there. In other situa-tions, the process can guide the timeline as no external deadline exists.

A general rule in establishing a timeline is that things always take longerthan expected. The more complex or innovative a project, the more likelydelays in the process. Build some leeway into your timelines whenever possible.

For a sample selection and implementation project timeline, see the appendix.

Major task areas to consider in building your timeline include the following:

❚ Do a needs analysis

❚ Evaluate the vendor market

❚ Evaluate your competitive set



❚ Develop a request for proposal (RFP)

❚ Issue an RFP

❚ Receive and evaluate responses

❚ Handle questions and clarifications

❚ Check references

❚ Develop a short list

❚ Schedule and script product demonstrations

❚ Have product demonstrations

❚ Handle further questions and clarifications

❚ Do site visits (customers and vendor)

❚ Conduct negotiations

– Contract terms

– Price

❚ Sign contract and pay deposit

❚ Have equipment-ordering lead time

❚ Deal with database population

❚ Handle equipment receiving, staging and installation

❚ Do database testing and confirmation

❚ Manage staff training

❚ Do real data input and conversion

❚ Do interface installation and verification

❚ Do inventory/financial balance verification

❚ Go live

❚ Evaluate the process and outcome

Obviously, any specific project may not include all of these steps. Any givenproject may include many of these steps, and some will be abbreviated orextended varying with the circumstances.

Role of System Selection CommitteeMost system selection efforts rely on more than one person. A large selec-tion project will require a substantial committee with representatives from


different disciplines and constituents. For example, a selection committeefor a new human resources information system and integrated payroll system might include members from human resources, accounting, payroll,procurement, information technology and operations. In a company with acorporate and property hierarchy, the committee may include members fromproperty-level payroll, accounting, human resources and possibly operatingdepartments as well. Include line-staff representation in the selectionprocess if possible, such as front desk or wait staff in a PMS or point-of-sale(POS) selection. They typically work with the system more than their managers do.

An “inclusive” approach to a selection committee might seem unwieldy andunnecessarily top-heavy. However, there are two primary factors recommend-ing a broader approach to the selection team:

❚ Ensure that all relevant perspectives are considered.

❚ Create support and “buy-in” in the property (ies) when the productgoes into deployment.

Typically, the committee will have a procedural leader and one or more ex-officio leaders by virtue of their senior positions in the organization. The procedural leader could be an engaged consultant or an employee withspecific expertise in the subject domain or procurement, with responsibilityfor overall execution of the process. These responsibilities typically includeoverseeing the needs analysis, authoring the RFP, managing the RFPprocess, scheduling, creating agendas for and keeping minutes of meetingsand doing follow-up. The ex-officio leaders often will be senior managementfrom involved disciplines in the hotel company or a hotel general manager.

Ethical Issue in System SelectionThere are many potential ethical issues or considerations in major purchasedecisions. The risks and consequences of an ethical lapse increase with thesize of the total purchase decision. While an in-depth discussion of purchas-ing ethics is beyond the scope of this document, we should identify somerelevant principles in organizing selection efforts to minimize conflicts ofinterest and ethical problems:



❚ Involve multiple people in the selection process. This approachminimizes conscious or informal collusion to influence the outcome.

❚ Avoid self-dealing and conflicts of interest. Spending the owner’smoney on purchasing from management’s affiliate organization can sometimes lead to a conflict and should always be disclosed.Ensure that consultants or employees used in selection processesdo not have a vested interest in seeing the business go to one vendor versus another. These interests could include “sales commissions” that are better described as kickbacks, equity positions in bidding firms or prospects for additional work if thebusiness goes to one vendor versus another.

❚ Treat all bidders fairly. If you give an extension to one bidder, makeit available to all. If the outcome is preordained and you simplyneed another proposal for comparison purposes, don’t force them tocomplete elaborate proposal processes for business they can’t win.If you devalue a vendor’s proposal because of one circumstance(weak financial condition, for example), be certain to evaluate allof the other proposals on the same dimension.

❚ Avoid fishing expeditions. If you are not serious about buying ordon’t have budgetary support, do not go to the market as if youdid. Use a request for information (RFI) with lenient timelines ifyou are solely looking for information and testing the market ratherthan buying.


NEEDS ANALYSISThe hotel company has a responsibility to conduct a thorough needs analy-sis prior to going out to the market. Sometimes the needs analysis will becompleted after evaluating the marketplace, as described below, but is moreoften done prior.

On one level, “needs analysis” can simply mean determining the numberand types of devices required in each part of the hotel. More critically,“needs analysis” also can mean identifying what features, functions andattributes are important to the company and are points of differentiationbetween different products. Conducting this level of needs analysis requiresa strong understanding of the operation today, where management intendsto take it and what role the proposed technology will play in getting there.

Doing a good job with needs analysis is crucial to maintaining control ofthe system selection process. If the hotel company fails to conduct a needsanalysis properly, it gives the vendors the ability to define system specifica-tion and sizing. With that, it yields control.

Data GatheringThe process of gathering data for needs analysis will vary significantly with the type of project and the type of company. A PMS conversion for anexisting hotel requires a different approach to data gathering than a newcentral reservations system for a medium-sized hotel company. However,most system selection efforts in a hotel environment will require needsanalysis along the following dimensions.

Functional and Operational Requirements

What are the features and functions required to support the operation?Answering this question often calls for developing process maps that identify who uses the system to do what in service of the guest.

