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Case Study

 

Stonebridge Companies Moves Its Hotel Management to SAP ERP

insiderPROFILES

July 1, 2010

Now managing 40 branded hotels, Stonebridge Companies was fortunate to experience growth — but it also faced challenges in managing that growth. Nasim Mansurov, Vice President of IT at Stonebridge, discusses the company’s search for an ERP system and the back-end process improvements it has seen post-implementation.
 

When a small company grows quickly through strong strategic choices, it’s obviously good for business. But ensuring that the now-midsize organization is properly equipped to manage that growth isn’t easy. Good strategy and strong sales create new business that often outpaces existing systems and processes. Front-office success can overwhelm back-office capabilities, thereby limiting the organization’s ability to not only continue its growth, but simply function efficiently.

This growth anomaly rings true for Stonebridge Companies, a privately owned development and hospitality management firm headquartered near Denver, Colorado. For Stonebridge, what had once been well-functioning, adequate business processes to manage back-end activities — such as HR, accounting, and procurement — began to fray as the company experienced strong growth.

Yet, rather than retreat or attempt small bore fixes, the company realized that it had to modernize its outdated, manual systems and processes, and do so holistically. Further, it would have to update these business activities in a manner that would sustain the new strategic direction Stonebridge set for itself. The tool for this job was an SAP ERP implementation.

According to Nasim Mansurov, Vice President of Information Technology for Stonebridge Companies, the SAP ERP system would provide the company with a scalable solution. “SAP’s platform for growth was a big selling point for us,” he says. “As our business increases — say we were to double in size — SAP gives us a platform that we can expand on.”

Embarking on a New Strategic Direction

Stonebridge Companies employs about 50 people in its corporate headquarters, and is also responsible for another 1,500 employees of the 40 branded hotels it manages for a range of investors. Stonebridge’s portfolio includes select-service, extended stay, mid-scale, and full-service hotels, with brands including well-known franchises such as Hilton, Marriott, Starwood, and InterContinental.

The company also has an arm that specializes in hotel development and construction, which includes readapting and renovating existing structures into hotel properties. Nonetheless, charged with managing approximately 6,000 guest rooms across the US, the company primarily focuses on the hotel management side of its business.

Stonebridge Companies hotel

Mansurov describes the management of these properties as an “all-inclusive proposition,” which includes managing staffing and payroll, procuring guestroom amenities for hotel guests, operating restaurants and meeting facilities, marketing the hotels and related services, and executing a host of other activities. Every hotel represents a unique entity within Stonebridge’s management portfolio, so each hotel must map to and account for all its invoices — for everything from high-speed Internet to restaurant supplies — as well as payroll, accounting, financial reporting, and more.

During the last several years, Stonebridge embarked on a new strategic direction under the guidance of its president and CEO, Navin Dimond. It phased out its relationships with the smaller hotels that comprised its management portfolio, while simultaneously replacing them with much larger, select-service and full-service properties. These efforts successfully increased the number of hotels under management, while also growing the company’s scope of management concerns.

As responsibilities and complexity grew, the company’s back-end legacy systems and processes created significant challenges for Stonebridge. “There were a lot of changes happening within the company. We were selling smaller properties and replacing them with bigger ones,” Mansurov says. “During this time, the technology part was also playing a huge role because while selling a property is a relatively seamless task, acquiring a new hotel and getting it up and running is a different story.”

“We have not only replaced our systems with a state-of-the-art technology, but also become a leader in hospitality management through growth, innovation, and best-in-class service for our clients and partners.”
Nasim Mansurov, Vice President of Information Technology, Stonebridge Companies
 

According to Mansurov, challenges included:

  • A lack of integration between payroll and employee time tracking management systems, leading to a lengthy and inefficient payroll process riddled with inconsistencies
  • Time-consuming and labor-intensive processes for rolling up financial data for each of Stonebridge’s hotels in order to prepare monthly financial reports for investors
  • Over-reliance on paper-based and manual processes throughout the organization, leading to inefficiencies and additional costs
  • Too many data silos, creating security and access problems due to many different types of data and software
  • A bulky and oftentimes costly invoice processing workflow that led to inconsistencies and marred relationships with vendors

This last issue was perhaps the most frustrating to Stonebridge. As Mansurov notes, “A small hotel like Fairfield Inn might generate between 50–75 invoices per month, which is not a big deal. But once you start dealing with large, full-service hotels such as a 300-room Doubletree Hotel, the number of invoices increases dramatically to over a thousand a month.”

