There is reason for optimism in the hospitality & tourism industry. The 2010 Soccer World cup is expected to bring a flood of tourists to South Africa. The intense media interest will stimulate tourism. This will in turn translate into a cash injection for the hospitality industry. This bodes well for IT investment in this cash-constrained industry. For the IT supplier, it is useful to understand the factors that influence the IT usage patterns in the hospitality industry.

Friday, September 25, 2009

Experience-Based Travel

Source: Olsen MD & Connolly DJ. (2000). Experience-Based Travel: How Technology is Changing the Hospitality Industry. Cornell Hotel and Restaurant Administration Quarterly, Feb 2000:30-40.

This article reflects the future predictions of hospitality industry experts, as recorded during two think-tanks convened by the International Hotel and Restaurant association in June 1997 and February 1998. In particular, the experts gave substance to the concept of “customer experience”.

The article refers to three overall patterns of change, and identifies the following recurring themes that were accelerated due to technology: 1) The emergence of a sophisticated travel consumer, with little brand loyalty 2) The hospitality industry as a provider of experiences for the customer and 3) The hospitality employee as a value-adding stakeholder of the firm.

The article then identifies the following drivers of change:
- Connected computers – with the growing maturity and diffusion of network technology, connectivity issues are mostly relegated to the not-so-distant past
- Real time applications have become the norm and consumers are increasing expecting and demanding fast response
- Regulating cyberspace
- Data warehousing and data mining
- Segments of one – the marketing focus is on increasingly narrow market segments, i.e. devising personalised product offerings, allowing bundling of products according to personal preference and targeting special pricing at very narrow market segments
- Archaic technology – much of the hospitality industry is burdened with old legacy property management systems running on old hardware. This platform is not suitable for the new generation of hospitality applications.
- IT for executives – IT is an integral component of the hospitality value chain, and executives cannot afford to distance themselves from it.
- Cost of technology – Since guests demand and expect technology based services, hotels need to find a way of financing financial outlay on this infrastructure.

Following from the discussion on drivers above, the following trends are foreseen:
- The internet has caused disintermediation, but it has also created opportunities for new intermediaries to establish themselves (e.g. Expedia.com, Travelocity.com).
- Auction style pricing models have emerged, whereby the customer offers a price and his bid is accepted or rejected.
- Customers will become more demanding, as they have more information at their fingertips, and are able to compare prices and product offerings easily.
- Firms will evaluate customers in terms of their lifetime value.
- Guest loyalty and reward programmes will gain increasing importance due to growing erosion of brand loyalty.
- Technology based data mining will be applied to determine customer preferences.
- Hotels need to bundle services into customer experiences rather than limiting their product offering to accommodation.
- Technology can assist in matching customer need with the offerings of the firm.

1 comment:

  1. The think- tanks held on which this article is based were in 1997 and 1998 - 12 years has passed in which it could be expected that the trends foreseen might have changed or become less relevant - however in the present Economic conditions they are very relevant. Only the trend of bundled rates - although they were strong drivers of high ARR - there is now a growing demand for unbundled rates as a way of limiting travel costs to the bare minimum.

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