Remington Hotels and its IT transformation journey
The idea of a mothership on which a host of independent units depend is a neat model for the hospitality industry, and it helps explain what attracted James Clent to the job of CIO at Remington Hotels, precisely three years ago.
He had spent the previous seven years transforming the business practices of two nationwide healthcare operators, both having clinics spread across America. “Now I have hotels. But it's not that different - you have an individual unit somewhere in the US which needs to be able to operate by itself, but which needs to be connected to the mother ship.”
As CIO of both Remington Hotels and its associated investment and advisory Ashford group of companies, he is very close to the business objectives of both the management arm and the hotel owners. Most of these are real estate investment trusts (REITs), traded on the stock exchange, though Remington Hotels manages twelve independent as well as 78 branded hotels from its Dallas headquarters. Well known hotel brands like Marriott, Hilton, Sheraton do not typically own the properties in their portfolio, turning them over to REITs and using the revenue to expand. The management company, whose name may not be known to the guest it directly serves, delivers the service on behalf of the owner, corporate or private.
REITs are required to pay out 90% of their net profit to their shareholders so the management company has to balance two driving objectives – to optimize revenues from the hotels and to maintain or increase the equity value of the properties. When Clent joined the senior management of Remington Hotels three years ago, he found a low cost, high revenue management company. “The IT infrastructure was a matter of band aids, paper clips and rubber bands,” he says with a chuckle. “You don't want to spend money when your objective is purely to raise the operating income for a hotel, so the focus is on revenue growth.”
However, the leadership of the company were aware that a transformation of this infrastructure could yield improvements in what is the lifeblood of the hotel industry, RevPAR or revenue per available room. “RevPAR is driven by occupancy and price. Let me give a simple example. If my hotel has 100 rooms, each priced at $100 at 49% occupancy that day's revenue is $4,900. But if by pricing them at $90 I get 65% occupancy and I make $5,850.” But cutting the price is not always the answer, he adds, since that does not take market conditions into account. If Cisco is holding a big convention in San Francisco, demand exceeds supply to the extent that rooms which normally sell at an average $110 are not available under $600.
Getting it right on the night is a headache. Remington Hotels' success depends on maintaining its reputation to improve a hotel's RevPAR by 10% to 12%, without dropping any of its service scores. James Clent started a change process as soon as he had assessed the current state of IT. “I found that everything was in-house, and running on internal servers, but without the support needed for a 24/7 operation. I said it makes no sense to try to build a world class data center environment within Remington Hotels - it would require huge investment in manpower and training, and probably co-location data centers here in Dallas with all sorts of backup equipment in there. I went to the leadership and explained what I thought were differentiators and which necessary but commodity procedures. They agreed, so then I investigated how we get to an architecture and a strategy that drives us forward into integration? Integration is something I believe in – data, and making it work for us, is my future!”
Rationalizing the infrastructure was the first, and in some ways the simplest task, he says. Non-core processes such as accounting, communications and HR were outsourced. “My entire accounting process has moved to Oracle cloud. I have no desire to have that internally – it is not the business I am in. I can do it better and more reliably in a cloud environment. So, one of the strategies I deployed was putting all these essential but non-differentiating processes in a commodity situation.”
That done, he was able to turn his attention to the core, revenue and reputation generating processes – the processes that improve the margins at the hotel while maintaining the high level of service and equity value in the property. “First and foremost, we have to apply analytics to make sure we have the optimized price setting to get the best RevPAR out of our hotel. We built an analytics environment based on Google Analytics, which is completely flexible. We have terabytes of data that we collect from multiple sources round the country and from our hotels, and push that into an analytics model that can ramp up when we are running our revenue prediction models. It can go from one CPU and 16GB of Ram to 128GB of RAM, and back again when we’re done, in a matter of seconds. So, we have a variable cost environment that runs our analytics. It is really big when we need it to be and really small when we don’t. It makes total sense to do it that way.”
That is how Remington Hotels keeps its finger on the pulse of its market, in real time and across all its locations; the next question is how to manage it. “The analytics strategy we have is a total and absolute differentiator,” says Clent. “That is where my focus is. My knowledge that I have in-house here is focused on my analytics strategy. I don't need my guys sitting there working on an email exchange database or the backing up of an exchange database, when I really need their intelligence looking at the analytics strategy.”
That doesn't mean they are developing analytics models though. “My task is to make sure I can get the data loaded from different sources and make sure I have the environment setup to achieve optimal performance, and I do that by deciding what is my best platform to do this. If I need anything changed in that environment I have an outsourcing partner like Saama or Zensar. Zensar works on my cloud strategy moving all of my non-differentiating processes into cloud and Saama is my analytics development team. I do not need those developers in-house, because tomorrow someone will develop a new and better tool, and I will find a vendor specialized in that tool rather than have those specialized resources on my staff. I have a simple VPN based network with all my hotels, for example. I haven't got enough work for a Cisco certified network associate (CCNA) on staff. Whenever I have to make a configuration change on my network I just tell my preferred vendor what I require.” His rule of thumb for any post is to ask whether there's enough workload to keep them busy – if not, he will outsource to a strategic partner.
Keeping his 45-strong IT team lean and focused is important to Clent - having worked in manufacturing he subscribes to the principles enshrined in the TPM. “Getting smart people in is going to be the biggest differentiator in the next ten years because there is going to be a shortage of them.” He sees his role as creating an environment of success in the company, recruiting from the top US colleges as well as internationally. “We have really interesting internship processes. They work on real life analytical and decision-making processes in an environment where the effects of that work are immediately seen and felt through the organization.”
That indeed is why he is in the job he loves: “I was looking for a company that invested in analytics and had the commitment to follow that through. That's rarer than you'd think. Remington Hotels is totally invested in big data and analytics – we are going to live by the data we can pull out of our own and other environments and make decisions based on that rather than on gut feeling.”