If the hotel enjoys a high proportion of repeat guests, strong guest profiling and history features are called for in a PMS selection. If a back-



office accounting system is being purchased for a centralized accountingoffice supporting multiple hotels, the ability to print checks from commoncheck stock becomes important. The catalog of PMS interfaces available iscrucial in selecting a telephone system.

The team conducting the needs analysis should identify and document thesekey attributes. Assigning some weighting of relative importance to featuresis also useful, and comes into play when evaluating RFP responses.

This step is the hotel company’s opportunity to change the way it doesbusiness. New functionality that supports changes is often the businessdriver for a new system, making this a critical step in the process. It oftenwill take a conscious mind shift for both you and, more importantly, yourstaff to realize that you don’t want a system that simply does everythingyour old system did.

Reporting Requirements

Reporting requirements are a crucial subset of the functional requirements.During needs analysis, identify key reports used in the operation. Goingsomewhat further, then determine what reports still will be useful orrequired in the new environment. Typically, you will find that the desireddata are available in the new system, but they may be presented somewhatdifferently. Identifying the key reporting requirements in needs analysisallows you to look for the important reports when evaluating systems.Again, make sure that the reports are truly ones you can’t live without, notjust ones you’ve always had.

Data Communications Requirements

Almost every computer system demands data communications. You need toevaluate them for fit into your environment. You typically need to evaluatethem according to type and capacity. Capacities are discussed below.

Most computers use TCP/IP, the protocol developed for the Internet, tocommunicate, but there are others, including serial (often found in PMSinterfaces to other systems) and parallel (typically for printers servicing asingle user). In the needs analysis stage, you need to understand whattypes of data communications are relevant for this project.


Equipment Requirements

The equipment requirements step is typically the easiest element of needsanalysis to conduct. It is usually reduced to a spreadsheet showing thenumber and types of devices in each location in the property. See the sample in the appendix. Note the provision for “Existing Devices” and “New Devices.”

Capacity and Sizing Requirements

While equipment requirements are straightforward and simple, capacity and sizing requirements often are complex. Properly sizing the trunk configuration for a PBX, for example, entails significant assumptions aboutthe number, types and duration of inbound and outbound calls. Sizing therequired bandwidth for an HSIA solution requires assumptions about takerates and applications. Sizing the disk drive requirements for a PMS or salesand catering system requires knowing much more than the gigabytes of datastored in the old system.

Defining sizing and capacity requirements for the system in detail (i.e., bythe megabyte, gigabyte or port) is often difficult for the reasons above.Also, different systems proposed for the same property often will be config-ured differently due to differing architectural or database considerations. APMS using a Microsoft® SQL Server database will demand more disk capacityand drives than one using a dBase-type database.

From a data-gathering perspective, the hotel company needs to provide thevariables driving system configuration and require the vendors to proposeconfigurations supporting those variables. These variables typically includethe number of rooms, number of ports, occupancy percentage (sometimes byseason), number of users and number of records from an existing system toconvert or transcribe. Include any estimates for future growth that the hotelcompany perceives as relevant. Ten percent capacity for future growthshould be considered a minimum for infrastructure proposals such as cablingand switching systems.



Strategic Alignment

As discussed above, a core system selection technique is the alignment ofthe technology and business strategies. This aspect of the needs analysisprocess filters the data already gathered through formal or implicit businessand technology strategies. The impacts of these strategies then get layeredinto the functional requirements for the proposed systems. In its simplestform, it means building the business strategies into the definition of thesystem requirements.

Existing Infrastructure and Applications

Consider the impact of your existing infrastructure and applications as partof the needs analysis process. For example, if the property has an elderlycable plant that tests with performance below Category 3 standards, youneed to add cable plant work to a PBX replacement project. If you areinstalling a POS product, you want to make sure that both the PMS vendorand the POS vendor believe they have interfaces to each other. Sometimesone vendor claims an interface, but the other has never heard of that vendor.

Likewise, consider the capability of the hotel staff to support a new technology environment. If the hotel has several applications running in the Windows NT environment today, can it readily support a Unix-basedsystem?

Timeline Considerations

Any deadlines or milestones that impact the project need to be documentedas part of the needs analysis. These deadlines may include projected open-ing dates, periods of low occupancy (usually a good time to do a systemconversion) or major events such as a national political convention or SuperBowl. This was discussed in detail earlier.


Budgetary Estimates

At some point there will be a demand for budgetary estimates for the project. Many hotel companies and consultants can generate budgetary estimates based on their experience. Informal conversations with vendorsare another useful source of estimates. Whatever source of estimates used,determine if it is an “all-in” estimate or a purchase and installation costonly, and adjust accordingly. Travel and entertainment for trainers andinstallers, sales and use taxes, shipping and third-party vendor costs areexamples of hard costs typically not included in purchase price quotations.

Following the needs analysis, one then goes out to the marketplace to identify potential vendors and key functionality and simply to learn what is out there. Evaluating your competitors is also part of this process. Thefollowing section briefly discusses some tools and approaches to evaluatingthe market and the competitive set.



TOOLS TO EVALUATE THE MARKETPLACEMost system selection processes go through a formal or informal examina-tion of the marketplace for the system of interest prior to really going outfor proposals. Sometimes the organization has sufficient prior knowledge ofthe market to know which vendors to talk to about what products, or itengages a consultant with this background. Sometimes informal conversa-tions with a few key vendors can educate the buyer effectively.

