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What the Cruise Lines Can Teach the Hotel Industry

Insights from Two People who have been CIOs in Both Industries

Are the systems that cruise lines use for their hotel functions identical to those used in the hotel industry?  Do cruise lines use technology that could benefit the lodging sector?  Has the cruise industry learned technology lessons - found technology directions - that hotels would be well advised to consider?

These questions have intrigued me for some time.  To find some answers, I turned to two people uniquely qualified to answer them.  I spoke with Tom Murphy, who was vice president-IT at Omni Hotels and CIO for Bristol Hotels before becoming CIO of Royal Caribbean Cruise Ltd. (a position he held until a few months ago when he became CIO of AmerisourceBergan, a Fortune 25 company).  I also spoke with Scott Heintzeman who, as CIO for Carlson Hotels, heads the technology organization serving the Carlson family of hotels (Radisson Hotels and Resorts, Regent Hotels and Country Inns) and who recently served as CIO for the Carlson Company fleet of Seven Seas Cruises.

My first question asked how the operating environment for IT in the cruise industry compares with that in the hotel industry.  Tom Murphy suggested that there is a difference.  "In hotels," he said, "it's too often seen as a necessary evil.  In the cruise industry it is widely viewed as a strategic enabler.  Every element of the strategic plan has an IT element.  Most hotel companies are restricted by capital and ownership constraints.  It's hard to sell ideas many times vs. the much more centralized situation in the cruise industry.  The cruise industry does not feel this fractionalized situation."

If CIOs in cruise and hotels are facing some similar challenges, as well as many different ones, does the operating environment for cruise systems (the needed functions and the conditions in which they operate) differ from what we experience in hotels?  Heintzeman and Murphy pointed out several important differences.

Heintzeman said, "Ten to 12 years ago we thought that we could use our hotel inventory system (for our cruise operation) but in reality inventory in the cruise business is handled in a totally different way.  We quickly learned that our hotel distribution system was not leverageable in the cruise business.  There is not much natural crossover from hotels to cruise.  The cruise business is not a floating hotel - it is a totally different business."

Purchasing, selling and staffing processes for the cruise industry are much more complicated than hotels.  Heintzeman said, "Due to this complexity, we are less able to use the traditional channels like the GDSs.  We are more reliant on travel agents and other conventional channels.  Another example is purchasing - where we face the complex logistics of procuring and stocking our vessels worldwide.  Yet another area of complexity is staffing where we deal with issues of fixed term contracts, an international workforce, compensation in multiple currencies and adherence to all of the international hiring laws."

Murphy said that a connectivity trend has impacted cruise industry systems. Murphy said, "Five years ago customers were no longer looking at cruising as an isolated experience.  People increasingly wanted the same connectivity experience as they have on shore at sea.  This was a fundamental change and became a priority for our whole IT effort. It resulted in a cultural transition. We (in IT) started to develop a technology direction for the customer and we moved from behind terminals and data centers to direct contact with customers."

Customer interactive television is another example of change. Murphy said, "Today it is generally much more advanced in the cruise industry than in hotels. Guests can use their televisions to book shore excursions, room service, order amenities and access the Web.  For the first time we had to build systems that were not buffered by the hotel department staff. We had to be able to deal directly with our passengers and produce user friendly, hardened systems."

Relating to the CRS, Heintzeman said, "When you are booking a cruise it is a fully inclusive tour - air, transfers to hotel, pre-departure hotel and activities, transfer to ship, passport/document tracking, the cruise itself, post disembarkation transfers, lodging and air.  The sales event is very complex, so the Web selling process has evolved more slowly."

Seven Seas Cruises chose Versonix for its distribution management system because they use the approach of offering a shell which can be adapted to the client's specifications in a highly customized fashion. Versonix offers a rules-based system. Rules, while arduous to develop, allow the CRS to manage a myriad of different products and sales programs. The rules for inventory control - including promotions, discounts and upgrades can be long and convoluted. For example, if a travel agent has booked five cruises this month, the sixth can have a one class cabin upgrade at no charge. There are dozens and dozens of permutations and combinations that the CRS must be capable of handling. Rules-based systems may become an option for the hotel industry as hotels increasingly propose dynamically packaged services as one of their primary offerings.

An example of a different approach by the cruise industry, Murphy said, "Cruise PMSs serve both guests and employees.  Every guest and staff member has a room and an account assigned to them. We took the PMS and 'super-sized' it."  Because there are occasional problems with satellite telephony from the ship, the PMS had to be able to work both connected and independent of Royal Caribbean's shoreside system with full auto-synchronization capacity.

Interestingly, Murphy suggested that the next generation PMS might be built in-house with a single platform combining both PMS and CRS.

Relationships and Revenue Management

Guest history, guest relationships and revenue management are interests shared by the cruise and hotel industry.  However, the cruise industry may be surpassing hotels in these disciplines.

The cruise industry has a considerable amount of information about guests' preferences.  Murphy said, "Previously only the travel agents knew about the customer and we knew very little until the passengers arrived. Then the challenge," he said, "was to bring this information onboard - literally to transfer it to our onboard data bases - and to use it in driving guest recognition and offering services."

