Disintermediation refers to the exclusion of intermediaries from a distribution channel. Through the Internet, organisations can reach consumers directly. Thus hotels can create their own web sites, bypassing the travel agents and the Global Distribution Systems (GDS’s) completely. A popular prediction is that the web will drastically alter the role of the travel agent as well as the role of the Global Distribution Systems (GDS’s). The GDS’s originated in the 1950’s, when airlines created in-house systems to manage their own inventories. Because travellers often wanted to book accommodation together with their flight bookings, the airlines allowed travel agents to add accommodation stock to their flight inventory applications. Hence the GDS’s were born, and still today, are used to purchase bundled products, i.e. flights, accommodation, car rental etc. Today there are only two large GDS’s used by the travel industry worldwide, namely Galileo and Amadeus.
A number of research papers deal with aspects of disintermediation – the article by O’Connor and Murphy (2004) provides a great summary of the important papers on this topic.
The Internet has created opportunities for new intermediaries like Opaque channels (e.g. Expedia.com, Travelocity.com), that filter and bundle travel products (Olsen et al., 2000).
Several papers address the rapid growth in hotel web sites (Garces et al., 2004; Buick, 2003 cited in O’Connor et al. 2004). The marginalisation of travel agents and GDS’s due to direct bookings on hotel websites has not happened, nor is this foreseen by industry experts (O’Connor & Frew, 2002).
References:
Garcés S & Gorgemans S. et al. (2004). Implications of the Internet – An Analysis of the Argonese Hospitality Industry 2002. Tourism Management, 25:603-613.
O’Connor P & Frew AJ. (2002). The Future of Hotel Electronic Distribution. Cornell Hotel and Restaurant Administration Quarterly, June:33-45.
O’Connor P & Murphy J. (2004). Research on Information Technology in the Hospitality Industry. Hospitality Management, 23(2004):473-484.
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.
Saturday, September 26, 2009
The Strategic Use of ICT in Marketing and Distribution
Source: Mistilis N, Agnes P & Presbury R. (2004). The Strategic Use of Information and Communication Technology in Marketing and Distribution – A Preliminary Investigation of Sydney Hotels. Journal of Hospitality and Tourism Management, 11(1):42-55.
This interesting article investigates the factors that influence IS adoption and IS use in hospitality firms.
The study was undertaken in Sydney. Eight hotels participated in the survey. A qualitative approach was used.
At the outset the author quotes from a number of previous reports, which indicate that ICT has not been implemented effectively in the hospitality industry.
The outcome is that the following factors are associated with ICT adoption in Sydney hotels (the strength of association is indicated in brackets):
- Security concerns are diminishing as sites have become safer (strong)
- Web advertising strategies that incorporated marketing on the web (strong)
- Hotel managers are not knowledgeable about ICT and the Internet (strong)
- Education and training of hotel manager (weak)
There was no association between ICT adoption and the size of hotel, chain affiliation status, age of manager and the management status (i.e. professionally managed).
The following factors inhibited ICT use in Sydney hotels:
- Limited management and staff time
- Little understanding regarding benefits of ICT
- Lack of technical expertise and training
Factors that played no part were the age of senior management, the size of the firm, its chain affiliation status and limited financial resources. Mixed results were obtained w.r.t. the lack of a strategic marketing plan incorporating the use of ICT channels and also the lack of commitment from top management.
Some interesting additional points are:
- The mode of Internet bookings is an important determinant of their success. A lot of Internet booking systems generate a booking in email format rather than integrating into the hotel’s reservation system online. This obviously limits the usefulness of these systems.
- Use of ICT technology will be most effective if a hotel also reegineers its business processes.
- There was low level of strategic thinking regarding the use of ICT, and the Internet was generally viewed as little more than an electronic billboard for the hotel’s brochures.
This interesting article investigates the factors that influence IS adoption and IS use in hospitality firms.
The study was undertaken in Sydney. Eight hotels participated in the survey. A qualitative approach was used.
At the outset the author quotes from a number of previous reports, which indicate that ICT has not been implemented effectively in the hospitality industry.
The outcome is that the following factors are associated with ICT adoption in Sydney hotels (the strength of association is indicated in brackets):
- Security concerns are diminishing as sites have become safer (strong)
- Web advertising strategies that incorporated marketing on the web (strong)
- Hotel managers are not knowledgeable about ICT and the Internet (strong)
- Education and training of hotel manager (weak)
There was no association between ICT adoption and the size of hotel, chain affiliation status, age of manager and the management status (i.e. professionally managed).
The following factors inhibited ICT use in Sydney hotels:
- Limited management and staff time
- Little understanding regarding benefits of ICT
- Lack of technical expertise and training
Factors that played no part were the age of senior management, the size of the firm, its chain affiliation status and limited financial resources. Mixed results were obtained w.r.t. the lack of a strategic marketing plan incorporating the use of ICT channels and also the lack of commitment from top management.
Some interesting additional points are:
- The mode of Internet bookings is an important determinant of their success. A lot of Internet booking systems generate a booking in email format rather than integrating into the hotel’s reservation system online. This obviously limits the usefulness of these systems.
- Use of ICT technology will be most effective if a hotel also reegineers its business processes.
