NEC Corporation Tells a Strong Hospitality Story

May 26, 2015

NEC.jpgFrost & Sullivan recently had the chance to speak with NEC Corporation about its strong hospitality story when it comes to enterprise communications and collaborations technologies. NEC reports an impressive installed base of hospitality customers (more than 10,000 entities), including leading hotel chains, cruise ships, event centers and travel organizations. The company grew its hospitality vertical revenue by 22.0 percent in 2014 and is expected to continue to achieve considerable growth rates in this segment. In terms of telephony and UC, NEC has been one of the most effective vendors in helping hospitality organizations move to next-generation telecommunications products and solutions.

What follows are the highlights of a conversation Frost & Sullivan recently conducted with NEC’s regarding the hospitality sector and its current challenges/opportunities: 

 How would you describe NEC’s global hospitality footprint and what differentiates NEC from other enterprise communications vendors in this particular segment? 

NEC has a dedicated Global Hospitality Team that provides coordinated coverage for hotel brands anywhere in the world, regardless of which country they are headquartered in.  This team—comprised of Mike Gray (Americas), Hiroo Ichii (APAC), and Kees van Donk (EMEA)—has established relationships with the major hotel brands and ownership groups to assist in:

  • Delivering high-quality communications products consistently across the globe 
  • Finding qualified NEC resellers for installation & continuing services worldwide 
  • Providing technology updates and information aligned with Hotel Corporate management initiatives 
  • Coordinating and maintaining brand standards for voice (including UC) and peripheral applications 
  • Working with 3rd-party providers to assure connectivity that achieves hotelier requirements 
  • Actively representing NEC before the various industry organizations (HITEC, HTNG, regional groups) 

NEC believes our approach to the hospitality market is superior to any of the other competitors in this space,  the end result being that NEC is the preferred or approved manufacturer for major hotel companies such as Starwood, Marriott, Hilton, Hyatt, Mandarin Oriental, Four Seasons, Peninsula, and more.  Hotel brands recognize and leverage NEC’s “long reach”, making it easy to choose NEC because of the assurance that they will receive proper support anywhere in the world where they operate.

When we speak about the adoption of enterprise communications and collaboration solutions (e.g., IP telephony and UC), where do hospitality entities stand?

Because of the persistently high number of analog endpoints in a typical hotel used to fulfill the basic needs of guestroom communications, the adoption rate of IP has been slower than that of the general business marketplace.  The incremental costs of upgrading infrastructure to support IP and the lower acquisition costs of analog endpoints when compared to IP telephones has resulted in the slow adoption of IP to the guestroom.  

New-build hotels are increasingly installing the proper CAT5 (or better) infrastructure at time of construction with the intent to provide all services via IP (voice, entertainment, security, environmental controls).  With no legacy investment to leverage, a new IP voice system reduces the hardware footprint and power usage, helping offset any disparity in guestroom telephone handset pricing.  Many of the major chains are moving administrative telephones to IP when upgrading existing locations, allowing for a chain-wide dialing scheme with on-net calling to avoid toll charges and take advantage of new UC applications that significantly enhance common workflow productivity and improve the guest experience.  

We see an IP adoption rate of approximately 20%, reflecting the conversion of administrative endpoints to IP with UC and greenfield investment in new builds. NEC expects this to grow as aging infrastructures are upgraded not just for voice but to accommodate advances in guestroom entertainment offerings and other data-heavy applications that positively impact the guest experience while creating new revenue opportunities for hoteliers.

Are you seeing some of your hospitality customers moving to UNIVERGE 3C?

NEC is currently proposing 3C for several hotel projects in the United States.  There is strong interest in 3C as a private cloud solution for property ownership groups, providing a common voice/UC platform optimized for low-cost performance and centralized management.  But because of the reasons listed above for the slow rate of IP adoption within this industry, 3C has not had an opportunity to be widely proposed even though it is an approved product by a number of hotel chains.  It is also worth mentioning that 3C is the platform of choice for hospitality operations (both hotel and residential operations) on a number of U.S. military bases across the globe due to that solution’s certification by the U.S. Department of Defense.

Are hospitality entities considering hosted/cloud communications?

Common to our industry in the past few years, there is much talk about the “hosted” and “cloud”. The promise of shrinking the hardware presence and minimizing onsite support continues to be the primary drivers for hotels to look at the cloud for voice services.  A secondary benefit to hotel owners is the conversion of costs from a CAPEX model to one of OPEX, eliminating large cash outlays to implement or refresh communications solutions.  

The low monthly payment model does have a detrimental impact on hotel chains that derive their brand and management fees from the monthly Gross Operating Profit (GOP), as the recurring expense cuts into the calculation of those fees.  

A few other issues that have prohibited cloud from really gaining ground:

  • The reliance on analog endpoints in the guestroom requires a large number of IP-to-analog gateways to support them.  These gateways typically require a significant CAPEX payment before services can be turned on, eliminating this benefit from the hosted model.  The gateways also take up more space in the data closet than traditional on-prem solutions. 
  • The inexpensive cloud offerings have lacked key features for the industry and had a poor track record on emergency call (911) support. 
  • The inexpensive cloud offerings have also had reliability and performance issues, requiring local POTS lines to be installed for survivability.  This also negates the expected benefits of this model. 
  • Cloud offerings with Service Level Agreements (SLAs) and the appropriate hospitality feature sets typically cost more over a 5-year period than a traditional on-prem solution with SIP trunks and localized business continuity (a hybrid cloud solution, if you accept SIP as a “cloud” service and the on-prem appliance as a business continuity and service integration “box”). 

The most obvious candidates for cloud services are greenfield deployments (new construction) in limited-service hotels with small room counts.  Limited service also means limited staff, including IT resources.  New build allows for appropriate wiring and infrastructure to be freely installed. The ability to transition management responsibility for some costs to a cloud service provider may make operational sense.

We at NEC find that when looking at the TOC (total cost of ownership) over a 5-year period a premise-based system with fully managed support and using analog guestroom telephones (new or existing) is still less expensive than the current cloud offerings.  Hotels with analog presence (guestrooms, public space) still require gateways to the IP system that take up equal or sometimes more space than today’s premises-based systems.

NEC has adapted our delivery models to accommodate this new demand for OPEX pricing models and is able to successfully compete against hosted providers using the same financial vehicle.  Also, many of the hotel brands are reluctant to implement hosted solutions into their larger metropolitan hotels with big room counts until cloud voice is a more mature technology.

NEC is currently working on a cloud hosted voice offering that complements its existing premises-based solutions, but unlike current cloud voice providers, NEC intends to offer a hosted solution deployable on a global scale with the same feature sets and reliability that our customers now enjoy and expect.

Although Frost & Sullivan acknowledges the existing challenges that NEC identified for hospitality entities to move to IP and UC communications, the growth potential in this industry sector is still expected to be high. With increasing globalization, the hospitality segment is estimated to offer unique growth opportunities for the introduction of innovative solutions. While IP telephony and UC penetration in the hospitality sector is still low, increased competition and the need to provide the best service experience to end users is projected to boost technology upgrades. Frost & Sullivan will soon embark on a research project analyzing the potential for deploying advanced enterprise communications and collaboration solutions in the hospitality industry. Stay tuned.



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Mohamed Alaa Saayed


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