Managing IT costs for travel and hospitality companies — today and every day
As Jeff Bezos stated in Amazon’s latest letter to shareholders, “The ability for organizations to access scalable, dependable, and highly secure computing power…is critical in this situation.” This is particularly true for travel and hospitality companies. Whenever disruption occurs, travel and hospitality companies’ attention turns to dealing with the immediate impact of a rapidly changing, uncertain environment. Transaction volumes potentially increase exponentially, as travelers and guests seek assurances, look to change or cancel existing reservations, and secure credits or refunds – all while new reservations (and income) decline. Corporate headquarters, field offices and operational facilities move to remote working, straining existing systems, network and connectivity solutions, while potentially launching new solutions to address the disruption itself. Companies urgently seek to minimize discretionary expenditure, preserve cash, and suspend major projects or investments – while optimizing and automating variable spend – such as cloud computing.
Idle airplanes and empty hotels and restaurants often incur considerable fixed costs, but the same doesn’t have to be true of a company’s technology infrastructure. To get the full benefits of cloud, it’s essential to ‘right size’ services based on actual workloads, leverage ‘elastic’ consumption – turning-up and dialing-down resources as required, adopting multiple pricing models and optimizing appropriate storage tier needs. When this is done the savings can be passed on to areas that differentiate your business. In a previous post I encouraged customers to ensure systems are deployed against architectural best practice — and optimized for security, resiliency and cost efficiency. Our team heard back from travel and hospitality companies of every size around the world about the steps they’d taken – and the results they were able to achieve. Here are some of their experiences:
Saving Costs in the Cloud
With 20 million reservations in 2019 and 12,000 hotels using its platform, D-EDGE’s Central Reservation System, helps hoteliers optimize their revenue. When COVID-19 struck, D-EDGE faced an unprecedented situation: more cancellations than reservations and the closure of 90% of destinations where D-EDGE’s customer’s operate. In response to these challenges, D-EDGE achieved 30% savings on their IT costs by reducing the size of instances (Amazon EC2 / Amazon RDS) to adapt to current needs, leveraging AWS Auto Scaling, using AWS Config and AWS Trusted Advisor to detect and shut down unused AWS resources, and optimize costs application-by-application. With these savings, D-EDGE was able to maintain staffing levels and to focus on servicing its customers. With almost one third of its staff being software developers, D-EDGE was able to build and deliver critical features to help its hotel customers manage through the pandemic.
“We worked together with the AWS teams to evaluate each application and service, and how costs could be optimized,” Pierre-Charles Grob, CEO of D-EDGE said. “This had not been done previously because up until that point we had the luxury of focusing on managing growth — rather than decreases of volume. AWS proved to be decisive in this crisis because it allowed us to reduce our costs, and therefore we were able to continue to invest in our resources while maintaining our teams at 100%, without resorting to short-time working.”
European travel leader TUI has long been a leader in utilizing cloud technology, from undergoing a digital transformation by migrating its on-premises data centers to AWS to delivering richer, more personalized customer experiences through machine learning. They moved quickly to adapt their technology to the challenges of COVID-19. For instance, one of its subsidiaries, TUI Destination Experiences (which operates in 49 countries and serves over 14 million guests who enjoy a variety of transfers, tours and activities) took a proactive approach and quickly adapted its AWS environments to match the reduction in business being experienced. With its business impacted greatly during the crisis, the leadership of TUI Destination Experiences was able to secure cost-savings of more than 55%.
“After the COVID-19 outbreak impacted our business, we began working on adapting our AWS infrastructure to the new situation. It took just days to see first results and weeks to see impressive cost-savings. As a result, we are now more cost and performance conscious than we were before. That culture shift is something we will take with us long after this unprecedented situation has passed,” said Miguel Angel Coll Alonso, Head of Technology Domain at TUI Destination Experiences.
Spanish hotel chain Meliá (with over 320 hotels in 40 countries) echoed TUI’s ability to save costs during this unprecedented time. Meliá kept mission-critical applications running while optimizing the infrastructure impacted by the decreased demand. Operating in AWS provides Meliá greater alignment between consumer demand and service costs than they had previously. The benefits of the AWS pay-for-what-you-use model became all the more apparent when demand dropped so dramatically. Optimizing AWS Services across the board led to a 40% cost reduction to date — with more savings on the way. Meliá is also using this period of disruption as an opportunity to transform – so as guests return, a new new kind of experience is enabled both for customers and employees. Before the crisis, Meliá‘s call center team was not set up to work remotely. Leveraging Amazon Workspaces they were able to, in just 10 days, enable all call center agents to work from home safely and securely — with no lag in performance. This is something Meliá is intent on taking advantage of well after the current situation has passed.
“Now more than ever we are seeing the direct benefits of an architectural shift to the cloud. Of course we were experiencing them before but when your business is pressure tested you appreciate the scalability and flexibility more than ever before. I’m happy to pass the savings along to help make a more sustainable business that is ready for the recovery once it comes,” said Christian Palomino, Global IT VP, Meliá Hotels International.
A Customized Approach
From airlines adjusting to decreased demand to food delivery companies keeping up with the influx of new customers, every situation is different. There is no “one size fits all” approach to managing disruption though we are encouraged by some of the stories we’ve observed across the industry. As D-EDGE, Meliá and TUI have shown, there are diverse approaches to delivering immediate efficiencies, that can deliver both short-term impact as well as long-term value. As travel and hospitality customers look to the future, build greater resiliency and efficiency into their IT operations, they’re taking advantage of a range of AWS services to lower costs and build their competitive advantage, including:
- AWS Spot Instances — enable customers to take advantage of unused AWS EC2 capacity, available at up to a 90% discount compared to On-Demand prices
- AWS Reserved Instances — provide capacity reservation when used in a specific Availability Zone and deliver significant discounts (up to 72%) compared to On-Demand pricing
- Amazon CloudWatch — provides data and actionable insights to monitor applications, responds to system-wide performance changes, optimizes resource utilization, and delivers a unified view of operational health
- AWS Auto Scaling — monitors applications and automatically adjusts capacity to maintain steady, predictable performance at the lowest possible cost
- AWS Instance Scheduler — enables customers to easily configure custom start and stop schedules for their Amazon EC2 and Amazon RDS instances; running instances during regular business hours can save up to 70% compared to running those instances 24 hours a day
These are challenging times for everyone, particularly travel and hospitality companies, together with those who work in and around them. Technology can only do so much though it’s encouraging to see customers finding solutions to managing the costs of their IT infrastructure, which in turn can passed along to other areas of the business — including areas of differentiation. And by taking such actions now, companies are developing competencies to build resiliency for the longer-term, while preparing for the recovery in demand across travel and hospitality. We are excited to see companies taking these saving and investing in innovation to better meet the needs of customers for the years ahead