- There was low level of strategic thinking regarding the use of ICT, and the Internet was generally viewed as little more than an electronic billboard for the hotel’s brochures.
Friday, September 25, 2009
Case StudCase Study: How the Trends Played Themselves Out in Real-Life
CASE description
Hotels A, B and C are located within close proximity from one another in a large town of the Northern Cape South Africa. All three hotels belong to the same owner who purchased Hotel A from his father in 1984. The business expanded under his leadership with the construction of Hotel B in 1991 and the conversion of Hotel C in 1994 from an apartment block.
Each of the three hotels operates in a different rate category market segment. Hotel A is a 3 Star with conference facilities, Hotel B is a 32 room 4 star luxury hotel and Hotel C is a 29 room 3 star budget hotel. All three hotels revenue is driven by a majority share of work related traveller and minor share of leisure / tourist traveller. Although there is no defined high and low season, factors like public holidays, school holidays and seasonal weather conditions, are and influencing factor in both segments. Both Hotels A and B are run as franchised operations. Hotel C is an independent hotel.
The products of all three hotels are made available to the market through both Information and Communications Technology (ICT) as well as conventional distribution channels. The repetition of the same product on different electronic channels such as the franchisor’s web site and third party web sites is problematic for the hotel management, as it provides opportunity for misrepresentation of the products and the prices seldom agree. This in turn affects the hotel’s image and creates the potential for lost revenue and/or legal liability such as covered by European laws regarding misrepresentation.
All web sites that refer to the three properties are regularly scanned to verify the correctness of representation. The web sites of opposition parties are also scanned regularly to assess and compare their value propositions.
Key external parties that form part of the value chain are travel agents, government departments and Personal Conference Organisers (PCO’s) and large corporate clients all of whom make individual or bulk reservations at the hotels, either directly or via the franchisor.
The hotel owner, who is now in his mid-forties, has no tertiary qualifications. Upon joining the franchise in 1984, he and his wife completed a one-year in-house training course in hospitality management. He does involve himself in day-to-day operations on a supervisory level but is primarily responsible for the financial well being of the business. The Hotel Owner’s wife, who is also in her mid-forties, acts as his assistant and acts in a supervisory level for yield management, rate constriction, marketing and system controls. A dedicated professional General Manager runs the hotels. The General Manager has no tertiary qualifications, but has risen through the ranks of the business and together with the owner and his wife; attend from time to time training courses in hospitality management offered by the franchisor.
The owner maintains a very conservative stance towards IS adoption, and is openly sceptical about unproven benefits of IS, his wife, who is very influential, is keen to adopt IS from an experimental perspective. Once IS is adopted it carries the full support and commitment of the owner and his top management team. All management are expected to use and understand the systems. Systems outputs are important points of reference for meetings, and inform decisions related to Capex, staffing and marketing.
Staff are appointed to the hotel at entry-level and have a matric certificate, basic computer literacy and speak English, but are otherwise untrained. Staff is promoted to managerial positions from within the organisation. All staff training is performed in-house. Low staff skills are historically an ongoing issue in the hospitality industry. It is a fundamental requirement that computer systems be easy to use.
Attention to customer service and satisfaction is vitally important at all three hotels, but especially at Hotels A and B. As part of this strategy, a birthday email or gift is sent to all regular guests. This is enabled through a daily report delivered to the receptionist every morning. Thus the system identifies guest birthdays and these are then actioned manually. All special instructions or special requests for Guests are also recorded and stored on Guest information data on the PMS for easy reference for present and future visits.
Every morning, an arrivals report shows the guests that are expected to check in during the day. Important guests are identified on this report, to ensure that they are adequately welcomed.
The franchisor offers a loyalty programme whereby subscribing guests earn points whenever they stay at the hotel and are ensured a percentage discount on the offered rate. The Hotels also have an in house loyalty scheme where -in points are assigned to a rate level; these points may then be redeemed in the restaurant or the gift shop. Both these programmes are designed to attract repeat business and create customer loyalty.
Attention to guest’s complaints is also vitally important from a customer service perspective. The franchisor has a centralised system which is accessed by the hotel. When a guest checks-out, he is encouraged to complete a comment card. This is captured into the franchisor’s system. Every month this system provides the hotel with statistics related to guest satisfaction. The system also calculates the estimated percentage of guests who would be likely to recommend the hotel to their friends and acquaintances. This statistic is especially important in a service-oriented industry which is heavily reliant on word-of-mouth referrals.
The strategic focus is currently on customer service and satisfaction as well as the maintenance of a profitable rate. The management point out that the strategic focus is adapted according to the ruling economic climate. Competition is fierce during the current recessionary times and price wars between the hotels and other accommodation providers are common. Eroded brand loyalty is now evident especially in rate sensitive market segments. In response many properties have lowered their rates to attract guests, but Hotels A, B and C have managed to maintain their occupancy levels while maintaining profitability by relaxing the application of demand-driven pricing, which was strictly applied during the boom years, as well as by increasing service levels by providing value adds such as free mineral water, biscuits and wireless Internet facilities to Guests with higher rates. These results were achieved despite Hotels A and B being the most expensive properties in town.