Though the above issues challenged the company, they were growing pains, not systemic failures. Stonebridge had successfully achieved its growth strategy, so now it needed to adjust its internal systems and processes accordingly.

“We want to make it as quick and easy as possible for strategic decision makers to review the performance of the company as a whole.”
Nasim Mansurov, Vice President, Information Technology, Stonebridge Companies
 

Choosing Between Home-Grown and ERP

Realizing that changes needed to be made, Dimond called in his leadership team and tasked them to develop an appropriate and scalable solution to their back-end management challenges. The team spent a considerable amount of time evaluating small, hospitality-specific solutions, as well as full ERP systems. After a thorough review of various industry solutions, the team realized that the smaller software systems required other software solutions for HR and payroll to be purchased separately, and lacked the much-needed integration between the products. “Knowing how much pain we had to go through in the past to make interfaces work, we did not want to drag ourselves into another long-term problem,” Mansurov says. “In contrast, an ERP system provides a tight, built-in integration between its modules without the need to create and maintain interfaces.”

The search for an ERP system was on. The first question that Mansurov and his peers needed to answer was whether to seek out a smaller industry-specific solution or one offered by a larger vendor with more powerful ERP systems. On one hand, a smaller, specialized solution could cope with unique hospitality needs, such as reporting and property management system integration — important operational elements that must be integrated with hard financial data. On the other hand, Stonebridge needed an integrated, transparent, and scalable solution that could facilitate future growth.

“What we asked ourselves at the time was, ‘What’s the point of investing in a home-breed or smaller industry-specific solution that has a questionable future?’” says Mansurov. “Even if we do get such a solution, in order for it to run the company as a whole, we would need to invest in other proprietary solutions for HR and payroll, and many other systems — and we’d be back to square one. We wanted to integrate everything into a single system and transparently use it across the organization.”

Additionally, with a smaller solution, if a vendor performed a heavy update on its system, Stonebridge would be left scrambling to ensure the changes in one system integrated with the other sibling systems without raising compliance issues and a whole host of other concerns. So they honed in on larger ERP vendors.

Selecting a Provider and a Partner

After narrowing the field to SAP and one other ERP provider, Stonebridge invited both companies in for meetings, but before long, substantive differences came to light. A deal-breaking differentiator was that the SAP competitor wouldn’t deal directly with a company the size of Stonebridge and assigned a local consultant who demanded a fee just to provide a quote.

Although SAP admittedly had little previous experience in the hospitality industry, according to Mansurov, SAP showed a strong willingness to work with the company. “When I called SAP, the contact immediately assigned an SAP representative,” he says. “The rep came out and visited us, and then we had weeks and weeks of meetings. SAP invited its own experts, and they brought in a partner to work with us, Tata Consultancy Services.”

Tata not only brought its SAP ERP implementation and integration expertise, but it also brought some first-hand hotel experience, which was a huge asset, according to Mansurov.

Additional selling points included the ability to integrate the financials, HR, and payroll functionality of SAP ERP into a unified system without the need for numerous interfaces. “All SAP modules are tightly integrated with each other,” he says. “And that was the big selling point, because we no longer would have to deal with maintaining different information silos and multiple versions of products like we had in the past.”

What sealed the deal was that Stonebridge received complete assurance from a very high-level executive at SAP Americas. According to Mansurov, “What really kicked off the SAP project was when a senior vice president of SAP Americas sat down with the president of Stonebridge Companies and myself, shook our hands, and said, ‘I give you my personal guarantee that this project will be a success.’”

The choice became clear: Stonebridge selected SAP. “The beauty of SAP software is that once you define it and establish a working environment, it’s a very stable system — unlike many other systems that are plagued with issues, even after years of implementation,” Mansurov says.

SAP and Tata moved fairly quickly to implement the software, and Stonebridge went live with SAP ERP Financials in October 2007 — followed by the modules for HR and payroll in January 2009.

