Many hotel CFOs are taking the lead on digital renovation as it becomes vital to their ability to survive and thrive.
A recent report by Sage, CFO 3.0: Digital transformation beyond financial management, surveyed finance leaders in medium-sized businesses, including in the hotel sector. It found that 70% of CFOs have taken full responsibility for technological change.
Digital transformation is radically changing the way hotels work, in their interaction with guests and in how all their back-office operations work.
For hotel CFOs, digital transformation is a relatively new responsibility. But it is a key part of their transition from recorders of business performance to visionaries who track real-time information to support decision-making with value-adding insights and analysis.
Many digital transformations have struggled to succeed, so this change presents huge challenges for CFOs. To achieve success, they need to upgrade their mindset, their skill set, how they manage talent, and how they communicate with other departments.
But the move towards digital transformation is also a fantastic opportunity for hotel CFOs to cement their position as a key board member and trusted adviser to the CEO.
What is digital transformation?
According to Hotel Tech Report, digital transformation in the sector refers to an organisation changing its approach to technology, people and processes to impact business performance and deliver value to consumers.
Greg Verdino, an author and digital change expert, says: “Digital transformation closes the gap between what digital customers already expect and what analogue businesses deliver.”
Transformations involve increased use of technology across the business. But to be successful, they must also involve cultural and operational changes. This might mean a change in leadership, a new business model, evolving the company culture, or reassessing how the company delivers value to its customers.
Many modern technologies have been transforming the hotel industry. For example, artificial intelligence (AI)-powered chatbots are helping guests change reservations, check account balances, and even open the curtains and order meals in their rooms.
Virtual reality is helping potential guests explore hotels, while augmented reality is helping foreign guests translate menus.
Hotels can extract data from Internet of Things devices – a system of interrelated digital machines – to deliver highly advanced services to their customers and streamline daily operations.
They can use biometrics for instantaneous personal identification to improve security and provide a more personalised experience.
Big data and analytics tools are helping hotels provide more personalised guest experiences. Data and analytics are also supporting operational efficiency and increased revenue, for example, through highly targeted digital campaigns and pricing optimisation.
Digital transformation is also improving many hotel back-office functions, for example, by using next-generation customer relationship management, enterprise resource planning and cloud-based accounting systems.
The latter can provide a flexible chart of accounts, automate a complete range of operating or ownership structures – all while managing consolidations from the parent company.
Cloud accounting can also help hotels keep up with evolving revenue recognition requirements to ensure compliance without compromising efficiency.
Meanwhile, automation of repetitive tasks saves costs and frees the time of finance professionals to work on supporting strategy by, for example, providing valuable insight into business operations and uncovering growth opportunities.
To support this, back office digitisation can provide metrics for improved real-time financial information and advanced analytics to improve decision making.
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What digital transformation means for hotel CFOs
Many hotel CFOs already have good knowledge about digital transformation due to their experience in leading advances in finance technologies such as in ERP and cloud accounting systems. This is one reason that companies often appoint them to lead digital transformation throughout the organisation.
Another is their ability to assess how projects impact the bottom line and add value to the business with a good return on investment.
The Sage CFO 3.O report says that taking this lead gives them a unique opportunity.
Financial decision makers used to be historians, reporting on past financial performance. Today, the advanced tools they have available, for example, in data analytics, enable them to become real time and predictive analysts.
Immediate data access, different information sources, and advanced analytics allow finance leaders to quickly determine the immediate and mid-term commercial opportunities for the business. This allows hotel businesses to adapt faster, take opportunities, and manage operations effectively.
Furthermore, AI and automation free finance talent to focus more on critical analysis, innovation, and creative and strategic thinking to augment business strategy, for example, in unearthing new commercial opportunities.
This evolution of the CFO means they also now have an integral role in data governance, data flow, cybersecurity, and performance analysis.
The Sage report says that, even with all these benefits, some CFOs are still reluctant to own the digitisation journey because it means they have to become both the gatekeepers and king makers to digitisation.
But CFOs must embrace their roles as leaders of emerging technology to cement their place at the boardroom table.
It could even help them spark a progressive surge that reverberates across the business. Conversely, not seizing this opportunity risks being left in the slow lane.
The report says finance leaders have an ever-expanding role to master – including new technologies to learn and data to uncover, while also managing employee and stakeholder expectations. They are understandably concerned about how to bed into their new responsibilities.
To succeed, it is essential that they have the right tools and flexibility to use them.
Dealing with cybersecurity
Meanwhile, cybersecurity and fraud remain the number one challenge in the UK – for example, felt by 62% of financial leaders in London. Fraud, cyber misuse, and data privacy protection now increasingly fall under the remit of the CFO.
But CFOs can also use emerging technologies to help counter this and decrease the risk of data breaches. For example, using the cloud can create enhanced levels of verification and security of data.
Another challenge is that 70% of CFOs still make decisions based on gut feel rather than data, says the Sage report.
To address this, they need more training with a full complement of business, analytical and data skills. The need to harvest data rests with them, so they increasingly need to increase their skills in data tools and cloud-based services.
CFOs should not underestimate the size of the change. They face a stiff challenge to improve technology even in their own function as 77% say they will be unable to provide insights if they do not invest in financial management technology.