During the economic boom years of 2007 and 2008, a strategy of revenue maximisation was vigorously pursued. The PMS applied yield management principles at property level to calculate the room rate according to available supply at the time of reservation. The PMS’s yield management rules were carefully devised to eliminate rate dilution resulting from the “wash” factor (i.e. lost room nights through late cancellations and/or non-arrivals). A dedicated yield manager was appointed to be the custodian of PMS pricing structures. The effect of yield management on room rates is clearly visible when comparing the Average Room Rate (ARR), Revenue per Available Room (REVPAR) and Revenue per Guest for any two periods, as demonstrated by the following figures:
2006 to 2007 2007 to 2008
Average Room Rate (ARR) 15% 36%
Revenue per Available Room (REVPAR) 25% 19%
Revenue per Guest 29% 35%
From the information in this table it can be seen that the ARR increased by 15% during the 2006-2007 period, but the revenue per available room increased by 25%. This shows that the increased room rate did not create rate resistance and therefore reduced occupancy but instead translated directly into higher revenue.
When the current owner took over the operations in 1984, all functions were performed manually. Soon thereafter a PABX (Private Automatic Branch Exchange) was purchased that automated the manual routing of incoming telephone calls to hotel rooms. A telex machine was purchased in 1984 to receive bookings made by the franchisor’s Centralised Reservation Office (CRO). This formed part of the franchise agreement entered into in 1984.
From these humble beginnings, more operational functions were gradually automated. The franchisor prescribed the acquisition of a designated PMS (Property Management System) in 1986. This greatly simplified the reservation and invoicing processes and reduced the risk of errors arising from manual transcription errors. This system also provided valuable reports related to turnover. The principal disadvantage of this system lay in its inadequate provision for data security. Backups were made manually onto floppy disks. However these backups proved to be unreliable. On a number of occasions the restoration of data from these backups failed, necessitating laborious recapture of transactions. This early system was also cumbersome to use, as its design relied upon codes that needed to be memorised, since no drop-down picking lists were provided.
In time more applications were acquired. The original PMS system was replaced to achieve greater streamlining of hotel front-office functions. A POS (Point-of-Sale) application was purchased to control stock of liquor and consumables and to capture pub and restaurant transactions. A TMS (Telephone Management System) was acquired to price telephone calls. Both the POS and TMS systems were interfaced to the PMS, to allow for guest transactions to be posted to their hotel rooms. Support functions were also automated through the acquisition of Salary and Wages as well as General Ledger systems.
Acquisition of IS was at times driven by the need to provide competitive technology based products, as was the case in 2007 when all rooms were upgraded with wireless connectivity to provide for Internet access in guest rooms. To use this facility, a guest purchases a voucher for set data usage, which issues him a password to enable him to logon to the wireless system. A dedicated room equipped with PC’s (Personal Computers) linked to the Internet was also created at the time, for the convenience of guests who do not have a laptop at their disposal.
Security at the hotels was enhanced through the installation of a network of security cameras, as well as by the acquisition of a system that controlled access to guest rooms via card key. This system protects the hotel against fraudulent theft claims by guests, as it keeps an audit trail of guest room accesses.
As applications were acquired, management adapted the in-house processes and procedures to embed the use of the applications in the organisation. For example, the front-office check-in procedure was adapted to provide for the issuing of the card key to the guest. The back-office procedures were adapted to include daily reconciliation to system produced reports and the calculation of profit and loss figures on a monthly basis from the accounting system.
Control procedures were also adapted to incorporate IS outputs, for example each morning a report of all expected check-ins and departures is automatically emailed to key managers, who are expected to comply with guests’ special requests. In some cases, error handling routines in the applications themselves necessitated the creation of new control procedures to action the exceptions. For instance, the check-out clerk needs to check for any POS or TMS transactions that could not be posted to the room, prior to finalising the guest’s invoice.
At the close of each day, the heads of departments are expected to acquaint themselves with key indices that are automatically calculated by the PMS and distributed via email. These emails reflect the ARR and the occupancy for the previous night and current day. Further email communications contain the list of important guests resident in the hotel, the total amount taken at the bar (actual versus budget) and guest complaints and compliments during the period.
Organisation structures were also impacted by the acquisition of technology. Before the advent of information systems, each hotel had its own General Manager and functional managers. However the PMS system allows access to the business data of all three hotels from a single geographic location, hence it is now possible to manage all three hotels from one site. Today the centralised management structure at Hotel A manages all three hotels.
The reservations management function was also centralised through the creation of a central booking office for all three hotels at Hotel B. This centre is manned by two staff members who capture all individual and group reservations for accommodation and conferencing products. Prior to the installation of the new PMS system, this was a decentralised function and one or two staff members were posted at each of the three hotels to perform this function. Furthermore the number of receptionists was reduced from two to one in each of the three hotels, resulting from the streamlining of the reservation capture function.