One aspect of marketplace evaluation is identifying vendors active in thesubject area. Typical resources to identify vendors include online searches,trade shows (notably HITEC1), trade publications (notably HospitalityUpgrade2) and conversations with other industry professionals.

Some of these industry professionals are likely to be members of your com-petitive set. Techniques to determine what they are doing in the technologyof interest start with simply asking them what they are using and how theylike it. Vendors are a rich source of competitive-set intelligence as well.Tracking press releases in the online press often will alert you to competitorbehavior and intentions.

If the system you are looking for is more of a horizontal application than ahospitality industry-specific system (for example, a human resources infor-mation system), you will want to look at trade shows and publications forthat discipline rather than at hospitality sources.

Highly complex, rapidly evolving or emerging technologies typically requirea more thorough approach to evaluating the market. HSIA is an example ofone such market today. One useful approach is the RFI. Less formal and spe-cific than its big brother the RFP, an RFI can help you to identify key attrib-utes of systems and vendors as well as to gauge the capabilities and serviceethic of specific suppliers.

An RFI is just that, a request for information. While an RFP implies anintention to purchase something from someone, an RFI excludes a currentpurchase intention and states only that the organization seeks information


1 HITEC is the acronym for the Hospitality Industry Technology Exposition & Conference. HITEC is the major hospitality technologyevent worldwide, sponsored by the professional association Hospitality Finance & Technology Professionals. The show is heldannually in June at rotating locations in North America. See http://hitecshow.org or http://hftp.org for more information.

2 See http://www.hospitalityupgrade.com.

to support and improve future decision-making. An RFI may or may notrequest price information, noting that such prices are nonbinding and forbudgetary purposes.

RFIs typically explore business models, system functionality and servicecapabilities in great detail. The hotel company then can compare theresponses to the RFI and identify key elements to include in the specifica-tions when it goes out to purchase. The hotel company is now a more edu-cated buyer, which should result in a better buying decision.



USE OF RFP TOOLS

PurposeThe RFP is the tool for maintaining control of the process and ensuring com-parability of responses. Any significant purchase decision should be builtaround an RFP process. Relatively small acquisitions may not warrant a fullydeveloped RFP exercise, but even an informal process should include manyof the characteristics described below.

Response format, timing and selection criteria are all explicitly specified.The RFP is more stringent and binding than an RFI and is as much aboutprice and terms as about service levels and functionality. RFPs may be sim-ple or elaborate, depending on the organization’s requirements, the projectitself and the skill of the author.

For a sample RFP outline, see the appendix.

The most common RFP format found is built around a checklist of featuresand functions with the vendors required to respond “Yes,” “No” or “Explain.”Although this format is relatively simple to write and to score, it simplydoes not tell you much about how a system works.

Another approach describes a business requirement and lets the vendorsrespond how their system fulfills that requirement. This approach to RFPs ismore difficult to write, respond to and score, but it yields much more infor-mation about the functionality and operation of the proposed system.

For example, a checklist-format RFP line item of “Define dates for grouppickup of designated charges that vary from the stay dates” could beanswered “Yes” by vendor A and “No” by vendor B, apparently a weaknessfor vendor B. But if you use a business-requirements RFP design, you willfind out that vendor B uses a charge routing mechanism to accomplish thesame objective, which is in fact more powerful than vendor A’s approach.

This disparity leads us to recommend the business-requirements RFP formatover the simpler checklist approach.


ContentsA typical RFP will contain these elements:

❚ An introduction of the project, the property(ies), its purpose andthe involved parties.

❚ A clear definition of the process to be followed, including all deadlines and milestone dates and specific conditions of responseand selection criteria. Clearly state that the selection criteriainclude compliance with the process and the quality of theresponse document.

If the vendor won’t work to do a quality job to win your business,how hard will it work for you once it has the business?

❚ A section providing enough detailed background information on the project to allow the vendors to configure and size the project.In addition to tables of equipment required (see sample in appendix), this section should include information on the numbersof employees requiring training by position and any interfacesrequired.

❚ A section for the vendor to describe itself, its business and its customer base. Remember you are buying a long-term relationshipwith the vendor as much as a system. Areas covered should includethe size of the organization in financial and operational terms, itshistory and its organizational structure. Key areas to examine are the training and installation organization and the supportorganization.

This section is critical to finding out everything you need to know about the vendor organization. If you do not do a thoroughjob here, you may select a proposal from a failing vendor.

Many privately held businesses will not release financial informa-tion, at least not early in the selection process. If such a vendorbecomes a finalist, revisit the issue, perhaps signing a nondisclo-sure agreement or accepting an affidavit of profitability from thevendor’s public accounting firm.



❚ A section listing functional requirements, logically grouped by area and organized in either the checklist format or businessrequirements format described above.

❚ A section identifying training requirements and the vendor responses.

❚ A worksheet for pricing, including maintenance and pricing forfuture services.

ProcessAs discussed above, the hotel company owns the responsibility to controlthe process. How much process the hotel company chooses to demand willvary with the size and impact of the investment. A relatively small projectwill demand a relatively brief process, consisting of the following:

❚ Issue an RFP, possibly an informal one

❚ Receive and evaluate responses

❚ Seek clarification to responses as required

❚ Check references

❚ Negotiate on price and terms

Most selection efforts include a demonstration of the proposed system,often from “finalist” bidders rather than from every vendor. You will derivemuch more value from the demonstrations if you develop a script of busi-ness scenarios that you wish to see shown. Without a script, a skilled“demonstration specialist” can easily skirt weaknesses and gaps in his or her application, making it seem seamless and transparent to the audience.Be forewarned that even with a script, the demonstration specialist usuallywill strive to vary from it and an observer must keep the demo on thescript.

