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Hotel PMS: How to Measure ROI

Posted December 17th, 2015

Every technology investment needs to ultimately translate into positive financial outcomes. Otherwise, what’s the point? When it comes to gauging the potential return on investment (ROI) on upgrading to a next-generation PMS, the first question to ask is: To what extent will the new system reduce the amount of time currently being spent on managing front desk activities, including check-ins and check-outs, and on such mundane (but time-consuming) tasks as consolidating guest accounts and managing rates and availability across distribution channels, including OTA, GDS, Web, and travel agents?

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To what extent is the new system likely to improve sales and revenue — for example, by increasing bookings via web booking engine integration, increasing occupancy rates through real-time inventory updates, and increasing average daily rates through integrated revenue management and advanced forecasting tools?

Another key factor to consider pertains to reduction in losses, including losses related to errors in manual updates and mistakes in POS consolidations (guest purchases made across other parts of the property), as well as lower integration costs with third-party hardware and software.

Finally, it’s important to keep in mind that enhancing the quality of the overall guest experience through the deployment of a next-generation PMS should lead to a greater number of repeat guest stays as well as a higher volume and intensity of positive brand advocacy, including favorable guest reviews on TripAdvisor and other popular customer feedback sites. The correlation between favorable guest reviews and positive economic outcomes is obvious.

Next-generation Property Management Systems tend to be significantly less expensive and require less up-front investment on the whole than their predecessors. There are many reasons for the shift to increased affordability, including the fact that installation is generally less complex and hardware is generally less expensive compared to, say, a decade ago.

With some systems, the data is stored in the cloud, reducing (or even eliminating) the need for on-premise servers. Incidentally, most cloud-based systems also use a subscription “pay as you go” model, which generally means no long-term contracts and no upfront capital investment for the software. This may be an important consideration, especially for small hotels, motels and inns operating with a limited budget.

In all cases, it is important to confirm which software features and modules, including future upgrades — as well as which hardware components, if any — are included in the base (recurring) price that is quoted so as to avoid any unpleasant surprises down the road.