There is a growing demand in the hotel industry for a pay-per-use model when it comes to communications. Hotel management is increasingly looking to execute flexible commercial contracts that recognise costs per-occupied room. This helps to improve asset management by reducing capital expenditure and cash flow volatility, as well as optimise profit per available room.
Ordinarily, when implementing communications systems, hotels will purchase more capacity than immediately required. This helps them avoid having to request additional capital for incremental expansions which may be needed due to seasonal fluctuations in hotel occupancy or demand peaks and valleys in convention and function business. The result of this traditional approach means that communications environments are typically 5-15 per cent over capacity at any moment in time, resulting in poor utilisation of capital and increased maintenance charges.
To succeed in the highly-competitive hospitality market, hotels must meet escalating customer expectations while keeping strict control of both capital and operational costs. Hotels are looking to maximise profit-per-room by delivering services at a predictable cost that is directly aligned to hotel occupancy. The newer consumption model for communications lets hotels directly align capacity, functionality and cost to the demands of the business.
For example, UXC Connect created an industry-specific consumption-based model for the Accor hotel group to address growing demand in the market for a pay-per-use model for telephony and related services. For Accor this was about creating a flexible cost model in line with business demand, whereby the hotel only pays for the rooms that are in use.
Advantages of consumption-based models over capital-based models
1. Reduce the cost of telecommunications infrastructure and maintenance Traditional communications solutions require a significant upfront investment in on-premise technology and project services. As part of this traditional model, customers are hit with large upfront costs before any capability or benefit is delivered. With the advent of consumption-based models, hotels now expect to pay only when they use the service and realise the benefits of the capability.
2. Align costs on occupied rooms for commercial flexibility
Many hotels have capital expenditure (capex) constraints. While technology is a key supporter and enabler of hotel initiatives, on its own, it very seldom provides a clear benefit. Removing the need for capex to provide communications services to customers gives hotels the financial flexibility they need to improve the bottom line and provides commercial flexibility to scale up and down as required depending on hotel occupancy.
3. Remove the need for hoteliers to own and manage expensive, non-profit generating ICT assets
Many consumption-based models provide not only the ability to scale up and down, but also the capability to exit or wind down capability. Many of the risks associated with technology lock-in and future capability development are moved away from hotels and back to the communications providers so that hotel manager can focus on core operations.
About the author
Steve Saunders is the practice manager – services for UXC Connect. With more than 15 years experience in ICT, Steve has built a career around understanding business challenges and developing innovative ways to create competitive, customer-focused solutions. He brings to market UXC Connect services and products that solve business challenges by reducing operating costs, improving service delivery, taking over non-core activities or improving workplace efficiency and collaboration.