A larger or more important selection effort could include required or optional visits to the site by vendors, visits by the selection team to reference customers and/or to the vendor facility, multiple rounds of written response clarification and negotiation.

This process should be explicitly defined in the RFP.


EvaluationRFP evaluation can take subjective or highly quantitative formats. Eitherapproach has pros and cons. A simple method that combines subjective and objective methods is to build a spreadsheet matrix with key attributesvertically listed in column A, and the vendor responses lined up horizontallyfor comparison. You can assign numerical weights to each attribute andscore the response for each vendor, multiplied by the weight. Then sum theweighted scores. There are numerous variations to this approach. See thesamples in the appendix.

Depending on what you are evaluating, you may find it useful to calculatevarious ratios on which to evaluate and compare responses. One such usefulratio can be “rooms under support”/“support employees.” A larger numberhere could indicate either an understaffed support organization or a superi-or application that simply requires less support. A response that divergesdramatically from the modal range indicates a faulty response, probablywhere the vendor outsources support to a third party and did not includethose outsourced support employees in its response.

No matter how informal your evaluation process, always transcribe the pric-ing component from all responses into a side-by-side comparison. You willalmost always find differences in the side-by-side comparison that were notevident when simply reading the responses.

Evaluate the response documents against the criteria you defined in the RFPitself. Among that criteria, specifically include the vendor’s compliance withthe RFP process as defined by the hotel. If a vendor is late with itsresponse or delivers a sloppy and incomplete response, score that againstthe vendor in your evaluation matrix.

Reference CheckingReference checking is a crucial element of the selection process. Referencesare your best opportunity to find out what it is like to be a customer of thebidding vendor and a user of its system.

Recognize that most vendors will only give you references that they believewill deliver strongly positive feedback. One way to tip the odds in your



favor is to identify customers of the vendor that it does not give as refer-ences. Use your industry contacts, the vendor’s website and other sources toidentify these references. Another tactic is to specify that reference clientsmust be similar to your organization (“references must be owner-operatorsof limited-service hotels of multiple brands with at least five properties andcentralized accounting”) or located in your geographical area. Smaller ven-dors or emerging technologies will have some difficulty in meeting restric-tive reference conditions, and will provide “generic” references instead.

Use a checklist when talking to reference clients to ensure that you getcomparable responses. See the sample in the appendix. Keep the conversa-tions brief and be grateful to the references for the time they choose togive you.

Do not expect highly quantifiable responses from references, but do expectto get a strong sense of what it is like to be a client. You will be able toreadily identify references that are unreasonably biased for or against thevendor and can discount those discussions to some degree.

Sometimes vendors will refuse to give references in the early stages of theprocess. Do not treat this unwillingness as a disqualifier, as many vendorshave found that their references mysteriously end up on another vendor’sprospect list in short order. They will give you appropriate references whenthey become convinced that you are serious and that they have a realisticchance of winning your business.

For a major selection effort, consider a site visit with current customers offinalist vendors. Rather than a few minutes on the telephone, observe actualutilization of the system and talk to line-level users about their experiences.

Vendor Site VisitsAgain for a major selection effort, consider visiting the vendor’s site tomeet with people other than the commissioned salesperson. Observe morale,neatness and businesslike behavior for a fit with your organization.


RFP CONSIDERATIONS

Understand TimelinesAs noted earlier, you need to understand your timeline and present that inthe RFP document clearly so that the bidders can include your timeline intheir response planning. Likewise, you need to understand the vendor’stimelines and the impacts that has on the selection process.

Allow enough time for quality responses: Forcing the vendors torespond to an RFP in a matter of days or even weeks will not help theselection process. Give them enough time to respond, particularly fora complex project. Recognize that the vendors have other customersto service as well. Putting them through a “fire drill” for a rapidresponse may remind them whom the customer is, but it won’t benefityour selection effort.

Quotas count: Most salespeople are evaluated on how much businessthey write in each month against a performance plan. If your RFPprocess goes into the negotiation phase late in a month, or better,late in a quarter, you often will find they are more willing to negoti-ate on terms and even price.

Vendors have their views of installation timelines: Do not be surprised if vendors state in their responses that they will not committo an installation date until after sales documents are signed. Oncecommitted, the customer usually is too, often to the point of payingfor training services that are removed from availability to other customers and then not utilized because you changed the dates.

Consider the end of the selection process a critical path item: Ifyour timeline called for contract signing after two months of the RFPand negotiation processes, with installation commencing immediatelythereafter, be aware of the impact of a delay on your ultimate instal-lation date. If you have to move the date, do so.



Attach Response Document to Contract DocumentsState in the RFP that the successful response will be incorporated into thesales/service contract documents to be signed. This gives the response doc-ument additional weight and meaning to the vendor. It gives the hotel com-pany a position to argue from if an element of functionality or servicepromised in the RFP response is not delivered.

Include EverythingUse the selection process to include absolutely everything into as few pro-posals as possible. This approach gives you greater control over your budg-et. Unless the hotel company intends to do much of the work internally,typically require a turnkey installation. If the hotel company will do some ofthe work, clearly specify what is excluded from the vendor’s scope.

Include the minor items that can add up, such as patch cords for an HSIAimplementation, or telephone faceplates for a PBX purchase.

