sweating the small stuff – part two (lowering your Cash Cost)

I frequent this site to keep up with who is doing what, where and when in hospitality.  I’ve found about half the content recently is either economic-doom-and-gloom or hopeful-economic-optimism.  So which is it?  If you’ve come to this site to find the answer, I don’t have it for you.  Sorry…

What I do have are tips on how to optimize your existing technology solutions to either increase profits or decrease costs.  Today we are specifically focusing on lowering your Cash Cost.

Cash Cost is inclusive to each area your business incurs a cost in receiving cash.  This includes cash accountability on the part of the employee and cash accounting on the part of management.  Multiply this process for each individual employee that accepts cash and your Cash Cost can get expensive.

The prolific way to eliminate this cost is to go cashless.  Many venues across the hospitality space have adopted this model: such as this one, this one, this one, and this one.  But getting completely cashless requires cash, sometimes a lot of it.  Instead, let’s look at some small ways you can alleviate Cash Cost.

prevent cash theft

Most POS systems (probably yours too) have built in cash accountability to help prevent theft and cash counting errors.  The first step in taking advantage of this is to ensure your employees are not sharing POS User Accounts.  My experience is if employees get to share accounts, there is a good chance they have also get to share in an ” unofficial” employee bonus pool.  Second is to require employees to enter a Cash Drop at the POS.  (Whether this is a blind drop or a not should be based on your business requirements and employee job function.)  Requiring a cash drop allows the management staff to review system reports that highlight over/short employees saving time by focusing first on the problems.

increase credit transactions

Increasing Credit Card transactions is a good way to decrease Cash Cost (and is a type of cashless payment), but you need to do the math for it to make sense.  Getting the most from your merchant services provider requires transaction volume and aggressive negotiation.  If you are not sure about how to go about negotiating your fee contact a company like this that does it on your behalf and gets paid based on your savings.  To make any meaningful savings here you should also have a software based payment solution integrated with your point of purchase system(s).

The best way to increase credit card transactions it to market it, but you also have to incentivize the consumer.  This can be implementing a no-signature transaction policy (moot if we ever migrate to EMV) or joining programs that encourage customers to pay with their credit card (i.e. here and here).

implement gift cards

Offering gift cards creates the opportunity to decrease Cash Cost and encourage customer loyalty.  However, this is the type project where scope creep can kill the initiative so be conscientious and realistic in defining what you are going to implement.  There is a very good chance your point of purchase system (PMS, POS, etc.) or credit card solution offers or includes a gift card solution.  It will most likely not offer all the bells and whistles of this or this or this, but the goal remember is to initiate low cost steps in decreasing Cash Cost.

customer account integration

This is an often overlooked but simple option to move in the cashless direction.  Additionally, this option has the HUGE upside of tracking your customer’s purchase habits.  Again there is a good chance also your existing point of purchase solution some sort of customer account charge.  For larger venues the better option is to implement an integration between the point of purchase system(s) and the customer account system(s).

The basis of this solution is an interface from your POS system to your customer account(s) system.

Property Management System to POS:  guest transactions are paid with a room key and/or name
Membership Accounting to POS:  member transactions are paid with a membership card and/or name

As with automated product/item depletion there is a very good chance your vendors already have the interface in place, meaning you can implement it with a minimal investment.

currency counting integration

If you handle enough cash to use currency counting machines another interesting option is to investigate an interface from the currency counting solution to the POS.  I have only seen this integration implemented a few times, but it has proven to be a highly cost effective solution with a convincing ROI.  It usually is accompanied with a higher investment cost however as this type of interface is generally custom integration that uses the POS Accountable Cash data, POS Cash Drop data, and Cash Counted data consolidated to a single report for simplified cash accounting.

If you have someone on the payroll that has the sole duty of counting cash and reporting discrepancies, this is probably a worth while option to investigate.

Obviously this list is not comprehensive, but hopefully stimulates some ideas.  If you have successfully implemented other options or have other ideas post a comment and share your knowledge.  In times like this it is worth it to share our experiences so we all come out ahead.

For more information about kevin sturm Consulting please visit my website or email Me.

mail call…what’s the scoop on SaaS solutions?

I received an interesting email a while back from Carson Mehl at Lumiere Hotels.

“I am curious to know if you have heard of any robust hotel software being developed that is web-based. Our company has started using a number of web-based software solutions such as Google Docs and Basecamp by 37signals and they have been a huge asset as far as ease-of-use, collaborative ability, and no-need for extensive/expensive hardware. The great thing about web-based software is that it all operates inside the browser so it can be easily accessible from a number of devices.”

