Chad Swartz, senior manager of IT operations at the Preferred Hotel Group, spent most of the year planning disaster recovery and ended up with a big cost-saving strategy for the Chicago-based firm.

Preferred, which specializes in group-travel sales, booking conventions, conferences and corporate outings into its network of luxury hotels, is moving its relatively tiny data center into the cloud.

The company signed up earlier this year for The Enterprise Cloud, a hosted server-and-software service from Terremark Worldwide. Under the plan, Terremark will supply 10 virtual servers—seven on full-time duty and three in reserve for spikes in demand—each with a pre-configured amount of disk space, memory and processing power, as well as a set amount of bandwidth, Swartz says. Actually, Terremark will supply double that eventually; one set for the production environment and an identical one that is physically located in a different Terremark data center, as a disaster-recovery hot site.

The service will cost about $16,000 per month for the whole kit-and-kaboodle. That compares favorably to the $210,000 Preferred was going to have to pay to refresh its aging Dell servers this year, plus $10,000 per month in co-location and bandwidth fees, Swartz says.

"Everyone is checking their budgets now," says Swartz. "If you go to the board, is it an easier sell to say we need to spend $200,000 in capital costs and $10,000 a month? Or just pay a $10,000 implementation cost and $16,000 per month? The cloud environment is going to explode, if just for the cost savings."

The need for disaster recovery—a mandate that came down from on high after members of the board realized the privately held company had no backup plans—was the driving force behind the investigation into cloud computing service. But it was the cost that sold it, Swartz says.

That's not surprising, given the currently dismal economics of the business- and luxury-travel markets, both key parts of Preferred Hotel's business.

Travel Business Slump Increases Pressure on IT Costs

At this time last year, only about a quarter of all hotels reported they were charging a lower average cost per room than they had at the same time the previous year, according to industry benchmarking analysts Smith Travel Research. Now, more than 40 percent report that they're charging less. Among luxury hotels that number jumps to more than 50 percent. And 20 percent of all hotels report that they're both charging less and are renting fewer rooms than the same time last year.