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.

Monday, July 20, 2009

Characteristics of the Hospitality Industry

The hospitality industry in South Africa is dominated by small businesses, to the extent that an audit commissioned by the Department of Environmental Affairs and Tourism in 2007 found that 97% of hospitality establishments in South Africa are Small and Medium Enterprises (SMME’s). Typically these do not belong to a chain, and many are owner managed (Theta, 2007).

There are severe skill shortages at all levels within the hospitality industry. At ownership level, this is ascribed to the low barriers to entry in the industry. According to a study commissioned by Theta (2007), there are no formal registration requirements and start-up capital requirements are low. Existing assets can be sold to raise the necessary capital. Some investors enter the industry because they are attracted to a specific geographic location. Most hospitality decision makers have not had formal IT training (Borsenik cited by Law & Jogaratnam, 2005). The collective impact of these factors is that most hospitality decision makers are poorly positioned to make quality IT decisions.

Skill shortages are also experienced at worker level, and formal qualifications of Hospitality workers are significantly lower than those of workers in the related industries of Travel and Tourism, Gaming and Lotteries, Sport, Recreation and Fitness and also Conservation and Tourist Guiding (Theta, 2007) and a very high percentage (54%) of workers are unskilled, i.e. lack basic numeracy and literacy skills (Theta, 2007).

These findings accord with those of Maumbe & Van Wyk (2008). In a study amongst 84 employees in 11 participating establishments, they found that the average worker at a South African hospitality establishment is poorly skilled and poorly compensated. This results in part from South Africa’s global isolation during the Apartheid years and the suppression of its tourism industry during this time (Visser & Rogerson, 2004), and in part from the trend that is prevalent in developing countries to firstly concentrate on the “bricks and mortar” tourism infrastructure and only thereafter pay attention to the development of human capital (Echtner, 1995).

The combination of long working hours and poor compensation in the hospitality industry has translated into a high staff turnover rate. This is in turn problematic for long-term staff development, which is a costly investment in itself (Spenceley & Seif, 2003).

The lack of knowledge at all organisational levels in the hospitality industry has an adverse impact upon the rate and speed of technology diffusion.

Another characteristic of the hospitality industry is that innovations are generally introduced and driven by suppliers rather than the hospitality industry itself (Hjalager, 2002). The technology supplier not only has expert knowledge regarding the technology itself, but is also experienced in the contextual factors that influence the success of its implementation. Thus the technology supplier is ideally positioned to fill the knowledge gap of the hospitality decision maker as well as the worker, thereby cushioning the negative impacts of the lack of hospitality and IT knowledge prevalent in the firm.

The technology supplier also determines the price, pricing structure and payment terms related to an innovation. These aspects of an innovation are important to small independent hospitality establishments, since they traditionally experience severe resource constraints.

References:

Echtner CM. (1995). Entrepreneurial Training in Developing Countries. Annals of Tourism Research, 22(1):119-134.

Hjalager AM. (2002). Repairing Innovation Defectiveness in Tourism. Tourism Management, 23:465-474.

Law R & Jogaratnam G. (2005). A Study of Hotel Information Technology Applications. International Journal of Contemporary Hospitality Management, 17(2):170-180.

Maumbe KC & Van Wyk LJ. (2008). Employment in Cape Town's Lodging Sector - Opportunities, Skill Requirements, Employee Aspirations and Transformation. GeoJournal, 73:117-132.

Spenceley A & Seif J. (2003). Strategies, Impacts and Costs of Pro-Poor Tourism Approaches in South Africa. PPT Working Paper No 11.

Visser G & Rogerson CM. (2004). Researching the South African Tourism and Developnment Nexus. GeoJournal, 60:201-215.

Current Topical Hospitality Products

The focus in the hospitality industry is towards applications that do not simply automate operations, but rather apply technology creatively to innovate new products and services as well as new distribution channels.

A quick scan of the world wide web yielded the following untested list of applications that are currently receiving vendor focus in the hospitality industry:

- Packaging of product offerings, to create a need-satisfying bundle across industries (for example a holiday package may consist of accommodation, car rental, flight bookings, and casino or spa vouchers). These applications are especially relevant if they can be operated on a self-service platform, by the customer himself rather than a service intermediary.

- Intensification of self-service, through the provision of kiosks in hotel lobbies, to handle transactions like reservations, check-in, check-out and concierge functions e.g. incident reporting.