Regrettably I was not able to point to any truly web-based solutions that I felt would meet the needs of a boutique hotel group. There are a few out there but none that I have extensive experience with or have been impressed with.

What Carson was really asking is why hasn’t a hospitality technology vendor come up with some true SaaS applications that fulfills the requirements for a boutique hotel or resort location? For those that are not familiar with SaaS it means Software as a Service. Wikipedia defines it as “…a software application delivery model where a software vendor develops a web-native software application and hosts and operates (either independently or through a third-party) the application for use by its customers over the Internet. Customers do not pay for owning the software itself but rather for using it. They use it through an API accessible over the Web and often written using Web Services or REST.”

In our email conversation Carson was good enough to expand to what hoteliers are looking for…

“…The newest evolution of internet browsers and runtimes like Adobe AIR are really opening up the possibilities for rich internet applications. Applications like Google docs, basecamp, ZOHO, buzzword (my fav), even Facebook that are stored in the cloud and accessible from anywhere, offer such an advantage. The ease of collaboration they provide is alone and tremendous improvement on traditional software not to mention the accessibility factor, ease-of-use, elegant design, and simple hardware requirements. I do not have super-deep ranging experience with hotel software, but what I have used is far short of what is possible today.

From an hotelier’s point of view, I see a demand for a well designed software platform that is easy to use and is far reaching ie: pos, pms, booking, web-booking, reporting, etc. What is currently available in this regard is very expensive and complicated from both a hardware and software standpoint. The existing platforms work well for companies with deep pockets, IT experts and central reservation departments…

I guess the dream software would provide seamless connection between web reservations, pms, and the gds. It would allow an administrator to provide different levels of access to employees. It would automatically create and update guest profiles. It would show activity feeds for a property (similar to a facebook newsfeed, but showing reservations made on the web, pms, or gds, and more). It would be dead simple to use. It would look elegant. Training would be obvious and intuitive. It would be a subscription based service or maybe annually licensed. The system would be complete so there wouldn’t be any interfacing problems between disparate types of software. All the data is indexed and searchable. Reports are automatically generated and distributed. Data is backed up securely. The software works in multiple languages. Software updates are seamless, because it is web based. Housekeeping could carry around a tablet pc or iPod touch and update their room list. Guests could check out from their tv or laptop. The list goes on and on. It may seem like a pipe dream, but I think it is a possibility especially as we are reaching the age of ubiquitous internet connectivity.

From a software company stand point I think there is demand for such a service. It might be a long long time before a large hotel company would make the switch but there are so many independent and small hotels for which this service would be a blessing. In addition, if the service was successful the access to data would be invaluable.”

I thought the question was a good one and the desires well stated. So the question stands to why are there not more SaaS applications for hotel/resorts?

In my experience the main reason has been a data access issue. For pure web based applications the data is held (and often owned) by the vendor. Data security standards and PCI regulations make it difficult for vendors to effectively and affordably deliver on the needs of a hotel/resort. PMS, POS, and GDS solutions are generally considered mission critical to the business. If you don’t have immediate access to the data then you cannot run your business successfully which often means inconveniencing the guest. And unless a company like Google with an almost infinite budget for infrastructure redundancy and fail-over brings a solution to the table the costs of effectively delivering a solution like this appears to be too high for a start-up looking at what is really a limited market (unless some of the larger brands like Hyatt, Hilton, and Marriott joined in).

Ultimately I hope I’m wrong because I believe we need this. A corollary could be made to what people thought about CRM solutions until Salesforce.com rocketed to uber-status of success and took over that space as the darling of the market.

If you know of a SaaS POS, PMS, GDS or other hospitality technology solution leave a comment as I’d be interested to find out more about them. Or if you have other thoughts on this topic post a comment and share your wisdom.

the attractive but un-sexy side of BI

I had a wonderful opportunity recently to join some very smart colleagues on a BI (Business Intelligence) panel presentation. I first need to thank Jon Inge for inviting me to be on the panel and for being an advocate for the un-sexy side of BI. Second I need to thank Rick Heuer, Geert Mol, and Clive Perry-Core who were on the panel with me. I learned a ton about CRM BI from Rick and Geert, and Clive has more hands-on experience to the nuts and bolts of BI than anyone I’ve ever met. It ended up as more of a round-table discussion than a panel really, but it was great for my own learning opportunities that way.