In 1990’s the franchisor acquired a CRS (Central Reservation System) to replace the old telex-based system in use at the CRO. Reservations are captured into this system at the call centres and communicated to the franchised hotels via email. These reservations originate from telephonic bookings recorded by the CRO, but also from travel agent bookings recorded onto GDS’s (Global Distribution Systems), bookings made by STO’s (Standard Tour Operators) and Opaque channels, which are third party agents who market via the web. The CRS continuously delivers bookings to Hotel A via email. The reservations are then manually recaptured into the local PMS. The franchisor also hosts a web site through which bookings may be made by the public directly. These bookings are emailed to the hotel upon confirmation by the guest.
A booking typically progresses through several channels before it reaches the hotel. Costs are typically levied by each channel. For example, when a guest makes a booking through a travel agent, fees are payable to the travel agent, the GDS and the franchisor. The GDS fee is a flat transaction fee priced in US dollars. Thus Rand-Dollar exchange rate fluctuations impact the profitability of transactions received from travel agents.
There are inherent risks associated with the movement of transactions through the channels. Sometimes transactions get lost. On occasion it has happened that bookings recorded by the GDS did not reach the hotel, to the dismay of guests.
There is opportunity for personal negotiation when a reservation is made at the hotel directly, instead of reaching the hotel through an electronic channel. For example, the rate may be negotiated based on the client’s lifetime value to the hotel. Electronic channels do not take this into consideration at all. Furthermore, when a booking is made at the hotel directly, information related to the guest’s last stay (date of last stay, room last stayed in, rate paid) informs the reservation function, thus making it possible for the same room or same rate to be offered to the prospective guest. The depersonalisation of the reservation function through electronic booking mechanisms is viewed by the hotel management as a significant disadvantage of these technologies.
Every effort is made to quantify the value of business received by originating distribution channel, travel agent, government department, company and guest in order to pinpoint profitable sources. This information is then used when devising special promotions and discounts. These are seldom made available on a general basis. The policy is to restrict special offers to very specific market segments.
While the owner makes every effort to track the cost, as well as the return on technology (e.g. the increased revenue from internet sales), the owner has indicated that no conscious effort is made to apply technology beyond the purpose for which it is acquired and that technology is probably not exploited to its fullest.
New hardware was acquired to keep pace with software acquisitions. Today 23 terminals spread across the three hotels provide access to the PMS application. A dedicated computer room, serving all three hotels, is located in Hotel A. This room is home to the dedicated application and database servers that host the PMS, the software controlling the network of security cameras and the wireless Internet control software. The installation is maintained by a freelance network technician contracted by the hotel on an ad-hoc basis. Problem resolution and maintenance of the PMS is performed offsite via ADSL line. This approach eliminates travel costs and expedites resolution.
The physical security of application data is ensured through regular backups. The PMS performs automatic data backups on a daily basis as part of its end-of-day routine. Once a month offsite backups are taken. On an annual basis, databases are cleared of redundant data, following a complete system backup that is kept in the hotel safe.
Thirty staff has access to the PMS. Each user is uniquely identified by the system.
Comprehensive audit trail functionality ensures that all transactions are tracked. Access profiles allow system functions to be restricted to designated user classes. This prevents sensitive functions from being performed by unauthorised personnel. For example, the receptionist cannot process refunds.
Various KPI’s (Key Performance Indicators) are tracked on a daily basis. Important KPI’s that relate to operational efficiency are the occupancy level, the average rate charged per room, the revenue per guest and the channel cost per reservation. Control over operations is maintained by monitoring the cost of food and beverages sold as well as the number of guest supplies issued.
Reports reflecting these key indicators are generated automatically on a daily basis and are emailed to nominated recipients. These reports enable offsite management and tracking of all aspects of the hotel’s operations and are a valuable management tool.
Hotels A, B and C are located within close proximity from one another in a large town of the Northern Cape South Africa. All three hotels belong to the same owner who purchased Hotel A from his father in 1984. The business expanded under his leadership with the construction of Hotel B in 1991 and the conversion of Hotel C in 1994 from an apartment block.
Each of the three hotels operates in a different rate category market segment. Hotel A is a 3 Star with conference facilities, Hotel B is a 32 room 4 star luxury hotel and Hotel C is a 29 room 3 star budget hotel. All three hotels revenue is driven by a majority share of work related traveller and minor share of leisure / tourist traveller. Although there is no defined high and low season, factors like public holidays, school holidays and seasonal weather conditions, are and influencing factor in both segments. Both Hotels A and B are run as franchised operations. Hotel C is an independent hotel.
The products of all three hotels are made available to the market through both Information and Communications Technology (ICT) as well as conventional distribution channels. The repetition of the same product on different electronic channels such as the franchisor’s web site and third party web sites is problematic for the hotel management, as it provides opportunity for misrepresentation of the products and the prices seldom agree. This in turn affects the hotel’s image and creates the potential for lost revenue and/or legal liability such as covered by European laws regarding misrepresentation.
All web sites that refer to the three properties are regularly scanned to verify the correctness of representation. The web sites of opposition parties are also scanned regularly to assess and compare their value propositions.
Key external parties that form part of the value chain are travel agents, government departments and Personal Conference Organisers (PCO’s) and large corporate clients all of whom make individual or bulk reservations at the hotels, either directly or via the franchisor.