But with the right systems and skills in place, they and their teams will be able to operate more strategically to drive the business forward.
Utilising the cloud
CFOs are aware of the benefits of the cloud such as increased cost efficiency, flexibility, integration and security – for example, through data centralisation. So, the next phase will involve further embracing cloud-based financial management technology.
The cost to switch to the cloud may be a barrier to adoption for some medium companies. But leaders will realise that cloud technologies create a nimbler and more cost-effective finance function. They minimise the need for hardware and storage, and provide more scalable and easily automated processes.
CFOs also must consider how cloud technology fits within their existing business infrastructures. But this is where financial decision makers can be most effective by enabling a connected operating environment that provides greater automation and advances in real-time insights.
Advanced technologies such as AI are also set to support the finance function throughout the digital transformation phase. These will create new jobs that will enhance the quality of working life.
The shift will enable financial decision makers to add value further, and help shape the strategy of the finance function and the wider business by using data insights and analytics.
Despite the challenges facing CFOs in hotels and other sectors, the future is bright.
How digital transformation is changing hotels
Meliá Hotels International is a good example of how digital change is affecting the way hotels operate. It is undergoing a transformation that aims to increase revenues by improving upselling processes, bill collection and VAT recovery, among many other things.
It also aims to reduce expenditure by optimising supplier management and creating an expenditure control platform with third parties.
Pilar Dols, CFO of Meliá Hotels International, says: “We need to look beyond technology and see digital transformation as changing the whole operating model and the employee journey. It is enormously relevant for many aspects of the CFO’s role.
“Digitisation demands new organisational units and structures, for example, creating shared services and global and regional clusters. It also requires new ways of working such as around process re-engineering and automation.
“In the finance function, it also means evolving our metrics and performance indicators, improving our cash flow management, and optimising the budget process.”
Dols says many CFOs are highly involved and invested in digital transformation because of its impact throughout the organisation, and because it drives resilience and success of hotel companies in such a complex and competitive environment.
“That’s why I am directly involved in our digitisation strategy, with the cooperation of the strategic planning vice president, who reports directly to the CEO,” she says.
“In the short term, this has led us to transform our organisational structure and create a new area and a new team devoted to digital transformation.”
This team is working to promote quick wins in analytics and reporting to enhance Meliá’s financial decision-making and make it more agile. But the programme also sets medium-term targets and aims to make Meliá competitive and sustainable in the long term.
Dols adds that digital transformation is completely changing the way hotel groups function.
“For example, by optimising resources with digitisation in our back office, we are seeing opportunities with new technologies – such as robotics, AI or machine learning – that allow the group to add value to stakeholders and customers,” she says.
Tips for CFOs on taking the lead with digital transformation
In the latest McKinsey Global Survey, 80% of respondents say their organisations have begun digital transformations in recent years. But only 14% say their efforts have resulted in sustained performance improvements. And only 3% report complete success at sustaining their change.
But five factors set successful change efforts apart, according to McKinsey’s analysis.
First, a common reason for failure is poor focus. Successful respondents focus ruthlessly on a few digital themes tied to performance outcomes.
Second, in defining the scope of their transformations scope, successful organisations set up enterprise-wide efforts and build new businesses, or functions, boldly.
Third, they create an adaptive design that allows the transformation strategy and resource allocation to adjust over time.
Fourth, they adopt agile execution practices and mindsets by encouraging risk-taking and collaboration across the organisation.
Finally, in successful efforts, leadership and accountability are crystal clear for each portion of the transformation.
Hotel Tech Report says hotels can learn from McKinsey’s analysis and from looking at transformations that have failed.
They should avoid trying everything at once and break their transformation into small, achievable efforts connected directly to a business outcome such as increasing revenue by reducing overbookings.
They should take time to understand the market and partner with best-in-class technology vendors.
“Pick the goal with the highest impact, such as: increase digital revenue and website traffic; reduce operational costs; improve product and service quality; or improve customer outcomes,” says Hotel Tech Report.
Meliá’s Dols advises hotel CFOs to give technology a chance, keep an open and innovative mind and, above all, do not fear change.
“They must become ambassadors of this transformative process, motivating their teams and making them see the digital transformation as a positive and necessary change,” she says. “It requires training and thorough and meaningful communication with employees.
“Also, such a comprehensive and huge transformation must be done by designing and executing simultaneously. Finally, finance leaders should consider appointing several change sponsors within functions, and creating a network of change agents.”
Conclusion on digital transformation
As hotel CFOs lead the way in digital transformation, they will redefine the finance function to play a bigger role in data governance, data flow, cybersecurity and other business priorities.
They will also use insights from new technologies to underpin growth strategy by increased market penetration, expanding to new markets, or introducing new products and services.
The responsibility for digital transformation is not small.
But, providing the right culture and technology is in place, tomorrow’s senior financial decision makers will become responsible for predicting the direction of the business, uncovering hidden opportunities and closing gaps in an organisation that is increasingly driven by data and technological insights.
Today’s hotel CFOs are transforming into real-time analysts. Tomorrow they will become visionaries.
CFO 3.0: Digital transformation beyond financial management
Discover how CFOs are playing a key role in leading the digitalisation of medium-sized businesses and learn how to move from a 'historian' to a 'visionary' within your business.