- Delivery of in-room services through technology. Examples are high speed internet, and entertainment options (e.g. video streaming) delivered via television. These applications increase the revenue per room.

- Integration of in-room services and CRM to deliver better service. Examples are i) storing a client's climate control preferences in the CRM, and using this information to automate settings at check-in and ii) the provision of in-room art that may be selected, and is then projected, with selections stored in the CRM, iii) keeping a client's dietary preferences (e.g. Kosher) in the CRM.

- Yield management, which offers innovative and complex pricing schemes, that marry supply and demand perfectly.

Thus current application trends in hospitality are for systems that do not simply automate operations, but instead create new technology-based products.

Patterns of IS Adoption in the Hospitality Industry - The Impact of the Number of Stars, Management Type and Chain Affiliation

The hospitality industry is far from homogeneous, in fact the demographic characteristics of hospitality enterprises differ widely in terms of size, quality, customer base and the degree of product sophistication. The question follows whether the characteristics of the firm impact the rate and extent of IT adoption, or whether IT innovations are homogeneously absorbed by the hospitality establishments across the board.

Orfila-Sintes, Crespi-Cladera & Martinez-Ros (2005) identified the following three main hotel characteristics:
- The number of stars. It should be noted that there is a correlation between the hotel size and the number of stars. Smaller hotels have fewer stars.
- Management type (hotel management under franchise contract, owner management, etc)
- Chain affiliation.

Orfila-Sintes concluded that:
- Larger hotels make more use of IT innovations.
- Chain affiliated hotels make greater use of IT innovations.
- Professionally managed hotels make greater use of IT innovations.

This article and the one authored by Siguaw, Enz & Namasivayam (2000) make a compelling case for the inclusion of these variables as independent variables in any empirical study in the hospitality industry.

References
Orfila-Sintes F, Crespi-Cladera R & Martinez-Ros E. (2005). Innovation Activity in the Hotel Industry - Evidence from the Balearic Islands. Tourism Management, 26:851-865.
Siguaw JA, Enz CA & Namasivayam K. (2000). Adoption of Information Technology in US Hotels - Strategically Driven Objectives.Journal of Travel Research, 39:192-201.

Stimulating IT Adoption

A great number of studies focusing on technology adoption concentrate on those factors that influence the likelihood of IT adoption.

While this is interesting from a vendor's perspective, it is equally relevant to understand those concrete activities that may be performed in order to stimulate IT adoption.

King (1994) itemises the actions that stimulate the adoption of IT by an organisation. Interestingly, King differentiates between actions that are performed by the consumer (in a demand-pull fashion) and those performed by the IS supplier (in a supply-push manner). Furthermore, consumer- and supplier- actions may be different depending on whether they are performed as a result of Influence (persuation) or Regulation (legislation).

According to King, the factors that influence IT adoption are:
- Knowledge building, which refers to activities that increase the pool of knowledge, e.g. funding of research.

- Knowledge deployment refers to the provision of information that allows competent use of the technology, e.g. training programmes.
- Subsidies refer to the funding of research and development programmes.
- Standardisation, which refers to the establishment of standards across organisations, so that innovations may more easily be adopted.
- Mobilisation, which refers to the effective coordination and alignment of the various parties, to ensure common purpose during IT adoption.
- Directives refer to coercive statements requiring the use of the innovation.

An IS vendor can perform the activities above to a greater or lesser extent to stimulate the adoption of IT. Examples of vendor activities that may be employed to stimulate the adoption of IT are:
- Creation and provision of training and education programmes (knowlege building and deployment)
- Ensuring compliance to laid-down industry standards (standardisation)


References

King JL, Gurbaxani V, Kraemer KL, McFarlan FW, Raman KS & Yap CS. (1994). Institutional Factors in Information Technology Innovation. Information Systems Research, 5(2):139-169.

Conclusion

From the research material reviewed, it appears that despite extensive investment in IS, hotels use IS primarily for the purpose of automating operational functions. There is evidence of the use of IS to support revenue maximisation objectives (through yield management). There is significantly less IS support for customer satisfaction objectives. Web presence has not generated significant new revenue streams and the main source of bookings remains the travel agent. IS support for personalisation is scant. The case study supports this research.
The hospitality industry has a stronger passion for customer satisfaction than ever before and IS should support this trend.
Winning technologies allow the management of geographically dispersed operations from one central location.