The hotel owner, who is now in his mid-forties, has no tertiary qualifications. Upon joining the franchise in 1984, he and his wife completed a one-year in-house training course in hospitality management. He does involve himself in day-to-day operations on a supervisory level but is primarily responsible for the financial well being of the business. The Hotel Owner’s wife, who is also in her mid-forties, acts as his assistant and acts in a supervisory level for yield management, rate constriction, marketing and system controls. A dedicated professional General Manager runs the hotels. The General Manager has no tertiary qualifications, but has risen through the ranks of the business and together with the owner and his wife; attend from time to time training courses in hospitality management offered by the franchisor.
The owner maintains a very conservative stance towards IS adoption, and is openly sceptical about unproven benefits of IS, his wife, who is very influential, is keen to adopt IS from an experimental perspective. Once IS is adopted it carries the full support and commitment of the owner and his top management team. All management are expected to use and understand the systems. Systems outputs are important points of reference for meetings, and inform decisions related to Capex, staffing and marketing.
Staff are appointed to the hotel at entry-level and have a matric certificate, basic computer literacy and speak English, but are otherwise untrained. Staff is promoted to managerial positions from within the organisation. All staff training is performed in-house. Low staff skills are historically an ongoing issue in the hospitality industry. It is a fundamental requirement that computer systems be easy to use.
Attention to customer service and satisfaction is vitally important at all three hotels, but especially at Hotels A and B. As part of this strategy, a birthday email or gift is sent to all regular guests. This is enabled through a daily report delivered to the receptionist every morning. Thus the system identifies guest birthdays and these are then actioned manually. All special instructions or special requests for Guests are also recorded and stored on Guest information data on the PMS for easy reference for present and future visits.
Every morning, an arrivals report shows the guests that are expected to check in during the day. Important guests are identified on this report, to ensure that they are adequately welcomed.
The franchisor offers a loyalty programme whereby subscribing guests earn points whenever they stay at the hotel and are ensured a percentage discount on the offered rate. The Hotels also have an in house loyalty scheme where -in points are assigned to a rate level; these points may then be redeemed in the restaurant or the gift shop. Both these programmes are designed to attract repeat business and create customer loyalty.
Attention to guest’s complaints is also vitally important from a customer service perspective. The franchisor has a centralised system which is accessed by the hotel. When a guest checks-out, he is encouraged to complete a comment card. This is captured into the franchisor’s system. Every month this system provides the hotel with statistics related to guest satisfaction. The system also calculates the estimated percentage of guests who would be likely to recommend the hotel to their friends and acquaintances. This statistic is especially important in a service-oriented industry which is heavily reliant on word-of-mouth referrals.
The strategic focus is currently on customer service and satisfaction as well as the maintenance of a profitable rate. The management point out that the strategic focus is adapted according to the ruling economic climate. Competition is fierce during the current recessionary times and price wars between the hotels and other accommodation providers are common. Eroded brand loyalty is now evident especially in rate sensitive market segments. In response many properties have lowered their rates to attract guests, but Hotels A, B and C have managed to maintain their occupancy levels while maintaining profitability by relaxing the application of demand-driven pricing, which was strictly applied during the boom years, as well as by increasing service levels by providing value adds such as free mineral water, biscuits and wireless Internet facilities to Guests with higher rates. These results were achieved despite Hotels A and B being the most expensive properties in town.
During the economic boom years of 2007 and 2008, a strategy of revenue maximisation was vigorously pursued. The PMS applied yield management principles at property level to calculate the room rate according to available supply at the time of reservation. The PMS’s yield management rules were carefully devised to eliminate rate dilution resulting from the “wash” factor (i.e. lost room nights through late cancellations and/or non-arrivals). A dedicated yield manager was appointed to be the custodian of PMS pricing structures. The effect of yield management on room rates is clearly visible when comparing the Average Room Rate (ARR), Revenue per Available Room (REVPAR) and Revenue per Guest for any two periods, as demonstrated by the following figures:
2006 to 2007 2007 to 2008
Average Room Rate (ARR) 15% 36%
Revenue per Available Room (REVPAR) 25% 19%
Revenue per Guest 29% 35%
From the information in this table it can be seen that the ARR increased by 15% during the 2006-2007 period, but the revenue per available room increased by 25%. This shows that the increased room rate did not create rate resistance and therefore reduced occupancy but instead translated directly into higher revenue.
When the current owner took over the operations in 1984, all functions were performed manually. Soon thereafter a PABX (Private Automatic Branch Exchange) was purchased that automated the manual routing of incoming telephone calls to hotel rooms. A telex machine was purchased in 1984 to receive bookings made by the franchisor’s Centralised Reservation Office (CRO). This formed part of the franchise agreement entered into in 1984.
From these humble beginnings, more operational functions were gradually automated. The franchisor prescribed the acquisition of a designated PMS (Property Management System) in 1986. This greatly simplified the reservation and invoicing processes and reduced the risk of errors arising from manual transcription errors. This system also provided valuable reports related to turnover. The principal disadvantage of this system lay in its inadequate provision for data security. Backups were made manually onto floppy disks. However these backups proved to be unreliable. On a number of occasions the restoration of data from these backups failed, necessitating laborious recapture of transactions. This early system was also cumbersome to use, as its design relied upon codes that needed to be memorised, since no drop-down picking lists were provided.