Likewise, include more significant elements of work, such as training roomequipment, set-up, tear-down and device relocation.

Here are some examples of other things to often build into the RFP:

❚ A site audit, in which the vendor sends a senior trainer back 60 to120 days after conversion to assess the operation and utilization ofthe system and to conduct remedial training.

❚ Service-level agreements with minimum performance and responselevels defined and financial penalties attached for not meetingservice levels.

❚ A software escrow provision, giving you access to or ownership ofthe application source code should the vendor go out of business.


Negotiate Now, Not LaterThe customer has the most power and the most control during the selectionprocess. Once the sales documents are signed or the system is installed, thebalance of power shifts back toward the middle or to the vendor. The tacti-cal implication of this reality means the customer should negotiate every-thing that it can foresee for the duration of the relationship in the selec-tion process. This approach is similar to the “Include Everything” tacticdescribed above.

Here are some typical examples to negotiate now, rather than later:

❚ Future years’ maintenance/support prices or caps on increases.Negotiate warranties for parts and labor as well. Are warrantiesthrough the manufacturers, who tend not to go out of business, or through the distributors, who tend to come and go much morefrequently?

❚ Additional per-room or per-seat licenses bought in the futurebecause of adding a property or other expansion.

❚ Rates for future training, installation services, custom programmingand so forth.

❚ The right to use the vendor’s “next-generation product” for noadditional licensing fee.

❚ A buyout clause, defining the costs for getting out of a revenueshare or service agreement before the end of the agreement.

Control Communications with VendorsIn the RFP, clearly identify a limited number of people whom the vendorsare allowed to contact during the process. These typically will be the func-tional leader of the selection team and one or two others. One purpose ofthis requirement is to minimize interruptions to the other members of theselection team. Another is to put up a minor roadblock impeding vendorswho feel they are losing the sale from calling someone else in the hotel andcomplaining about their competitor or the selection process. It won’t stopthem, but it does give you the opportunity to tell them not to do it again.



Require Line-Item PricingAlways require detailed, line-item pricing with quantity, unit price andextended price for each component of a purchase. As noted earlier, youshould always transcribe the vendor’s pricing into a comparison spreadsheetfor side-by-side evaluation, as shown in the appendix.

Provide your spreadsheet for vendors to populate in their response. Manyvendors will want to provide pricing in their own formats only, but cus-tomers should insist on line-item pricing in the customer’s format. If ven-dors resist, allow them to provide pricing in their format that ties to thepricing shown in your format.

Plan for Competition Between Distributors and VendorsSometimes you can buy the identical product from multiple competing dis-tributors of the same manufacturer. Other times, the competition is betweenthe actual vendors rather than distributors.

Get Sales and Maintenance Agreement DocumentsRequire vendors to provide all of their sales documents during the proposalphase, before you get into negotiations. Then when there are problematicaspects of the sales documents, they become part of the negotiation cyclerather than a second, third or fourth round of negotiations.

Many hotel companies require legal counsel to review all contracts above agiven dollar amount or duration. Involve the legal department earlier ratherthan later in reviewing the documents.

Require “Best Price First”In the RFP, require vendors to propose their best prices first. A fully retailprice usually will stand out, allowing you to eliminate a vendor that isn’tstarting out competitively. Typically, any starting price eventually will yieldthe best final price, but starting from a lower initial price makes for a shorter journey.


Create Long-Lists and Short-ListsTypically, issue your RFP to as many vendors as you think can reasonablyexpect to win your business and that you are willing to evaluate. This wouldbe the “long-list” of vendors. Expect a number of them to drop out for rea-sons of their own and to not submit a proposal. Initial evaluation of theresponses you receive will identify some number of bids you can eliminateimmediately based on price or the quality of their response document.

Then begin your detailed evaluation of the system functionality, servicesproposed and pricing offered. You then will be able to eliminate more vendors based on functionality or some other criteria you established inadvance.

At some point you want to narrow the field down to as few as two, and nomore than five, finalists. These vendors are your “short-list.” Typically, checkreferences on your short-list and try to make it shorter. Invest time indemonstrations, test drives and site visits only for the vendors you are mostserious about, and then enter negotiations.

Negotiate an Acceptance ProcessAs part of the negotiation phase, negotiate an acceptance process. Give the

acceptance process meaning by attaching final payment to acceptance. Use

quantitative criteria for acceptance, such as the number of ports active, the

continuous hours of uptime and the average response time. Never agree to a

payment schedule that does not allow you to hold back final payment until

any leftover installation issues have been addressed.

Handle NegotiationsAn in-depth discussion of negotiating tactics is beyond the scope of this

guidebook. Many volumes have been written about negotiating by people

who have spent lifetimes studying the art. A few key aspects of negotiation

include the following:

❚ Make the vendors want your business and want to do business with you.

❚ Keep at least two bidders in the contest until you have a signature.



❚ Strive to level price so that you can make the decision on other factors.

❚ Any external deadline weakens a negotiator’s position.

❚ Focus on issues rather than attacking the other party’s positions.

❚ A little humor goes a long way to bringing someone around.

And always:

❚ Remember that you will likely see the people on the other side ofthe table again, and behave accordingly. This includes the vendorsyou don’t select as much as those you do. If you treat the winningvendor poorly in the negotiation phase, you will probably feel it inthe end. If you treat the negotiation process as a relationship-building opportunity, the relationship will probably serve yourorganization well over the years.


KEY ELEMENTS TO CONSIDERThere are many elements to the proposals that the hotelier needs to consid-er. This section reviews some of them.