In his opening Jon referenced a great article from the Wall Street Journal on “Knowledge Management” which is largely what BI is all about. (Which I was bummed to not find on the web and provide as a link to all of you. If you find it give me the link in a comment.) The opportunity benefit of BI is to effectively act on meaningful information about your business…or more briefly put knowledge management.

During the introduction of the panel each panelists described how they worked in BI. During this brief introduction I came to the sad realization that I specialize in “un-sexy” BI. The “sexy” side of BI is in CRM and marketing. Their personal introductions were exciting and I’m sure led to everyone dreaming about a hotel knowing you when you walk in the door, welcome you by name, hand you your favorite margarita, quickly tele-port you to your room with pre-set temperature and lighting preferences, and have music playing based on your perceived mood and core body temperature. It is what you read about in press releases from the big brands in the industry where they know everything about what the customer prefers. The summation is Know your guest and achieve total patron value! Increase revenue through understanding your guest’s preferences and market directly to them! Sexy No? (to be said in a French accent)

For the record I totally agree it is way more fun to talk and dream about the benefits of BI with CRM. But the reality is the ROI and TCO for BI with CRM is harder to quantify (I tried hard to get a fifth acronym in that sentence but I couldn’t find one that made sense. Though I digress). It is not impossible to quantify, just harder. Before I jump into the “attractive but un-sexy” side of BI I think it is important to lay some foundation. First let’s take a shot at defining TCO. Total Cost of Ownership (TCO) is the total investment capitol put into the technology solution over a specified period of time. Return on Investment (ROI) is the duration it takes for decrease in costs and/or increase in revenues to surpass the overall investment (or TCO). To put simply, save or make more money than what you spent within a specific time period. The measure of any good technology solution should be create cheaper, faster, and better operations than what you do now. The general problem with proving the ROI of BI with CRM is the generalizations that take place into why certain customer preferences exist and under what specific set of circumstances. It is the accurate capture of circumstances that really creates the challenge. It is difficult (not impossible) to tie a decrease in cost or more likely and increase in revenue to a specific preference or area of guest behavior being influenced by an almost infinite number of inputs (aka circumstances) that lead to a specific action (for more thoughts on this see when CRM will achieve its potential).

So if BI with CRM and market data is “sexy” then the operational analysis side is really the “un-sexy”. Note that both are attractive, but the former is far more attractive than the latter.

The un-sexy side is the analysis of your operational systems data in order to decrease costs and increase revenues (yawn). I’ll define operational systems as Property Management System (PMS), Point of Sale (POS), inventory management, time and attendance, service optimization, and other solutions implemented to manage the operations of a venue. See, I’m only two sentences into the “un-sexy” and you’re mind is already wandering…hmmm..what should I have for lunch today…

But, when this data is captured in a meaningful way and linked to other external data elements (i.e. weather, currency exchange rate, website click through, etc.) the value proposition of BI becomes very attractive. I’m going to say “becomes” attractive because generally the first thing that a BI system shows you is how poorly your systems are currently setup to capture meaningful data. You will need to spend at least three to six months cleaning up configuration elements of your existing system(s) before BI will begin to have analytical payoff. The correlation can be made that it’s like exercise for your technology solutions. You may hate the process but you’ll like the results. I’ll cover some thoughts on the steps to a successful BI installation in a future post. But for those in need of immediate gratification Jon Inge wrote a great article in this months Hospitality Upgrade (it’s free by the way…so subscribe) entitled Demystifying Business Intelligence. You can download the article here from Jon’s website.

As an exercise in brain storming here are a few examples of how to both define and achieve ROI for your BI solution. I am making a HUGE assumption here that you already have some meaningful KPI’s identified for your business and that you can apply them accordingly. If you have not, first go read Jon’s article.

the pms story
A key metric for any hotel/resort is RevPAR (revenue per available room). The value of this KPI becomes more valuable over time as you compare it against historical data. It is one of the measures used for how to price a room and it’s amenities. Some PMS systems will give you this number over a specified date range and may let you compare it to one other range. Or you can run multiple ranges and do the comparison yourself by entering the information into a spreadsheet. But, what if rather than just looking at previous RevPAR numbers you were able to review historical RevPAR numbers with the corresponding temperature/weather and current exchange rates with selected currencies over multiple selected date ranges. Then what if that information could be plotted graphically for you giving you some solid predictive analytics on what room rate would give you the best RevPAR based on matching factors from a historical period. The ROI benefit in this example is actually achieved in more than just the revenue opportunities. It can also be achieved in the “improved costs” column by spending fewer hours entering information into spreadsheets.

