Take "rev PAR," for example. It's a common term for a key hotel metric that, until recently, Peabody Hotels Group (PHG) could track only monthly, according to Warren Winslow, PHG's corporate controller. Since installing a BI system designed specifically for the hospitality industry, however, the Memphis, Tenn.-based hotel management group can track "rev PAR," or revenue per available room, in near real time.
PHG owns or manages nine hotels in Massachusetts, Florida, South Carolina, Tennessee and Arkansas. Its properties include the southern Peabody Hotels, notable for the live ducks in their lobby fountains. In 2002, Winslow began looking at ways to make the group's hotels more efficient. His group got its ducks in a row, evaluating four BI tools and settling on Execuvue from Pittsburgh, Pa.-based Aptech Computer Systems Inc., a hospitality technology vendor. Its pre-built functionality for hotels set it apart from generic BI platforms, Winslow said.
Choosing vertical BI tools is an increasingly common approach, according to Joshua Greenbaum, principal analyst with Daly City, Calif.-based Enterprise Applications Consulting. Whereas general-purpose BI platforms are akin to toolkits, vertical BI software is a finished application. It's like the difference between building a house and buying a house, Greenbaum said, and many companies aren't interested
"Most business users want a tool that goes out and finds information and provides it to them in a way they can use. [Vertical BI] is a much better approach than the general tool approach, and I think it's really the future of BI," Greenbaum said. "General-purpose tools are expensive to own and require a lot of programming and development work. There's a lot of non-core expertise and software development that's needed."
The only drawback Greenbaum sees is that there aren't enough vertical BI tools on the market. Depending on the industry, companies may have a hard time finding pre-built tools that fit their needs. He predicts that this will change, as more experts and developers lend their specific industry expertise to vertical BI tool development projects. The choices may already be growing -- according to a Cognos spokesperson, the company currently has more than 300 partners, offering customized systems for industries such as financial services, healthcare and government.
PHG's vertical business intelligence tool
The tool that PHG chose, Aptech's Execuvue, is a customized front end built on a BI platform from Ottawa, Ontario-based Cognos Inc. It includes a custom interface and pre-built analytics cubes geared to hotel users. It can calculate rev PAR, for example, with no customization required. Aptech also has a hospitality-oriented data mart, designed to integrate with property management systems, point of sale (POS), and other common hotel software.
"Some people within every organization are, as I call it, 'protectionists' with information," Winslow said. "I didn't want to take that position. Knowledge is power and the more I can give [hotel managers] out there, the better they can act on it and bring that value to the organization. We just had to groom them to look at [the new BI data]."
BI has increased flexibility and reduced operating costs for PHG's hotels, according to Winslow. Now, managers have daily reports instead of waiting until month-end. With near-real-time occupancy rates and rolling forecasts, food and beverage managers can adjust labor schedules and supply orders. BI also enables better energy management tactics, such as shutting down power on certain floors of hotels when occupancy forecasts are low. And, with better forecasts and trend analysis, Winslow said, managers can more effectively estimate payroll and labor needs -- traditionally the biggest costs in hospitality.
The senior management group, which oversees all of the properties, has also appreciated the operational agility enabled by BI, Winslow said. In addition to rev PAR, they can track other key metrics in near real time -- the average daily rate charged for rooms, for instance, and the percentage of occupancy, which is the number of rooms occupied on any given night. Executives have really appreciated the ability to drill down on metrics to understand the data behind them, Winslow said. Rolling forecasts have increased financial visibility and reduced the number of days needed to close the books. It has enabled a reduction in accounting staff of more than 50% and saved other labor costs. Winslow would not give specific numbers, but he said he will probably make his ROI objective sooner than forecast.
For other hospitality companies considering similar BI initiatives, Winslow recommended inclusion of operations and hotel managers in the planning. And, once BI is rolled out, hospitality companies should stress the value of the system, he said, so managers take full advantage of the capabilities.
Choosing vertical vs. general-purpose business intelligence tools
Vertical BI systems such as Aptech's Execuvue shorten implementation time and reduce costs, according to Cam Troutman, director of sales. They are also key for industries such as hospitality that are newer to BI, he said.
"Hospitality has a certain language," Troutman said. "Customers don't have to pay [Aptech] to learn their business, and that's time and money that they save. If they hire a BI consultant that works in a different industry every day, they're essentially paying them to learn their business."
The choice of pre-built vertical BI software, a general-purpose platform, or a customized application ultimately depends on requirements and available tools, according to Gerry Brown, senior analyst with Northamptonshire, U.K.-based Bloor Research International Ltd.
"If you are addressing a standard industry requirement (e.g., triangulation reporting in insurance), a vertical solution is best," Brown wrote in an email. "If you do triangulation reporting in your own unique way, buy a customizable solution. If you are introducing a unique industry innovation (e.g., quadrangle reporting), build your own."