As You Like It

By Elizabeth Wasserman

RFID can help hotels, resorts and restaurants both attract and retain customers by providing personalized and convenient services.


In the multibillion-dollar global hospitality industry, hotels, resorts and restaurants are competing fiercely to engender customer allegiance by creating loyalty programs and increasing their use of customer relationship management techniques, as well as with branding and marketing. Now many in the hospitality industry believe that radio frequency identification could give establishments that invest in the technology a competitive advantage, by personalizing the customer experience and making services more convenient.

It’s a well-known fact in the hospitality industry that it’s far costlier to attract new customers than to keep existing ones, especially high-end patrons. RFID may enable establishments to provide more personalized services and pampering that result in return business. For example, with RFID-enabled room key cards and RFID interrogators stationed at key locations on the premises, the concierge or the bartender in the lounge could greet guests by name. And if guests opted to have personal information loaded onto the RFID chips in their key cards, their rooms could respond to their preferences for temperature, lighting and even radio stations.

During the past few months, the RFID Hospitality Management Systems (RHyMeS) Center at Ngee Ann Polytechnic in Singapore has been demonstrating to executives of hotels, resorts and casinos from all over the world how to use RFID to personalize services, which has attracted interest from several chains. “A number of hotels in Singapore would like to empower their staff, particularly those who come into regular contact with guests, with the ability to identify and recognize the guests,” says Ng Poh Oon, manager of the RHyMeS Center, which opened in 2006. “With this capability, the hotel staff would then be able to provide that extra personal touch by addressing the guest by his/her name and anticipating his/her needs accordingly.”

It’s not just high-end guests who could benefit from such services. Family-oriented resorts and amusement parks, as well as convention hotels, are issuing RFID-enabled wristbands and key fobs that guests can use to access their rooms and make cash-free purchases in gift shops, restaurants and arcades. And cruise ships are considering tracking passengers with RFID to increase security (see box on opposite page).

At the same time, hotels and resorts are applying RFID in behind-the-scenes applications to track assets, such as liquor and uniforms. And casinos have embedded RFID tags in gambling chips to impede theft and/or counterfeiting.

While some hotels and other establishments report a return on investment from closed-loop RFID applications, others cite privacy concerns and the cost of RFID room key cards and infrastructure as challenges to RFID adoption. And the benefits of RFID are not likely to spill over to the open supply chain, which includes food, beverages, uniforms and linens, anytime soon. The major chains are not requiring suppliers to RFID-tag shipments of goods to better track inventory, because they see the ROI in such applications as less immediate.

The Customer Comes First

The high cost of replacing magnetic-stripe key lock systems at hotels is keeping established facilities from upgrading to RFID access systems. But building plans for many resorts currently under development, such as the Grand Del Mar Hotel in San Diego, include an RFID infrastructure. Jeremy Rock, of the RockIT Group in Los Angeles, who is consulting on the IT work for the hotel, says RFID will be used primarily for the guests’ room card keys, which will also provide access to golf facilities and perhaps be tied in to point-of-sale terminals in gift shops and other amenities.

Great Wolf Resorts, a fast-growing chain of family resorts featuring indoor water slides, arcades, snack bars and other activities, designed three new facilities with an RFID infrastructure: one in Pennsylvania’s Pocono Mountains, one in Niagara Falls, Ontario, and one in Mason, Ohio. Guests at these resorts, who often venture around the water parks in their bathing suits, now won’t have to find lockers for their room keys and wallets, or return to their rooms at the lodge when they want to buy food or play arcade games. Instead, they can use their RFID-enabled plastic wristbands to access their rooms and pay for food, game tokens or gift shop items. And adults can load certain dollar amounts on children’s wristbands on a daily basis so kids don’t have to hit them up for cash to play games or get a snack.