FunctionalityDoes the system functionality line up well with the features and functionsidentified in the needs analysis?

Other Elements of ValueMany systems offer other elements of value worth noting. Some of theserefer to vendor as much as the system itself. Following is a partial list.

❚ If many of the properties in a given market use a particular system,then you are likely to find many employees in the labor pool whoalready know how to use it, shortening training cycles and reducingcosts.

❚ Some systems are designed to be highly upgradable over time, thus “future-proofing” the investment. Such a system can commanda higher initial purchase price. This is sometimes called an “ever-green” product strategy.

❚ Some vendors have earned a reputation in the marketplace forbeing very difficult to deal with. You may assign additional valueto a firm with a reputation for being relatively easy to deal with.

❚ The size of the vendor can be either a plus or a minus in terms ofvalue. A very large vendor probably has lots of resources and is less likely to go out of business. A small vendor may value yourbusiness more highly and provide better service.

Elements of ServiceEven if you request a fully turnkey proposal, you will likely find varyinglevels of services proposed. Customer support on an ongoing basis is typically one of the major sources of dissatisfaction with an incumbent vendor. Following are some elements to explore.



Organization of call center: Are agents organized by subject areaand skill levels? What are the call center hours of operation andstaffingmlevels? Does it use a call tracking and distribution center?Does a person or an automated attendant answer the phone? Can thevendor provide statistics on call center performance?

On-site support services: If the system being purchased requires on-site support, from where are the technicians dispatched? Is there a response-time commitment for major failures? Are there enough technicians in the nearest dispatch facility?

Skill and professionalism of installation team: Do installers arriveon schedule and work promptly and professionally? Do they clean upthe work area after they leave? Do they coordinate effectively withhotel personnel, especially for training or guestroom access?

Quality assurance (QA): Are all software releases subjected to thorough QA testing, including testing at the code level and the functional level? Is the QA group a separate organization within thedevelopment function, or are the programmers doing their own QA?

Product enhancements: Does the release history of the product showa structured program of developing, testing and releasing updatesand enhancements? What role do customers have in determining whatenhancements go into a given release?

Elements of PriceThe system selection committee needs to report out the total cost for theentire project, not just the cost shown on the sales contract. Below weidentify and describe major elements of price that should all be consideredin the price analysis and the budget.


One-Time CostsMany costs associated with an installation occur one time only. Many ofthem are fixed by sales agreement, others require an estimate. Hotel man-agement often can manage these costs to some degree. Examples wouldinclude using an Out-of-Order (OOO) hotel room for equipment storagerather than an off-site facility or agreeing in advance to a reasonable perdiem for a trainer’s travel & entertainment T&E expenses

Software license fees: These are fees paid to the vendor for therights to use a piece of software. Different vendors use different licensing strategies: per site, per server, per room, per port, per seatand sometimes combinations of the above. An application softwarelicense fee might be paid for a call accounting or property manage-ment system. Then there are often additional license fees for operat-ing system seats, database users, networking software and so forth.These fees are typically paid to Microsoft® by the application vendor.

Hardware purchase fees: These are fees paid for various elements ofhardware: servers, racks, routers, switches, protocol converters,PCs,printers and so forth. Racks, patch panels, patch cords and other relatively small components often are overlooked. Sometimes a software vendor will provide this equipment; other times it will specify minimum requirements and you must source it yourself.Vendors often require third-party suppliers to ship servers to the vendor location for staging, incurring further shipping costs.

Project management fees: Some vendors charge a specific fee forproject management to coordinate the overall effort from their side.Hotel companies often hire a consultant to provide projectmanagement from their side, as well.

Installation service fees: These are paid to a vendor for actuallyinstalling, configuring and testing the system in the hotel. This alsoincludes charges for configuring the system in the software or building the database. These services often are subject to surcharges for after-hours or weekend work. Relocating devicesfrom the training room to their final position often is overlooked.



Third-party installation costs: These are fees paid to other parties than the system vendor. These often include the cost of having interface installers from the PBX, CAS, POS and other systems on-site for a PMS conversion, or having the local telephone company provide new service for a PBX replacement.

Training: This usually is performed on-site, ideally by a professional trainer. If an installation requires minimal training for a few people, sometimes the installation technician will conduct it. Complex systems sometimes have off-site training programs available. Some applications lend themselves to Web-based or other forms of computer-based training.

Staff time represents another aspect of the cost of training. Younot only have to pay your hotel employees to attend training, buttheir regular shifts have to be covered by someone else while theyare in class, possible leading to overtime. This is one reasonseasonally slow periods are popular for system conversions.

Despite the perceived high cost of training, it is not an area toskimp on. A common execution problem is for a hotel to fail to getits people to the scheduled training. Then when the employeescan’t use the new system, it is blamed on inadequate training bythe vendor. The existence of a CD-ROM or Web-based trainingtool might be a differentiator between two otherwise similarproducts. All too often we spend tens, or even hundreds, ofthousands of dollars on these systems and then over time, as upgrades and staff turnover occur, we use less and less of thepowerful functionality that attracted us to the system in the firstplace.

Training environment: A large or complex implementation (such as a new PMS) will require a significant amount of classroom training in an appropriate training room. A training room should have adequate space, power, light and HVAC service for the trainees, instructor(s) and one computer per student and instructor. Each student also requires adequate table surface next to his or her computer for note-taking.


