IT Value Wake-Up Call

Though Marriott carries the bags at more than 2,600 hotels worldwide, the company owns less than 1 percent of them. Marriott leaves the risk of ownership to others and makes its money by managing hotels and by franchising its name. Managing and franchising bring higher margins than owning everything, but shine a bright light on Marriott’s ability to deliver services above and beyond putting mints on pillows. Owners and franchisees are demanding—and occasionally rebellious—about extracting every last bit of return from their investments in land and buildings.

They want their IT cheap.

Though Marriott’s centralized reservation system is legendary in the industry, the company has stumbled with projects that have not had adequate business leadership, or have lacked necessary buy-in from the owners and franchisees. We asked Marriott’s President and COO William Shaw how he manages the cooperation between IT and the business, and how he finds the elusive ROI in IT projects.

CIO: How does your business strategy affect IT?

William Shaw: The way we grow is to find new owners and franchisees who want to own our hotels or license our brands, or existing owners and franchisees who want to add more units. So we need to have technologies that are flexible so that we can build off of a common platform that spans across our different brands and across the different geographies.

To attract owners and franchisees, we have to have technologies that make them more effective and more efficient, whether it’s reservation systems or revenue management. That’s critical if you want to be the most preferred amongst the different owners and franchisees.

For example, we’ve been able to demonstrate with our reservation system that our hotels generate more revenue per call, that they get the lowest cost [versus other operators]. We’ve put in a new system to take a lot of the accounting functions out of the hotels and put them in Knoxville at a shared service center. We’ve gone back to the owners and demonstrated the savings.

Do the owners and franchisees tell you which technologies are most important to them?

On something really major, we don’t go ahead with it unless we meet with the owners and franchisees and get their support. Because ultimately, that’s who’s paying for it. [They] make capital investments in IT at their hotels. They also pay fees for applications such as the reservation systems or for services such as wide area network connections.

Carl Wilson, who is the CIO, has technology advisory committees with the owners and franchisees. We communicate with them about how we think new technologies would support their objectives. They give us feedback on what their objectives are, what their preferences are, what they need for better performance.

What would you say is Marriott’s core competence?

It’s really our people. At most of our large hotels, you’d find that the average person on the management team has been there close to 20 years. I think, in IT, the average tenure is pretty close to 10 years.

One of the things that Carl Wilson has done here is help with more lateral movement. He came to Marriott with a reputation for creating strong working partnerships with his business colleagues. One of the biggest changes I’ve seen over the years is that the people in our information resources organization have gotten much better knowledge of what’s going on in the business. We encourage people to move between our business and information resources groups, which helps support better business decision making and convergence [between the business and IT].

What must your IT core competence be to match that business core competence?

The first thing is having technical expertise. And keeping up with what’s going on in the industry, what your competitors are doing with technology. The other thing is being able to work with the people in the Marriott business so that they can understand what their needs are. Communication is critical. Because it’s not easy to measure the returns on investments in technology. It’s not like a hotel. There, you know what the investment is, you know what the cash flow is, and you know where it came from.

Given the difficulty of measuring benefits from IT, what do you look for in an IT investment?

You’re looking for either how it’s going to generate more revenue or how it’s going to reduce your costs.

But you said that’s hard to show.

It is. It’s difficult to separate the value of the technology from the value that our associates, business processes, training or corporate culture provide.

So if you could change one thing about IT, what would it be?

I wish it was easier to measure the actual results of IT. When you’re building new systems, you get as much benchmark data as you can about how other companies are using those systems, and you talk to outside parties to get their advice and lessons learned. But often it’s difficult to understand why this system costs what it costs. And then, when you’re trying to figure out whether you should spend another 10 percent or 15 percent to change or improve it, [the decision] can be very subjective.

The guess work bothers you?

Yes. You’ve got customers out there who are challenging you all the time on the costs. We have a lot of franchisees and owners who operate hotels for other brands besides Marriott. That gives them a chance to come back and tell you, We think you could do something cheaper.

We’ve got to just keep looking for ways to optimize every process and tool to make sure that we’re adding more value. [As I mentioned earlier,] we streamlined our finance and accounting functions, moving them to a shared service center in Knoxville. New tools have enabled more efficient workflow management, driven productivity gains and improved the speed of customer billing. Also, process automation and standardization have resulted in savings to properties that exceed their costs for the service center.

We quantify the value that technology brings to this initiative through performance indicators that assess associate and guest satisfaction, cost and service delivery.

Of course, alignment is a two-way street. What is the most important thing the business could do to align itself with IT?

[We’re] continually educating people in the business about how IT can help out. It’s something we’ve been doing on the finance side too. We put together some training programs to teach general managers and other key people how the owners of hotels look at a hotel.

So education is the key then. How do you make it happen?

The education process has become a day-to-day way of conducting business, through processes that require collaboration. In addition, Carl Wilson has conducted briefings for senior executives, including myself, on new technologies and trends affecting our industry. These briefings also include information about what our competitors are doing, as well as Marriott’s strengths and weaknesses.

What do you do to ensure business accountability for Marriott’s IT investments?

We don’t go ahead with a project unless somebody in the business has taken responsibility for it, as well as somebody from information resources. That came from when Carl arrived here and looked at some problems we’d had on some projects in the past. It was because nobody really put a stake in the ground from the business side and said, This is what I want. And therefore, the scope kept changing, and the costs of projects kept changing.

Now, whenever there’s a project, we make sure that somebody in the business is responsible for it. IT is responsible for making sure it comes in on-time and on-budget, but somebody in the business has to make sure that they’re getting what they want. If they decide that they want something different, they have to get the scope reapproved.

You’re in a very cyclical business. Does IT play any role in smoothing the cycles?

If you go through a period like 9/11, when you’ve got much lower revenue, there can be more pressure to delay a project such as enhancing your reservation system. But with the real big projects—such as putting in our shared service center—we went ahead because it was going to take about a year and a half, two years, and it had big returns.

How do you counter resistance when money is low and people want to wait to do IT projects?

In times like that, technology is often something that can help give you a competitive advantage, but sometimes you have to sell IT a little harder.

We provide information on the business value that a new tool is expected to provide. By promoting transparency of information, we believe we facilitate the decision-making process and overcome potential challenges before they arise.

Executive Editor Christopher Koch can be reached at ckoch@cio.com.