Focusing first on guest relationships and information about them, Murphy said that RCCL maintains relationships using three systems: the CRS, the PMS (which provides guest history/preference data to a variety of systems including the POS and dining management systems) and the telecommunications systems.

At Radisson Seven Seas Heintzeman said, "Our focus is to serve the delivery personnel by giving them access to preference information about our passengers.  Because of our responsibility to delivery a 24/7 experience to the cruise customer, we are more focused on customer services in cruise than is expected in hotels."

The cruise lines are taking the practice of revenue management far beyond achieving the optimum cabin rate. Murphy said, "There is an opportunity to do more for in-cruise revenue management. We can allow production each day of coupons, sweepstakes and two-for-ones for passengers based on activity during the cruise rather than wait for the next cruise.  RCCL has onboard revenue managers who look to boost in-cruise spend based on in-cruise activity."

Other Cruise Technology Innovations

There are other differences between the systems used in the hotel industry and those used at sea. Some cruise lines have modified their POS terminals to display guest history and preference data. Dining management systems have become, Murphy explained, more complex as upper-tier cruise lines increasingly attempt to satisfy (and juggle) the requests of passengers who can select, often at the last minute, from a variety of dining outlets and who may or may not wish to dine at pre-assigned tables seating up to 10 guests.

PBX and onboard telephone systems were also identified as an area of difference. By international marine laws, Murphy said, this technology is categorized as a life safety system and as such must meet very exacting standards. Due to these rigorous demands only two vendors develop applications: Alcatel and Erickson.

One more initiative related to information is e-mail access by staff. RCCL installed small computing devices in all crew cabins for schedule notifications, business-related e-mails and Web access. Murphy said, "We provide e-mail access for personal communication at an extremely nominal cost. It helps the crew feel more in touch with their homeland and what's happening on land."

The Vendor Community

It doesn't take long to realize that the cruise line vendor community is very small.  Heintzeman said, "Many more vendors serve hotels in the area of PMS and inventory management. In comparison to the 125 products available to hotels, with 20 of them offered by major vendors, I would estimate that there are six in cruise."

Suppliers identified by Heintzeman and Murphy include Versonix for CRS, Fidelio for PMS (although Heintzeman quickly pointed out that it is a completely different product from that offered to the hotel market and is sold by a different corporate division of MICROS-Fidelio) and IBM; MICROS Systems and InfoGensis for POS, and Erickson and Alcatel for PBX.

So, What is Worrying You?

In the course of these conversations, it became clear that cruise ships place a high priority on delivery of an end-to-end experience that offers an abundance of choices, extensive passenger recognition, convenience and freedom from mundane hassles.

If this assessment was correct, it raised another question. What issues were on the minds of cruise industry technology executives? Murphy identified the escalating size in ships as one issue.  Murphy said, "Only a few hotels like those in Las Vegas and the Gaylord properties have experience at this scale of operation. Next, easing the processes of embarking and disembarking are priority issues for us, as is the challenge of sourcing passengers from different countries (rather than primarily from the US). This adds a host of issues. How do you attract them and serve them onboard with Internet or television in various languages?"

Security is also high on the list, as is the growing complexity of the onboard environment. The contract model for staff, with rotations off the ships every few months, does not lend itself to having users with accumulated competence. Lastly, Murphy identified the challenge of meeting the legislative and regulatory requirements of the many countries where RCCL does business, recruits or its ships visit.

Customer privacy was an issue mentioned by Heintzeman. "We have to try to maintain the relationship with our guests but we do not want to over-communicate. We do not want to wear out our welcome."

Lessons for Hoteliers

From the dual experiences in both cruise and hotels, there are definite things to be learned. Murphy said, "Successful CIOs are the ones who can sell ideas to those who are not interested. The CIO must be an innovator not a facilitator; then they must sell their innovation."

Turning to systems, Murphy said that hoteliers are too dependent on big vendors. He said, "They are not pushing those big vendors out of their comfort zone. Too often we look at IT as commodity stuff rather than as a source of opportunities for competitive advantage."

Lastly, Murphy said that cruises realize that trip planning and anticipation are part of a cruise trip.

Heintzeman suggested that an opportunity exists for hotel companies to take a close look at rules-based systems. He said, "Any hotelier would be improved by working a year or more in the cruise business. That's what it did for me. It helped me understand process management at a different level and think about some of the services we could deliver to our hotel guests but that we don't today."

From the Author

I did not hear what I anticipated from these two executives.  I expected to hear about readily applicable systems or techniques that could benefit the hotel industry. I did not.

On the other hand, I realized that the comments made by Heintzeman and Murphy highlighted opportunities for innovation and growth in the hotel industry; such as in-visit revenue management, working more closely with technology vendors, making guest history information available to our staff at the POS, giving more staff access to e-mail and using it as a communication vehicle, working harder to recognize and fulfill the national/cultural interests of our guests and expanding the capabilities of our in-room entertainment systems.

The comments were thoughtful and thought provoking. Our challenge now is to take them to heart, and then to take action.