In time more applications were acquired. The original PMS system was replaced to achieve greater streamlining of hotel front-office functions. A POS (Point-of-Sale) application was purchased to control stock of liquor and consumables and to capture pub and restaurant transactions. A TMS (Telephone Management System) was acquired to price telephone calls. Both the POS and TMS systems were interfaced to the PMS, to allow for guest transactions to be posted to their hotel rooms. Support functions were also automated through the acquisition of Salary and Wages as well as General Ledger systems.
Acquisition of IS was at times driven by the need to provide competitive technology based products, as was the case in 2007 when all rooms were upgraded with wireless connectivity to provide for Internet access in guest rooms. To use this facility, a guest purchases a voucher for set data usage, which issues him a password to enable him to logon to the wireless system. A dedicated room equipped with PC’s (Personal Computers) linked to the Internet was also created at the time, for the convenience of guests who do not have a laptop at their disposal.
Security at the hotels was enhanced through the installation of a network of security cameras, as well as by the acquisition of a system that controlled access to guest rooms via card key. This system protects the hotel against fraudulent theft claims by guests, as it keeps an audit trail of guest room accesses.
As applications were acquired, management adapted the in-house processes and procedures to embed the use of the applications in the organisation. For example, the front-office check-in procedure was adapted to provide for the issuing of the card key to the guest. The back-office procedures were adapted to include daily reconciliation to system produced reports and the calculation of profit and loss figures on a monthly basis from the accounting system.
Control procedures were also adapted to incorporate IS outputs, for example each morning a report of all expected check-ins and departures is automatically emailed to key managers, who are expected to comply with guests’ special requests. In some cases, error handling routines in the applications themselves necessitated the creation of new control procedures to action the exceptions. For instance, the check-out clerk needs to check for any POS or TMS transactions that could not be posted to the room, prior to finalising the guest’s invoice.
At the close of each day, the heads of departments are expected to acquaint themselves with key indices that are automatically calculated by the PMS and distributed via email. These emails reflect the ARR and the occupancy for the previous night and current day. Further email communications contain the list of important guests resident in the hotel, the total amount taken at the bar (actual versus budget) and guest complaints and compliments during the period.
Organisation structures were also impacted by the acquisition of technology. Before the advent of information systems, each hotel had its own General Manager and functional managers. However the PMS system allows access to the business data of all three hotels from a single geographic location, hence it is now possible to manage all three hotels from one site. Today the centralised management structure at Hotel A manages all three hotels.
The reservations management function was also centralised through the creation of a central booking office for all three hotels at Hotel B. This centre is manned by two staff members who capture all individual and group reservations for accommodation and conferencing products. Prior to the installation of the new PMS system, this was a decentralised function and one or two staff members were posted at each of the three hotels to perform this function. Furthermore the number of receptionists was reduced from two to one in each of the three hotels, resulting from the streamlining of the reservation capture function.
In 1990’s the franchisor acquired a CRS (Central Reservation System) to replace the old telex-based system in use at the CRO. Reservations are captured into this system at the call centres and communicated to the franchised hotels via email. These reservations originate from telephonic bookings recorded by the CRO, but also from travel agent bookings recorded onto GDS’s (Global Distribution Systems), bookings made by STO’s (Standard Tour Operators) and Opaque channels, which are third party agents who market via the web. The CRS continuously delivers bookings to Hotel A via email. The reservations are then manually recaptured into the local PMS. The franchisor also hosts a web site through which bookings may be made by the public directly. These bookings are emailed to the hotel upon confirmation by the guest.
A booking typically progresses through several channels before it reaches the hotel. Costs are typically levied by each channel. For example, when a guest makes a booking through a travel agent, fees are payable to the travel agent, the GDS and the franchisor. The GDS fee is a flat transaction fee priced in US dollars. Thus Rand-Dollar exchange rate fluctuations impact the profitability of transactions received from travel agents.
There are inherent risks associated with the movement of transactions through the channels. Sometimes transactions get lost. On occasion it has happened that bookings recorded by the GDS did not reach the hotel, to the dismay of guests.
There is opportunity for personal negotiation when a reservation is made at the hotel directly, instead of reaching the hotel through an electronic channel. For example, the rate may be negotiated based on the client’s lifetime value to the hotel. Electronic channels do not take this into consideration at all. Furthermore, when a booking is made at the hotel directly, information related to the guest’s last stay (date of last stay, room last stayed in, rate paid) informs the reservation function, thus making it possible for the same room or same rate to be offered to the prospective guest. The depersonalisation of the reservation function through electronic booking mechanisms is viewed by the hotel management as a significant disadvantage of these technologies.
Every effort is made to quantify the value of business received by originating distribution channel, travel agent, government department, company and guest in order to pinpoint profitable sources. This information is then used when devising special promotions and discounts. These are seldom made available on a general basis. The policy is to restrict special offers to very specific market segments.
While the owner makes every effort to track the cost, as well as the return on technology (e.g. the increased revenue from internet sales), the owner has indicated that no conscious effort is made to apply technology beyond the purpose for which it is acquired and that technology is probably not exploited to its fullest.
