Outrigger Case Study Essay
Outrigger Case Study
Though the hotel and resorts industry has suffered due to the declining economy over the past several years, Outrigger Hotels and Resorts (“Outrigger”) has been able to maintain a strong niche market in Hawaii as well as beginning to expand geographically, establishing a stronger international presence. Though they began as major competitors with companies like Marriott, Hilton, and Starwood, Outrigger has been able to diversify its product portfolio mainly through acquisitions to appeal to a wider customer base. Outrigger created OHANA hotels to attract more “budget travelers” as well as beginning to offer condominiums off the beach front to appeal to regular travelers that vacationed more frequently. In these new markets, Outrigger benefited from no direct competition and is able to benefit from a diversified product portfolio. Outrigger has enjoyed success in these new markets but has faced many problems due to their entrance into these slightly different markets.
In spite of Outrigger’s aggressive geographical and product expansion in new markets, it has preferred to maintain a centralized management structure. Along with their centralized management structure Outrigger has tried to develop centralized operations and information systems. Outrigger’s operations and IT infrastructure in Hawaii were highly centralized. Outrigger’s properties in Hawaii all utilized the same Central Reservation Office; however all other properties located outside of Hawaii handled their reservations in house, limiting collection of important customer data and missing out on the opportunity to enjoy significant cross-property traffic. All properties in Hawaii ran on a JD Edwards ERP as the cornerstone of Outrigger’s back office operations while running Stellax, their integrated CRS/PMS, providing revenue management, reservation center support, and enabled data collection for further analysis on their E.piphany software.
This integrated IT infrastructure has allowed Outrigger to “harness the analytical power of E.piphany to do forecasts and generate business intelligence both at the source of business and at guest levels.” Properties outside of Hawaii are not allowed to benefit from integration of IT and information systems since they run on similar but different systems that do not allow for real time electronic interface with other hotel locations and wholesalers of vacations. Outrigger believes that a centralized IT infrastructure and systems is a source of competitive advantage. However, as the firm has diversified its product portfolio and geographic presence they have been sacrificing the centralization of IT infrastructure and have been unable to harness the potential benefits of integrated systems in their international markets.
To remedy this problem of a lack of integration and communication, Outrigger could expand their use of Stellax to its international locations, develop a new PMS/CRS system that better could better handle the different needs of Outriggers’ properties in different markets, or move its information sharing to the cloud for better communication between properties. Expansion of Stellax would benefit Outrigger by enabling consistent data gathering and analysis of important business and customer information that could allow for rewards programs that could increase profitability through cross-property traffic and meeting the needs of the customer better. This expansion of Stellax would be expensive and could create problems due to differences in needs between properties in Hawaii and international properties. Development of a new PMS/CRS platform that would be better suited for the wide variety of needs between different properties, though customization could be achieved through the application of add-on modules that could tailor the new PMS/CRS system to the unique needs of each individual property.
This solution could be very complicated and much more expensive then the first alternative due to the degree of customization. In addition, this option could create a more decentralized structure when Outrigger is trying to achieve increased centralization of operations. Lastly, Outrigger could move their information sharing between properties to the cloud. This option is less expensive than the other alternatives but would offer limited benefits. Though properties would be able to share business and customer information, analysis would be limited due to different data gathering techniques and differences between the type of business and customer data that each individual property’s system collected. To enable better integration of properties and to create a more centralized IT and systems infrastructure, Outrigger should develop a new PMS/CRS platform that would meet the needs of their diversified product markets.
Though this option is most expensive it offers the most centralized structure and the greatest potential value for Outrigger. Stellax is very outdated even though it still suits the needs of properties in Hawaii, but not the needs of Outrigger’s international properties. By developing a new customizable PMS/CRS platform, Outrigger would become much more centralized and could create value from its diversified portfolio of projects through the utilization of rewards programs that promote cross-selling of Outrigger properties and harnesses the power of business and customer information that is consistent between Hawaii properties as well as international properties. To track to success of such a large system implementation Outrigger could track the amount of customers that visit multiple Outrigger locations and the success of cross-selling of properties through the tracking of customer’s redeeming rewards points they earned through staying a multiple different Outrigger properties. Implementation of brand new software is risky however if it is properly managed and implemented correctly the rewards could greatly outweigh the cost.