A printer, data projector and flip charts are also useful. Mostvendors will limit the size of any one class to 10 to 14 students.Training rooms must be secured against theft and have a datanetwork connection to the server(s).

Someone, either the vendor or the hotel, needs to set up thetraining room. Then someone needs to relocate the devices totheir final locations prior to conversion.

Data conversion and input: Sometimes a system conversionrequires the manual or automated input of existing data. Examplesinclude guest profile records and future reservations in a PMSconversion or general ledger and accounts payable detail in anaccounting system conversion. Whether automated or manual, thecosts of inputting these data must be recognized. Many considerlive data input a useful component of training, and find thatemployees learn that much more about the system.

Vendor Travel & Entertainment for trainers and installers: Thevarious vendors sending training and installation personnel usuallywill incur travel costs to your location and while there. These costsinclude airfare, mileage, taxis and meals. The hotel company needsto be aware of and estimate these costs.

The hotel company needs to determine the accounting treatment ofthese costs in some situations. For example, a condo property may need to pay unit owners for rooms used by vendors.

Equipment shipping and storage: Most vendors recover shippingcosts from the customer. Sometimes a project incurs storage coststo hold quantities of equipment awaiting installation.

Change orders and cost overruns: Sometimes the scope of workneeds to be adjusted during the project. Additional work or rework of tasks already completed often will trigger additional billing. Sometimes an estimated cost is simply wrong.



Agree in advance with the vendor on how change orders will beapproved and by whom. Negotiate ceilings or price caps on someestimates where possible. Include a line item in your budget forcost overruns and changes.

Payment and deposit terms: These terms are a very real aspect of price. Most vendors require a significant deposit in order to commit to do the work, and will impose payment terms favorable to them given the chance. These terms are all negotiable.

In the RFP, assert the hotel’s right to hold back a meaningful percentage (15 to 25 percent) of the total cost subject to written acceptance of the completed installation.

Change management: This is the art of getting line employees to “buy into” a change and getting them to embrace the new system as their own. Management often overlooks this cost area. Tactics used to drive staff awareness, desire and knowledge in support of the change include all-employee meetings, posters, contests, incentives and logo item premiums. The investment in change management will vary with the nature of the change. Budget accordingly.

Recurring CostsOther elements of cost recur over time, typically monthly or annually. Belowwe identify some of them. Ensure that the sales documents have a mutuallyagreed-to definition of when the warranty period expires and support ormaintenance fees begin.

Software support or maintenance: Most vendors charge a fee foraccess to their customer support function for assistance inresolving questions or problems with the application. These feesoften are calculated on a per-room or per-seat basis. Support costsusually entitle the customer to all software upgrades releasedduring the support period.

We see service-level agreements more often in the industry. These can be either rigid or broad agreements for minimum acceptable performance of the application. Failure of the vendor to keep


performance better than the service-level agreement often triggers a credit toward future support payments.

Be aware of third-party software support costs, typically for adatabase or operating system. These costs are less amenable tonegotiation than application software support fees.

Hardware maintenance: This typically is offered either on-site or mail-in. Most major computer manufacturers sell on-site warranty service upgrades or extensions. These usually represent a good value on servers, less so on desktop equipment. Manufacturer warranty upgrades usually are paid at the time of purchase and are rarely negotiable.

Maintenance on PBX equipment usually is bundled with thesoftware support, and typically is priced on a per-port, per-monthbasis. These prices are negotiable.

Network integration services: Many hotel companies find it anoutstanding value to retain a local network integrator to supporttheir desktop equipment, servers and networking software aboveand beyond manufacturers’ warranties. This service becomes anoutsourced systems manager for properties that cannot carry thatposition.

Training and retraining: Over time, the hotel may wish to purchase additional training. This could take the form of a five-day visit from a PMS vendor’s trainer to assess the use of the system and conduct remedial training, or sending a system administrator off-site to a vendor location for advanced training. These costs typically are negotiable.



APPENDIX

Sample Worksheets

Sample PMS Equipment Configuration

Sample Accounting System Weighted-Feature Comparison

Sample PBX Proposal Price Comparison

Sample Reference-Check Protocol

Sample Generic RFP Outline

Sample Project Timeline




SAMPLE HOTEL

CURRENT PCs TERMS REPORTPTRS

FOLIOPTRS

POSTERMS

POSREMOTE

PTRS

#EES TOTRAIN

Front Desk 2 2

Reservations/PBX 3 1 0

Management 2 0

Housekeeping 1

Engineering 1

Night Audit

CRO

Accounting 1

Sales 2

TOTAL 5 7 1 2

DESIRED EXISTING PCS

NEW THINCLIENTS

NEW FATCLIENTS

NEWPTRS

POSTERMS

POSREMOTE

PTRS

#EES TOTRAIN

Front Desk 2 27

Reservations/PBX 3 1

Management 2 2

Housekeeping 1 2

Engineering 1 1

Night Audit 2

CRO 0

Accounting 1 1

Dining Room 1 5 1

Lounge 3 2 1

Kitchen 1 2 1

Bellmen 1 1

Sales 2 1 3

TOTAL 5 10 1 3 8 4 22

DESIRED INTERFACES Make, Model & Version

CAS Make, Model & Version

PBX Make, Model & Version

VOICE MAIL Make, Model & Version

CREDIT CARD Make, Model & Version

CRS Make, Model & Version

POS Make, Model & Version

Sample PMS Equipment Configuration

Sample Accounting System Weighted Feature Comparison




Sample PBX Proposal Price Comparison

Sample Reference Check Protocol

Reference CheckVendor

Client

Contact __________________ Title __________________ Rooms _____

1. Were you involved in selecting {VENDOR} for your hotel? ___________

2. Who else did you evaluate? ___________________________________

3. Why {VENDOR} vs. the others? ________________________________

_________________________________________________________

4. Do you feel like all promises made during sales cycle were met? _____Explain ___________________________________________________