New hardware was acquired to keep pace with software acquisitions. Today 23 terminals spread across the three hotels provide access to the PMS application. A dedicated computer room, serving all three hotels, is located in Hotel A. This room is home to the dedicated application and database servers that host the PMS, the software controlling the network of security cameras and the wireless Internet control software. The installation is maintained by a freelance network technician contracted by the hotel on an ad-hoc basis. Problem resolution and maintenance of the PMS is performed offsite via ADSL line. This approach eliminates travel costs and expedites resolution.
The physical security of application data is ensured through regular backups. The PMS performs automatic data backups on a daily basis as part of its end-of-day routine. Once a month offsite backups are taken. On an annual basis, databases are cleared of redundant data, following a complete system backup that is kept in the hotel safe.
Thirty staff has access to the PMS. Each user is uniquely identified by the system.
Comprehensive audit trail functionality ensures that all transactions are tracked. Access profiles allow system functions to be restricted to designated user classes. This prevents sensitive functions from being performed by unauthorised personnel. For example, the receptionist cannot process refunds.
Various KPI’s (Key Performance Indicators) are tracked on a daily basis. Important KPI’s that relate to operational efficiency are the occupancy level, the average rate charged per room, the revenue per guest and the channel cost per reservation. Control over operations is maintained by monitoring the cost of food and beverages sold as well as the number of guest supplies issued.
Reports reflecting these key indicators are generated automatically on a daily basis and are emailed to nominated recipients. These reports enable offsite management and tracking of all aspects of the hotel’s operations and are a valuable management tool.
The Adoption, Productivity and Competency of Technology Based In-Room Services
Source: Karadag E & Dumanoglu S. (2009). The Productivity and Competency of Information Technology in Upscale Hotels
This article presents the results of a survey of 122 managers of upscale hotels in Turkey. Managers were specifically asked about their perception of the levels of adoption, productivity and competency of in-room technologies available to hospitality industry.
Productivity was defined as “the ratio of what is produced (output) over what is required to produce (input) within a specific time limit” (Johns & Wheeler, 1991). Managers were asked for their perception of the productivity of each of the in-room services.
Competency was defined as “the generic knowledge, skill or attitude of a person, related to effective behaviour as demonstrated through performance” (Griffiths & King, 1985). In relation to this survey, competency related to the degree of knowledge about the ability of IT to contribute to the creation of competitive advantage.
Nine in-room technologies were included in the survey. There were notable differences between adoption levels and the levels of perceived productivity of the technologies. Following are the survey results. Technologies are sequenced according to their adoption level (the most widely adopted technology is the mini-bar, and it is listed first). The perceived level of productivity is shown in brackets.
In-room mini bars (8), Room energy sensor (1), Electronic locking system (3), Internet access (6), Automatic wake-up (4), Electronic in-room safe (9), Pay per view TV (7), In-room checkout system (5), Voice mail (2).
Regarding competency, managers were asked to indicate their level of agreement with a number of statements related to technology competency. Mean scores were then obtained. Following are the competency statements, sequenced according to the mean scores they attracted (in brackets):
Competency Statements, Mean Score Ranking
Technology improves service quality (1), Technology improves manager / employee productivity (2), Technology helps lodging properties gain competitive advantage (3), The Internet is a powerful marketing tool (4), As the use of technology increases, online reservations increase (5), As the use of technology increases, service quality increases (6), Technology is too costly to continually upgrade (7), Technology reduces the number of employees (8), As the use of technology increases, the costs increase (9).
The above results show that hospitality managers by and large understand that IT can make a significant contribution to their firm’s competitive advantage. The article then further explores whether there are significant differences in perception of competency between managers of independent hotels, hotels affiliated to domestic chains and those affiliated to international chains. Findings were that managers of independent hotels believed most strongly that technology improves service quality. Managers of hotels affiliated to domestic chains believed most strongly that technology reduces the number of employees and also that service quality increases proportionally as the use of technology increases.
This article presents the results of a survey of 122 managers of upscale hotels in Turkey. Managers were specifically asked about their perception of the levels of adoption, productivity and competency of in-room technologies available to hospitality industry.
Productivity was defined as “the ratio of what is produced (output) over what is required to produce (input) within a specific time limit” (Johns & Wheeler, 1991). Managers were asked for their perception of the productivity of each of the in-room services.
Competency was defined as “the generic knowledge, skill or attitude of a person, related to effective behaviour as demonstrated through performance” (Griffiths & King, 1985). In relation to this survey, competency related to the degree of knowledge about the ability of IT to contribute to the creation of competitive advantage.
Nine in-room technologies were included in the survey. There were notable differences between adoption levels and the levels of perceived productivity of the technologies. Following are the survey results. Technologies are sequenced according to their adoption level (the most widely adopted technology is the mini-bar, and it is listed first). The perceived level of productivity is shown in brackets.
In-room mini bars (8), Room energy sensor (1), Electronic locking system (3), Internet access (6), Automatic wake-up (4), Electronic in-room safe (9), Pay per view TV (7), In-room checkout system (5), Voice mail (2).