“We did this to enhance the guest experience at our resort,” says Rajiv Castellino, chief information office at Great Wolf Resorts. “Your wallet is on your wrist. You can open your door to your room. You can go shopping at any of the outlets, the spa, and the arcade—all with just the wristband. You don’t have to carry cash, credit cards or any identification.”

Castellino says the chain has no plans to switch its older resorts to RFID systems, primarily because of the expense of installing RFID door locks and an RFID infrastructure. Great Wolf is undertaking an ROI analysis to see if the RFID-enabled resorts have encouraged guests to spend more. The company is also considering other RFID-related services, such as converting vending machines so guests can pay with their RFID wristbands, and instituting mapping and location services to let parents know where their children are and vice versa. “This helps provide more security for our guests,” Castellino says.

Ripley Entertainment, which owns the Great Wolf Lodge franchise in Niagara Falls, has been so impressed with the use of RFID at the facility that it now wants to expand the use of RFID wristbands to other attractions. The company, which also owns 34 Ripley’s Believe It Or Not parks, wax museums and miniature-golf establishments, is investigating whether RFID wristbands can help trigger surprises in museums or personalize the level of information provided to guests based on age or preferences. “We like what we see, and we’re going to expand our use of RFID throughout our attractions,” says Bob Masterson, president of Ripley Entertainment. “When we ask, ‘Do you want all the detail or a little?’ we can put on your wristband information that tells the attractions, ‘Tell him everything’ or ‘Reveal this just for the kids.'”

Some resorts are switching to RFID for guest payment systems instead of room key-payment combinations, because payment systems require a minimal expense—as opposed to the replacement of all guest room locks—and can provide big benefits in terms of increased sales. The information also helps these firms automate customer billing and gain insight into which goods and services are most popular and when new supplies need to be ordered.

Since 2005, Valtur, which operates 20 luxury resorts in Europe, the Middle East, Mexico and Africa, has begun issuing RFID cards to guests for use in gift shops, recreation facilities and restaurants. The RFID system, designed by IBM, also allows for the automatic collection of data, replacing a system based on colored beads and armbands that patrons used to pay for services. With the old system, purchase information was tabulated each night and faxed back to headquarters. With RFID, point-of-sale information is electronically relayed back to headquarters immediately.

Blue C Sushi, a chain of restaurants based in Seattle, has replaced a bar-code tracking system for plates of sushi that rotate through the restaurant on conveyor belts past every table with an RFID food-monitoring system.

“They didn’t have a very sophisticated supply chain where they had EDI [electronic data interchange] and electronic links between suppliers and manufacturers,” says Brian Dalgetty, IBM’s director of RFID solutions development. “They had different people in different locations in charge of services or in charge of the spa, issuing armbands and colored necklaces. They would keep track on paper who bought what and then fax that information to headquarters.”

In less than two years, Valtur has seen sales increase by 19 percent. The company has also cut costs by 10 percent by optimizing its supply chain based on real-time data about what is selling. In addition, billing time at individual resorts has been reduced by 66 percent.

Behind the Scenes

From Las Vegas to Sydney, many hotels, casinos and restaurant lounges have realized an ROI from RFID applications that clean up shady practices, as well as laundry. A big problem in the hospitality industry is liquor shrinkage caused, in part, by generous bartenders who either “overpour” or offer customers free drinks. Capton’s Beverage Tracker RFID system, deployed by Chicago’s Hyatt Regency McCormick Place in 2005, wirelessly monitors each and every drink via RFID-enabled pour spouts on liquor bottles. The system tracks the exact amount of liquor poured by the bartender and even notes the brand, time and date. Hotel managers can analyze the pour data and compare it with receipts in the lounge that show when drinks were poured and what was recorded in the POS system.

In the 18 months since the Capton system was deployed, Dan Piccolello, food and beverage director at the Hyatt Regency McCormick Place, estimates that the system has discouraged overpours and free drinks, reducing the establishment’s $250,000 in annual liquor purchases by at least 2 percent. “If someone is pouring one-ounce drinks, you know it. If someone is pouring two-ounce drinks, you know it,” says Piccolello. “The fact is that management knows what the bartenders are pouring, which is quite a powerful piece of information.”