5. Was installation timely and unobtrusive? ________________________

6. Does the system work as you expected? _________________________Explain ___________________________________________________

7. What do think about the support organization? __________________

8. What do your guests say? ____________________________________

__________________________________________________________

9. Is it really Plug & play to your guests? __________________________

10. Would you select {VENDOR} again? _____________________________

__________________________________________________________

11. Cat 5 or shared pair? ________________________________________

12. Amenity or fee?____________ Fee Amt? ___________________

13. Other _____________________________________________________


Sample Generic RFP Outline

Outline of Generic Request For ProposalA typical Request For Proposal (RFP) document might contain the following sectionsin addition to an appropriate cover letter:

1. General Conditions - An introductory section generally outlining what the doc-ument is asking for and who is asking. Establishes timeline and documentsthe process to be followed with detailed and specific instructions to the ven-dors, contact information for all relevant parties. Most RFPs contain mutualstatement on confidentiality, requiring that vendors not reveal the specifics ofthe request and that buyers not reveal non-public information learned duringthe process.

2. Factors Affecting Selection - A list of the criteria for selection.

3. Project Background – Detailed information about the project. Should includerequired equipment configurations, volume capacities and so on. Contents willvary widely with the specific project. Many projects will demand a significantamount of background information on the buying company, their businessmodels, properties and key relationships.

4. Vendor Profile – Asks specific questions about the vendor company and theirclient base. Solicit financial information, size and geographical presence.

5. Solution Summary – Asks vendors to provide a brief summary of their proposedsolution.

6. Specifications – Solicits detailed system specifications from vendors. Contentswill vary widely with the project.

7. Key Attributes – Identify key features/functions/attributes of the desired solu-tion and require vendors to comment on their solution’s ability to support therequirement. May use "Yes/No/Explain" format or business requirements for-mat as discussed in sectionXXX.

8. Scope of Work – Identifies the services you expect the vendor to provide andallows them to comment on or add to them.

9. Pricing Worksheets – Often presented in Excel, requires line item pricing fromthe vendors in your format to ensure comparability.

10. Exceptions & Additions – Provides vendors with a place to provide an alterna-tive solution or to point out where they do not meet a requirement of the RFP.



Sample PMS Project Timeline


23 Equipment Installation 2 days Fri 11/7/03 Mon 11/10/03

24 Database Testing & Confirmation 2 days Tue 11/11/03 Wed 11/12/03

25 Training Room Setup 1 day Tue 11/11/03 Tue 11/11/03

26 Staff Training 1 wk Wed 11/12/03 Tue 11/18/03

27 Real Data Input/Conversion 3 days Mon 11/17/03 Wed 11/19/03

28 Interface installlation 1 day Fri 11/21/03 Fri 11/21/03

29 Inventory/Financials Balanced 1 day Fri 11/21/03 Fri 11/21/03

30 Go Live 0 days Fri 11/21/03 Fri 11/21/03

31 Acceptance 1 wk Mon 12/1/03 Fri 12/5/03

Task

Split

Progress

Milestone

Summary

Rolled Up Task

Rolled Up Split

Rolled Up Milestone

Rolled Up Progress

External Tasks

Project Summary

Project: Sample PMS Project PlanDate: Fri 5/16/03

ID Task Name Duration Start Finish

1 Selection Process 0 days Mon 6/2/03 Mon 6/2/03

2 Needs Analysis 3 wks Mon 6/2/03 Fri 6/20/03

3 Evaluate Market 1 wk Mon 6/23/03 Fri 6/27/03

4 Develop RFP 2 wks Mon 6/30/03 Fri 7/11/03

5 Issue RFP 0 days Fri 7/11/03 Fri 7/11/03

6 Receive & Evaluate Responses 5 wks Mon 7/14/03 Fri 8/15/03

7 Questions & Clarifications 2 wks Mon 8/18/03 Fri 8/29/03

8 Short List 0 days Fri 8/29/03 Fri 8/29/03

9 Schedule Demonstrations 2 wks Mon 9/1/03 Fri 9/12/03

10 Develop Formal Script for Demos 1 wk Mon 9/1/03 Fri 9/5/03

11 Product Demonstrations 3 days Mon 9/15/03 Wed 9/17/03

12 References 1 wk Thu 9/18/03 Wed 9/24/03

13 Further Questions 1 day Thu 9/25/03 Thu 9/25/03

14 Site Visits 1 wk Fri 9/26/03 Thu 10/2/03

15 Negotiations 3 wks Fri 10/3/03 Thu 10/23/03

16 Contract Signing 0 days Thu 10/23/03 Thu 10/23/03

17

18 Implementation Process 0 days Thu 10/23/03 Thu 10/23/03

19 Equipment Ordering 0 days Thu 10/23/03 Thu 10/23/03

20 Order Forms 0 days Thu 10/23/03 Thu 10/23/03

21 Database Creation 1 wk Fri 10/24/03 Thu 10/30/03

22 Equipment Receiving & Staging 2 wks Fri 10/24/03 Thu 11/6/03

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