Beyond the technical resources required to install the software, Mansurov says that SAP also provided invaluable guidance, such as offering SAP Best Practices, customization tips to meet Stonebridge’s unique hospitality management needs, and numerous SAP guidelines and best-case scenarios for running workflows and automating various business practices. “You can basically create your own SAP programs within SAP software if you want to,” he says. “SAP advised us to go with a standard solution as much as possible, but they helped us customize pieces where necessary.”

Achieving 6 Key Benefits

Although there are numerous individual benefits to Stonebridge’s adoption of SAP ERP, the system itself has delivered value by making back-end processes far more efficient. In fact, Mansurov believes that the company should see a return on its investment within three years of implementation. “The SAP system helped us clean up our data, change business processes, and start in the right direction from scratch — significantly changing the way the company functions,” he says. In particular, Stonebridge now has a scalable ERP solution that can enable future growth and that has contributed to these six major company-wide improvements to back-end processes:

  1. Efficient invoice processing: The former paper-based and manual processes for invoicing have been replaced with a far more efficient, cost-effective, and automated workflow. Business users are able to drill down through the system to find individual invoices, their status, and the name of the specific manager who may be holding an invoice.
  2.  Accurate payroll: Transactions are more efficient, more accurate, and far less error-prone. It is not uncommon for a single employee to perform more than one job in more than one department, with different pay rates — for example, an employee could work as a restaurant server one day and as a banquet server the next. The system can now account for these varying duties and pay rates.
  3. Streamlined hiring: Previously, a full-time data-entry worker was needed in the corporate office just to enter new hiring information. Now, managers can hire within certain wage thresholds for each type of job. If they need to exceed a threshold, a request can automatically be generated and sent to the respective regional manager to check if the claim is valid and then approve the hire.
  4. Timely accounting: Processes have been streamlined, making monthly reporting to investors more efficient and timely. In fact, says Mansurov, Stonebridge was able to cut its demand on accounting resources in half — freeing the staff to perform other important tasks.
  5. Improved transparency: The inner workings of the company are now far more transparent to managers. “Today, hotel managers are able to run reports for their own property and see what is going on in near-real time,” says Mansurov. “If an investor calls looking for information on a hotel for a specific time period, we can run reports within minutes, attach them to an email, and send them to the investor. The system is now 100 percent transparent.”
  6. Reliable security: Further, all of the above can be done securely and within the governance principles set by the company and mandated by regulators. “In order to do anything in an SAP system, you have to have proper authorization. So even if you are the general manager of a hotel, you only have access to that particular hotel’s systems and not anything else,” Mansurov says. “For example, if you’re an HR manager, you shouldn’t be seeing financial data. We also control that,” he says, adding that security and governance within SAP ERP includes strict adherence to concepts such as segregation of duties — meaning the same person cannot approve a purchase, generate an invoice, and issue a check.

What’s Down the Road?

Mansurov says that Stonebridge’s adoption of SAP ERP has very likely been an industry-changing event. He sees the company as a pioneer in the industry, as far as ERP is concerned. “If you look at the hotel management industry as a whole, not many companies are willing to take up such an enormous effort to fix their systems,” he says. “Many of these companies remain rather small, or when they grow to become a large company, they run home-breed solutions instead of going the ERP route. I think this mindset is going to change. When other companies realize that they can streamline their processes and cut risks just like we did with SAP ERP, I think more and more customers will be implementing ERP solutions.”

Further down the road, the company may look for modules to help the hotel construction side of its business, as well as look into SAP Customer Relationship Management and other SAP solutions to enhance specific aspects of the hospitality business.

“As our business increases, SAP gives us a platform that we can expand on.”
Nasim Mansurov, Vice President, Information Technology, Stonebridge Companies
 

“By implementing an ERP solution, we feel that we have not only replaced our systems with a state-of-the-art technology, but also set a larger goal — to become a leader in hospitality management through growth, innovation, and best-in-class service for our clients and partners,” Mansurov says. “We’ve changed our business processes and changed how we operate as a company.”

In the future, Stonebridge is going to continue to use SAP software to change the way it does business. “With the next few projects we are working on, we want to automate our executive reporting and provide hands-on experience to our executives,” he says. “We want to make it as quick and easy as possible for strategic decision makers to review the performance of the company as a whole.”

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