He also says that the system may have helped increase revenues over the same period, although determining a percentage is difficult. “It’s given us better accountability,” Piccolello says. “From our end, it’s been a success.”

Casinos have long tried to control liquor—sending secret shoppers to sample drinks, watching bartenders as they pour and, more recently, investing in liquor gun spouts, which are attached by tubes to bottles in a centralized distribution area, to control the amount poured for each drink. Ed Layton, food and beverage director at the Island View Casino Resort, which opened in Gulfport, Miss., last year, says he purchased a Capton RFID system for a fraction of the cost of a liquor gun setup. “This system cost us $35,000 to install,” Layton says. “And the [liquor gun] system was going to be close to $240,000 for the initial installation and setup.”

Casinos are also starting to combat chip counterfeiters or cheaters with RFID security systems. The Galaxy StarWorld casino in Macau, which opened in October 2006, installed RFID interrogators around the casino and is using gaming chips embedded with RFID tags from Progressive Gaming International. The Wynn Hotel and Resort in Las Vegas deployed a similar system. The interrogators can read as many as 500 chips per second, whether stacked up or spread across a table. The casinos are hoping that RFID gaming chips will help cut down on unscrupulous gamblers who try to sneak in counterfeit chips or pass off low-value chips as having higher values.

Another big problem in the hospitality industry is linen shrinkage—uniforms, tablecloths and other items sent out for laundry service are often stolen or misplaced. Now resorts are finding that RFID can provide an accurate count of what is sent out for service and what is returned. “On any given day, huge amounts of laundry items, such as towels, bedsheets and bathrobes, are sent out for cleaning,” says Ng Poh Oon, of the RHyMeS Center. “RFID can be used to minimize or even eliminate discrepancies between the amount sent out for cleaning and the amount received after cleaning.” In the future, such applications may also provide better prevention against guest theft of towels, bathrobes and other linens.

The 352-room Star City Casino, in Sydney, manages a wardrobe inventory of 80,000 uniforms, valued at $1.8 million (U.S.). Back in 1997, Accenture helped design a wardrobe control system that involved having RFID chips sewn into clothing so that a uniform’s movements could be tracked down laundry chutes, into washing machines and back into stock. According to Accenture, the casino found that the RFID system was superior and more cost-effective than using bar codes, which may need to be replaced every one to two years. The RFID chips last at least five years—often longer than the life span of the uniforms.

Welcoming RFID

While the hospitality industry is not known to be a leader in information technology adoption, RFID is sparking some imaginations. Blue C Sushi, a chain of restaurants based in Seattle, for example, has replaced a bar-code tracking system for plates of sushi that rotate through the restaurant on conveyor belts past every table with an RFID food-monitoring system from Intermec, along with business process technology from Microsoft. The RFID system provides more detailed business intelligence, including what type of sushi is on a plate and how long it rotates on the conveyor belt—the restaurant’s policy is to remove items that have rotated for one hour.

“Over the course of the next nine to 12 months, as we gather data, we will ask ourselves hard questions about what is it that customers are wanting and what is it that customers are not wanting,” says James Allard, founder of the chain. He hopes that the technology will help the company plan menus, order supplies and ultimately reduce waste by better anticipating customer needs.

Rock of the RockIT Group says that some major hotel chains are considering issuing RFID ID cards to employees. RFID could, for example, keep tabs on the housekeeping staff, to determine which rooms they have cleaned, how long they spent in each room and when items such as meal trays were removed from corridors. “You can tell every time they enter a room, the time and who entered,” Rock says. “It can help tell how productive they’ve been and which rooms they cleaned.”

But privacy issues may present a challenge to the adoption of RFID in the hospitality industry. While in many Asian countries consumers are willing to trade personal information for better service, that may not be the case in North America and Europe, where guests may object to RFID-enabled key cards that identify them by name. One way to address such concerns is to make RFID usage an “opt in” choice on the part of consumers.