the pos story
The POS story I think is one often left behind, but it is one near-and-dear to my heart. Your POS (and PMS) system holds real data about customers that they pay you to keep so you can know more about them. How wonderful is that?! Grocery stores have the POS BI story down…it’s a science of revenue for them. Hotels, resorts, and other venues should be watching and learning from their successes and their mistakes. As a quick story lets meander into a world where all your POS data means something (meaning versus what you have now). It means what do your customers like, what do they not like, and what should they like but just are not finding and buying. By “should they like” I’m referring to placement, description of the item, presentation on the plate, verbal marketing, and price. BI with POS allows a manager or chef to aggregate and compare data for items that are selling well to items that are not selling well, and possibly against the day of the week, time of the day, and temperature outside.

the inventory management story
You get an even better story if you tie POS to Inventory Management and look at actual cost versus selling price data. A manager can run pricing strategies and get concrete data back on how well or poorly it worked. For example, take your top 10 selling entree items and increase the price of each of them by 5%. If you have historical price and cost for those items for the previous three months you should have food costs, theoretical and actual yields, margin, and profit for those items. Track on a weekly basis for three months how the 5% price increase affects each of those performance monitors and you begin to understand exactly how much items should be priced for in order to achieve minimum food costs, maximum margins, and maximum profits. You may tell me you can do this now, but I’m going to tell you only with a small troop of analysts and well massaged data.

the employee performance story
Wouldn’t it be great to have a better understanding of what made great employees great, good employees good, and poor employees…well…suck? I’m sure you can tell me about personal drive and character and customer relation skills and I’ll agree with you. But what if you could see metrics about employees like how many more transactions they perform, or how efficient they are in certain work areas, or why they are always able to predict what needs to be done before it needs to be done (okay…that one may be harder to figure out). Again, manufacturing plants have been dong this for years…we just have to catch up and figure out how to make it work for hospitality A BI solution should have all the data points where an employee enters information into your technology solutions, and that transaction is tied to an employee ID. Employee ID is often the ONLY common thread among disparate technology solutions so this specific area can be one of the easiest to achieve. The benefit of seeing performance information on your performance range of employees is to spot operational efficiencies that great employees implement and then work to train those into the rest of the staff.

If you are shaking your head at me saying, “Employees won’t do it even if I show them how to be better”, then I’m going to tell you that you have bigger problems. Employees suck either because of lack of education or apathy. BI can help you fix the education part and then you can help yourself and fire the apathy part.

the staff management story
The last story we’ll weave is the magic tricks around staff management. I never ceased to be amazed at the creative processes that I find managers and client venues using to estimate staffing requirements and build employee schedules. It is an artful guessing game made more accurate after years of experience and some trial and error. But if you have employees entering information for time and attendance (if you pay people you have this I think), and you have historical revenue information (for a specific day of the year possibly for multiple years), and you have employee performance detail (for example revenue per hour) for a “good” employee then you could have the best staff management procedures on the planet based on BI data and predictive modeling. Bringing this information together into a BI solution gives you forecasted revenue expectations with forecasted costs for which you can then effectively manage your schedule and get maximum revenue potential at minimum cost from your staff. I have a dream….

See, you find it attractive…admit it. But (yawn) sooo un-sexy. Who wants to talk about boring operational efficiency metrics to executive management so you can purchase a BI solution? I hope you.

I would love to hear from you if you have other great examples of ways you achieved the ROI of your BI solution. I’d also like to hear from you if you think mine are ridiculous. And as always, if you’d like to find out more about kevin sturm Consulting please visit my website or email me.

enterprise software, hoax or holy grail – part one

This is the first post in a three part series on enterprise software solutions.

“It’s an enterprise software solution.” This has become a loose and liberally used term by hospitality technology vendors and hospitality venues. It is for many technology vendors the everything feature, used to answer questions about consolidated ad-hoc reporting, multi-layer configuration, shared data elements, and next generation architecture and interface support. “Yes we can do that, it’s an Enterprise solution.” But the reality for most hospitality venues seeking the Holy Grail of enterprise systems is very different. Implementing a single enterprise solution is a complex task. Implementing multiple enterprise systems is difficult at best and may be impossible for some if not carefully planned and executed.

I consulted with a client who a few years back purchased a number of Enterprise software solutions with promises of decreased food cost, better financial reporting, improved menu analysis, and lower system support costs. They chose well established vendors with proven track records, working with each vendor to implement the system to take advantage of it’s enterprise features. But like many other venues with similar initiatives, they found the project to be highly complex with problems the vendors had not prepared them for. The current outcome of their initiative was to remove one solution all together, delay the implementation of other solutions, and focus on retrofitting a single Enterprise system to meet business needs.

