UNLV professor heralding Las Vegas as hospitality technology hub
28 June 2011
Like many residents invested in the future of a town battered by recession, Mehmet Erdem likes to sell Las Vegas’ benefits whenever he gets the chance.
Erdem, an associate professor at UNLV’s William F. Harrah College of Hotel Administration, recently found an opening in Austin, Texas, while attending HITEC, a premier hospitality technology convention.
In response to conventioneers’ complaints about the lack of direct flights to Austin, Erdem extolled the virtues of direct flights into Las Vegas — a dry, windy place free of crippling natural disasters such as ice storms and tornadoes. It’s also chock full of diversions and eager for visitors — especially those with expense accounts.
He wasn’t able to persuade the roving convention to move to the nation’s top convention destination (Baltimore will host the group next year). But the professor, who teaches a course in hospitality technology, has also been selling Las Vegas another way: as a hospitality technology hub.
Las Vegas is making some progress, most recently opening a Microsoft-powered technology center, LINQ360, in Summerlin panelists said. The center, housing 16 technology providers, will serve as a showroom for hospitality customers interested in purchasing software systems and as an incubator to fund technology startups in the hospitality sector.
Technology can help companies operate more efficiently, such as room key swipe cards that double as marketing tools.
Hospitality software can assist in the marketing effort by tracking how and when guests spend money. Hotels that know when business is slowest can use data to appropriately price rooms rather than guessing based on the competition. They can also use tracking software to schedule events throughout the year that could boost business.
For all of its marketing muscle, Las Vegas needs to do a better job promoting itself to attract technology heavyweights, conference participants said.
That should mean more publicity for companies such as Switch Communications, they said. The Las Vegas-based supercomputing giant and conference participant supplies data warehousing for Fortune 500 companies and government agencies, yet it is largely unknown to the public.
But with steep high school dropout rates and a low rate of college attainment, Las Vegas reflects a factorylike economy driven by hospitality jobs that don’t require higher education. According to the Chronicle of Higher Education, 21 percent of Clark County adults have a bachelor’s degree versus the national average of 28 percent. College grads are just under 15 percent of Nevada’s population, according to research firm Applied Analysis. That’s bad news for corporations, especially technology giants, that cluster in more highly educated regions.
Although creating a high technology industry in Las Vegas may sound doubtful, Erdem and others think it’s within reach because of its overlap with the hospitality sector. Las Vegas serves as the global headquarters of an expanding gaming industry, with technology suppliers and other vendors thriving on growth in Europe and Asia even as business suffers at home.
“We need to capitalize more on what we have,” he said. “We’re not doing much to invite technology companies to town, although that’s changing.”
Technology is of growing importance to Las Vegas’ corporate giants. After decades perfecting the science of gambling by using high-tech tracking systems to monitor players’ habits and enticing them to return, casinos are faced with new generations of visitors spending less on gambling. The recession has prompted efforts to replicate robust gambling marketing engines in other, historically overlooked areas, including systems that forecast hourly demand for hotel rooms and software that tracks customer spending on dining, shopping and entertainment, therefore allowing casinos to offer rewards to people who don’t gamble.
In a postrecession era where profitable yet leveraged casinos are struggling to make debt payments, a system that can eke out a slight increase in profit margin can mean the difference between losing money and operating in the black, said Patrick Bosworth, a partner with Duetto Consulting in Las Vegas.
“In an industry where everyone was earning money a few years ago, there wasn’t a whole lot of motivation to squeeze out another 3 percent growth in profit margin,” Bosworth said. “Now, they can’t just wait for demand to return.”
Technogeeks hold the keys to a profitable future in Las Vegas, Bosworth said. Business school-trained technology gurus, rather than glorified marketers, can understand the mind-numbing jargon spit out by software used to forecast demand for hotel rooms, such as “multiple progression models,” “exponential smoothing” and “linear algorithms,” he said.
Las Vegas casinos have scored significant victories by delivering four-star service in some of the world’s largest buildings. Now that times are tough, technology experts are needed to help market more strategically to customers with limited budgets, he said.
State regulations dictate everything from the software that determines the spin of a slot machine to the game’s built-in profit margin. But the casino business is known more for complying with government rules than for innovation, industry experts say.
“We like to see our operators and vendors leading in innovation, but it always seems like they are catching up” to other industries, Erdem said.
That’s partly a size problem, as Las Vegas megaresorts have a more difficult time implementing advanced technology than hotel competitors with smaller and simpler operations, he said.
Some hospitality software programs are better suited to hotel chains with thousands of small, identical properties than big resorts, each with a unique set of amenities, Bosworth added. Adapting generic business software to the casino environment doesn’t always work, while developing software in-house takes specialized talent some casinos may lack, he said.
With an educational system that falls short of those in high technology centers such as Silicon Valley, Las Vegas has long had an uphill battle in attracting high tech employees, Erdem said. That’s a problem for technology chiefs, who are only as good as their underlings, he said.
“It’s like being a great basketball coach at a university that isn’t attracting enough talent or doesn’t have enough scholarships,” Erdem said. “You may be a good CIO but our environment isn’t conducive to convincing, let’s say, a programmer from San Jose to move here with the assurance that his spouse will get a job and his kids will go to a good school.”
Nor is Las Vegas attracting enough high techno industries where people can cross over into hospitality jobs, he said.
Many industries, not just casinos, are challenged in finding technologically minded employees, said Katrina Lane, chief technology officer of Caesars Entertainment.
Her department was among 100 honored by CIO magazine last year for innovation in information technology.
Lane entered the marketing field after receiving an undergraduate degree in physics from Stanford University and a doctorate in experimental physics from Cornell University. She joined Caesars in 2004.
“I didn’t come to the (casino) industry so much as I came to the company … because it was a leader in this space,” she said.
UNLV should play a role in creating a technology hub in Las Vegas by having a supporting curriculum to attract talent, panelists said.
That was the idea behind INNovation Village, a hotel college campus at UNLV that would include a research lab and a showroom for hospitality products and services. Caesars put up some of the money for the campus after it was proposed in 2007, although progress has stalled as matching state funds and other hoped-for corporate donations evaporated in the recession. Budget cuts forced UNLV’s hotel college to slash several hospitality and tourism-related programs in an effort to consolidate resources in hotel management.
The agreement with Caesars, which included a matching funds requirement, expired in 2009 and would require a new agreement to renew the fundraising effort. Caesars will have paid $7.5 million toward the effort after it makes a final $1 million payment this year toward hospitality research. Although the campus is on hold, most of that money is funding research on best practices in hotel management, technology and human resources issues such as motivating employees.
“I hope that we continue to invest in our education system,” Lane said. “Vibrant institutions,” are crucial in attracting the talent the industry needs to stay competitive.
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