The barriers for hospitality companies to host their IT systems in the cloud are coming down fast. But hotel owners and operators still have their reasons for not moving everything into the cloud.
Historically, hotels in remote locations and cruise ships with patchy internet coverage had good reason not to move their on-premise IT systems into the cloud.
But in recent years, advances in low earth orbit satellite technology are bringing high-speed internet connectivity to even the most isolated places in the world.
John Burns, president of Hospitality Technology Consulting and a cruise enthusiast, said: “The one uncertainty is that you never know how good the internet connectivity is when you are at sea. Although things have got much better. I was talking to a fellow consultant the other day who just completed a cruise down to Antarctica on a ship that is using Starlink, the service provided by Elon Musk’s company SpaceX. He says it was just breathtakingly good.”
In August 2022, Royal Caribbean Group, announced its plan to roll out Starlink across its fleet of 64 ships. Carnival Corporation, with nearly 100 ships, made a similar announcement in January 2023.
Josh Weinstein, CEO of Carnival Corporation said: "The added bandwidth will give the brands the capabilities and flexibility to introduce new guest services and features, as well as help boost operational functions like onboard equipment monitoring and real-time communications between ship and shore teams. And importantly, adding Starlink's innovative technology to the company's existing connectivity platform will also help our amazing crew stay in touch with friends and loved ones."
SpaceX is one of a handful of companies providing global internet coverage. Musk’s company is understood to own most of the thousands of satellites currently in low earth orbit (550-1,000 km from the Earth’s surface).
Low earth orbit satellite connectivity
Hotel businesses in remote parts of the UK may soon be the beneficiaries of Starlink technology too. At the end of 2022, the UK Government launched a trial to see how Starlink’s satellites can deliver high-speed connections to more than a dozen very hard to reach locations in Snowdonia, the North Yorkshire Moors, the Lake District and elsewhere.
Although this particular barrier to cloud computing is now coming down, it is not just remote hotels that have had their reasons for not moving to the cloud.
Many hotels are holding onto their on-premise property management systems (PMS), that are run from servers in a back office or basement.
Heather Byron is SVP Services at Alliants, a provider of technology consultancy services and SaaS products. She commented: “There is a genuine concern about the disruption to staff, the disruption to operations, the costs. Those are the pinch points. And the nature of the business is a factor too. It’s constantly customer-facing, with tight margins, pressures on staffing, so it’s just another project that needs addressing, but in the prioritisation of what hotels need to focus on, it’s not seen as critical.”
Having a legacy PMS does not prevent hotels from adopting SaaS products, said Byron: “ If you’re going to invest the money, you’d rather invest it in a business intelligence tool or a customer-facing app to keep up with those broader customer expectations.”
New lightweight integration tools such as Enterprise Service Buses, Event Streaming and Robotic Process Automation have eased some of the challenges of integrating SaaS products with on-premise systems.
Byron said: “With legacy systems, one of the key questions hoteliers ask first is: ‘We use this system. Can your system piggy-back on ours?’ We have precedents of enhancing the guest experience and allowing hotels to really streamline their offerings and services within a variety of systems.”
Choosing the right time
Hoteliers have told Byron they are not moving their PMS to the cloud for a variety of reasons, such as: “The downtime will disrupt our online bookings and check-in process,” or “It’s too busy at the moment and we cannot outlay the IT resource necessary to ensure a proper risk analysis and smooth migration.”
January and February are the quietest months for many hotels. A good time for a major tech upgrade? Vibhu Gaind, CIO, RBH Hospitality Management, who is halfway through a cloud migration for the company’s 50 properties, said: “Everyone else is doing the same so there is a limited amount of resource in the market, a limited number of vendors who we work with, and you need to plan for these things well in advance, especially to stay away from the summer months.”
Another reason put to Byron is: “We have other IT projects/tools that are already involved in the on-premise solution. A migration can break our connected systems.”
A phased migration approach can minimize disruption to connected systems. This involves migrating systems and applications to the cloud in stages, rather than all at once, so that any issues can be identified and addressed before moving on to the next stage.
Capex or opex?
Another familiar reason for not moving to the cloud concerns the financials. Some hoteliers have argued that going to the cloud creates an operating expense, but by keeping their on-premise solutions, it’s a capital cost that they can put on expenses and make their margins look better.
Burns commented: “You have arguments on both sides. Capital expenses take a long time to define and approve so you don’t have agility when it’s a budget cycle of one to three years – inception, research, submitting it and approval and finding the funds. So the opex avenue of just a monthly charge can be a lot faster.”
“That said, our tradition in the hotel business is to buy a system and then keep it for eternity so at some point we’ve got a 30-year-old system sitting there behind the front desk that has long since paid for itself, whereas with opex you’re paying $X per room per month forever and if you string that over 30 years it gets expensive. On the other hand, it’s always an up-to-date system because it’s always being refreshed and enhanced as opposed to your old system that’s on-premise and still remembers what the world was like in 1990.”
Hilton Hotels started its cloud migration programme in 2013 and Marriott in 2016. The process takes time, not least due to complex multiple ownership structures. In general, the global hotel industry has been slower than some other industries.
When oil and gas exploration companies like Shell moved to the cloud, a key motivation was to reduce their enormous energy bills.
With the spike in energy costs (and the end of the UK Government’s Energy Bill Relief Scheme earlier this year, hotels using the cloud today will have lower electricity bills. But, as we have seen, there are plenty of other considerations that lead to hotels putting off cloud migration.