For some venues installing multiple enterprise solutions is not currently a reality, but for others it can be accomplished with a well planned project and diligent management of the the individual sites and vendors. Venues currently planning on migrating or replacing disparate technology solutions with one or more Enterprise solutions must consider these items before selecting a vendor(s).

research and document technical and functional operations.
Before choosing an Enterprise solution it is important to ensure that you can feasibly implement an Enterprise solution. This will be different for each type of venue, but four important requirements are network architecture, security permissions, site operations, and financial reporting needs.

Most enterprise solutions require some form of network solution that connects all sites, and many vendors them will request a dedicated or isolated network. In this day and age it would seem simple to get Internet access with all the options, but time and again venues (especially remote venues) find that Internet access is difficult if not impossible to get. For many a T1 or Fractional T1 is the only option, which can break the budget of many technology projects. To add complexity to the situation, your security team is waiting to tell you all the reasons the desired solution will not meet security standards. If it is not documented already, request Information Technology (IT) to document permission and access protocol for your network, and involve IT in the process of selecting your system.

If you are contemplating an Enterprise system it often means you have multiple locations spread out over a geographic area. And unless you are McDonald’s each of these locations have defined their operations and are reticent to change. It is vitally important you understand and document these operations, from the front end user to the detailed reporting procedures used by finance. Be diligent in asking for any “customizations” that individual sites have made to their existing solutions. Pay special attention to finance since most established finance teams have custom spreadsheets or macros that have been created to work with their existing system. Interrupting this process without a replacement plan will not only create project delays but unhappy employees.

evaluate and change your operations.
When you have documented your operations it is time to make some hard decisions. One of the most difficult projects to undertake is deciding on your corporate standards. It is actually easy at corporate, but difficult at the site level. Management at individual locations are never excited about operational changes, and are often not willing participants. The success of your project(s) weighs heavily in the hands of local site management, and their participation is vital. Decisions need to be made in advance of your technology decision so that data requirements are understood and planned changes to operational processes documented.

Once these decisions are made, it is important to mandate the planned changes. Customizations at the site level will kill your enterprise project with poor transactional data. A top initiative of your Enterprise project should be to ensure quality data is being stored. Lots of operational procedures will ensure lots of disparate and duplicate data in your system.

understand hierarchy of data elements.
Now that you have your general operations down, you can begin to document the important data elements. These data elements are important for two reasons. First, they are the back bone of your reporting. It’s the old adage of garbage-in-garbage-out. If you don’t understand the data going it, the data coming out won’t make sense either.

Secondly, data elements will be the measure to understand Enterprise hierarchy of your technology solutions. Pay attention, because this is important. Enterprise solutions are based on a hierarchy of data elements. For example, at the most basic level they will have a hierarchy of the business.

Corporation – Ownership Entity
Business – The actual business
Region – Sub definition of Business
Site – Physical place of business

Not all technology solutions will have all of these data elements, but most will have some subset. This however is the most basic hierarchy of an enterprise system. Each data element will then be associated with one or more of the above data elements. Some examples of sub-data elements are employees, revenue types, revenue centers, inventory items (whether food, rooms, tables, or people), and point of service (POS) devices.

When reviewing your technology options request a detailed data hierarchy from all prospective vendors. If they do not have this information, demand it. It is too important to your success to overlook. If they cannot provide it, then they are not worth evaluating.

diagram interface points.
If you have completed all the above successfully, you have done the easy part. You understand the operational requirements, documented important data elements, and have information on how your prospective vendors define those data elements. As great as it would be if technology vendors designed their architecture with other vendors in mind, they did not. They designed them with release dates, internal initiatives, and other customers in mind. Each data element from each vendor is a puzzle piece and the puzzle pieces must fit in order see a holistic picture of your data.

Careful attention to this step will make or break the success of your enterprise solution project. It is also important that someone with a strong technical understanding be involved in this step. Enterprise projects succeed or fail on how well the data elements fit together. I recommend putting together a simple table that creates a single view of how these data elements fit together. Having this information in a single view defines how each vendor’s hierarchal structures complements and contradicts each other.

For example, if your Point of Sale (POS) solution defines revenue centers at the lowest level and your Property Management System (PMS) defines them at the highest level an interface architecture needs to be implemented to ensure maximum benefit is achieved from each system.
You’ve now made it to the vendor selection process. For tips on Enterprise Software implementations read Part 2 of this post.

For more information about kevin sturm Consulting please visit my website.