Consumers in North America and Europe are being introduced to RFID personalization at events, so they may become accustomed to such services. Recently, IBM issued RFID badges to VIP guests at Wimbledon and the French Open, so they could access restricted areas. A growing number of conventions and trade shows now issue RFID-enabled ID badges that not only allow access to convention floors but also trigger customized presentations at kiosks or alert booth sales people automatically to a visitor’s interests.

Some say that attitudes in the hospitality industry are changing as executives realize that information technology can help them cut costs and provide the increased personalization in services that customers are demanding. “The most common need initially,” says IBM’s Dalgetty, “is how to improve the customer experience and customer loyalty.” But he thinks the hospitality industry will be more interested in using RFID in its supply chain once more suppliers start tagging shipments, as many now do to supply such retailers as Wal-Mart in the United States and Metro in Germany.

A 2006 report from Deloitte Touche Tohmatsu and the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University, called “Hospitality 2010,” found that while the industry historically ranked low in terms of technology spending compared with other consumer businesses, all hospitality executives surveyed expected to increase IT investments. RFID is increasingly becoming a component of that spending, as the industry recognizes the benefits of RFID.

“Technology has improved overall customer service, such as faster response time, global reservation systems and real-time booking,” says Ng Poh Oon, of the RHyMeS Center. “RFID will be able to offer the hotel industry enhanced alternatives to existing technology-enabled products and services, such as improved guest security, personalized experiences and better accounting of hotel assets such as people and inventory.”

Cruising With RFID

Lately, it seems that there has been an increase in reports about passengers who disappeared mysteriously while on cruise ships. Getting lost at sea is a rare occurrence, but the cruise ship industry is nonetheless looking for ways to increase security and safety for the 11 million passengers worldwide who take cruises annually.

Several of the world’s largest cruise lines are considering RFID-enabled room key cards that would double as passenger IDs. By adding RFID interrogators to the standard metal detectors through which passengers embark and disembark, the ship could collect passenger data automatically and have a real-time manifest of who was on board. RFID cards could also alleviate bottlenecks when passengers return to ships from excursions. Instead of having to physically swipe their key cards in readers at specified entryways, passengers could just walk through designated portals—a major time savings on ships that typically hold 3,000 passengers or more.

Getting lost at sea is a rare occurrence, but the cruise ship industry is looking nonetheless for ways to increase security and safety for the 11 million passengers worldwide who take cruises annually.

Even lingering questions about missing passengers could be partially answered through RFID tracking. “There is some talk about sectioning vessels so that if people go missing we can check if they have accessed certain areas,” says Max Lessmollmann, managing director in charge of finance and operations of Fidelio Cruise Software, which provides software for many of the leading cruise lines, including Holland America, Norwegian and Silversea. RFID readers, he adds, could be posted in certain areas around the cruise ship so authorities would know that “the passenger has gone on deck 12 and never returned.”

One ship that is using Fidelio’s RFID tracking software is The World, owned by ResidenSea. An RFID chip has been added to the magnetic-stripe key cards distributed to passengers and crew. The magnetic stripe is used for point-of-sale purchases onboard, and RFID provides security and identification. The RFID technology provides additional benefits. For example, the restaurant’s maitre d’ has an RFID reader that identifies passengers. “He can address people by name in the reception area,” Lessmollmann says. “It has quite a stunning effect on passengers. It enhances service tremendously.”

One of the main challenges to the adoption of RFID on cruise ships is cost: An RFID-enabled key card costs about $1, compared with a magnetic stripe card, which costs about 10 cents. To issue RFID cards to thousands of new passengers every three or four days—or even every week—can add up to a million-dollar increase in cost. But the benefits may outweigh the costs. “With time, in a few years,” Lessmollmann says, “this will be standard.”