Travel Business Slump Increases Pressure on IT Costs
At this time last year, only about a quarter of all hotels reported they were charging a lower average cost per room than they had at the same time the previous year, according to industry benchmarking analysts Smith Travel Research. Now, more than 40 percent report that they're charging less. Among luxury hotels that number jumps to more than 50 percent. And 20 percent of all hotels report that they're both charging less and are renting fewer rooms than the same time last year.
Travel-agency bookings dropped 11.6 percent during October, according to Airlines Reporting, a transaction clearing house for the travel industry. The Air Transport Association also forecasts a 10 percent drop in the number of passengers travelling during Thanksgiving this year. Smith Travel Research predicts demand for hotel rooms will drop slightly during 2009 and 2010, while the supply of hotel rooms continues to rise at about 2.5 percent per year this year and next.
That's not the kind of environment in which most IT executives would try to implement a disaster recovery plan, outsource their data center and launch a customer relationship management project all at the same time, as Swartz did.
Swartz, who was hired less than a year ago as part of an expansion of Preferred Hotel's IT staff from one person to seven, actually went into the cloud investigation assuming the company would shift over to VMware virtualization environment but continue to use a co-location service to house the physical servers themselves. When it became clear how much lower the capital cost would be, at a similar ongoing monthly service charge, he was sold.
"With a colo, if something breaks you have to go there and fix it, or have someone send parts and wait until they get there. Meanwhile, everything is pretty much crippled," he says. "In a cloud environment, you have a facility manned 24 hours a day and virtual servers. So if a piece of hardware goes down, I'll never even know about it. [Terremark's] load-balancing takes care of it automatically and puts [the effected virtual server] onto another machine. From an operational perspective, the focus shifts away from maintaining the servers and onto doing other things."
The ability to focus on IT functions unique and specifically beneficial to your own business is one of the biggest strategic benefits of cloud computing, says James Staten, principal analyst at Forrester Research.
"The power of the cloud is that you're being offered these services by people who view data center operations as their business, not something they do as part of the rest of IT," Staten says. "They do it considerably better than you do because it's all they do."
Among companies larger than 1,000 employees, about five percent use cloud computing services, according to a market-survey report Staten conducted and plans to publish early in the first quarter of next year. Among small- and mid-sized companies only about two percent are currently using cloud services, according to Staten's data.