Regarding competency, managers were asked to indicate their level of agreement with a number of statements related to technology competency. Mean scores were then obtained. Following are the competency statements, sequenced according to the mean scores they attracted (in brackets):
Competency Statements, Mean Score Ranking
Technology improves service quality (1), Technology improves manager / employee productivity (2), Technology helps lodging properties gain competitive advantage (3), The Internet is a powerful marketing tool (4), As the use of technology increases, online reservations increase (5), As the use of technology increases, service quality increases (6), Technology is too costly to continually upgrade (7), Technology reduces the number of employees (8), As the use of technology increases, the costs increase (9).
The above results show that hospitality managers by and large understand that IT can make a significant contribution to their firm’s competitive advantage. The article then further explores whether there are significant differences in perception of competency between managers of independent hotels, hotels affiliated to domestic chains and those affiliated to international chains. Findings were that managers of independent hotels believed most strongly that technology improves service quality. Managers of hotels affiliated to domestic chains believed most strongly that technology reduces the number of employees and also that service quality increases proportionally as the use of technology increases.
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.
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.
Thursday, September 24, 2009
Revenue Management in an Economic Downturn
Source: Kimes SE. (2009). Hotel Revenue Management in an Economic Downturn: Results from an International Study. Cornell School of Hotel Administration, 1-13
Trying economic times bring about their own complications for the hospitality industry. In this article Sheryl Kimes discusses the results from a survey of hotels to determine the problems encountered by the hospitality industry during recessionary times, and also the remedies that may be employed to counteract the negative impacts. Conclusions were drawn from the 291 responses that were received by Kline.
The problems identified by Kline are 1) consumer rate resistance 2) contract re-negotiations 3) competition and 4) price wars.
Hotels are advised above all not to cut their rates across the board, because it will be very difficult to increase them again. It is much better to offer special pricing to very select customer segments; the segment should be as narrow as possible.
Strategies to counter the effects of the economic downturn are:
- Revealing one’s strategic intentions, i.e. publicising one’s strengths
- Competing on quality
- Creating strategic partnerships
- Leveraging one’s loyalty programmes
- Developing additional revenue sources
- Developing additional market segments
- Bundling of products, to conceal the fact that rates have been reduced
- Unbundling of products, i.e. base the rate on the core room rate only, and charge additional amounts for any additional services
- Increasing exposure through opaque channels, which bundle products, thereby disguising the rates
- Offering very selective rate cuts
Trying economic times bring about their own complications for the hospitality industry. In this article Sheryl Kimes discusses the results from a survey of hotels to determine the problems encountered by the hospitality industry during recessionary times, and also the remedies that may be employed to counteract the negative impacts. Conclusions were drawn from the 291 responses that were received by Kline.
The problems identified by Kline are 1) consumer rate resistance 2) contract re-negotiations 3) competition and 4) price wars.
Hotels are advised above all not to cut their rates across the board, because it will be very difficult to increase them again. It is much better to offer special pricing to very select customer segments; the segment should be as narrow as possible.
Strategies to counter the effects of the economic downturn are:
- Revealing one’s strategic intentions, i.e. publicising one’s strengths
- Competing on quality
- Creating strategic partnerships
- Leveraging one’s loyalty programmes
- Developing additional revenue sources
- Developing additional market segments
- Bundling of products, to conceal the fact that rates have been reduced
- Unbundling of products, i.e. base the rate on the core room rate only, and charge additional amounts for any additional services
- Increasing exposure through opaque channels, which bundle products, thereby disguising the rates
- Offering very selective rate cuts
Adoption of IS Use in the Hospitality Industry - Influence of Structural Factors on Strategy and Ultimately Adoption
Source: Siguaw JA, Enz CA & Namasivayam K. (2000). Adoption of Information Technology in US Hotels: Strategically Driven Objectives. Journal of Travel Research, 39:192-201.
This interesting article investigates the link between structural aspects of a lodging establishment and the strategies that are supported by the technologies they adopt.
Four structural variables are defined, namely:
- Lodging segment (i.e. budget, economy, midprice, upscale, luxury)
- Lodging type (all-suite, extended stay, convention hotel, casino hotel, standard hotel, bed-and-breakfast)
- Chain affiliation (chain affiliated or independent)
- Size, expressed in terms of number of rooms
Three strategic priorities are considered, namely:
- Revenue enhancing strategies, e.g. yield management
- Employee productivity enhancing strategies, e.g. automation of manual functions
- Guest services enhancing strategies, e.g. customer relationship management
The survey results are reflective of the 4679 hotels who responded to the survey and had adopted at least one technology.
There were differences amongst the lodging establishments w.r.t. strategic priority, namely:
- Chain affiliated hotels adopt significantly more technologies than independent hotels, and specifically technologies that enhance employee productivity and also revenue.
- The more expensive the lodging segment the more technologies it adopts, and specifically revenue enhancing technologies.
- Convention and casino hotels implement more technologies than any other lodging type.
- Size influenced the extent of technological adoption and specifically the number of employee productivity and revenue enhancing technologies adopted.
This interesting article investigates the link between structural aspects of a lodging establishment and the strategies that are supported by the technologies they adopt.
Four structural variables are defined, namely:
- Lodging segment (i.e. budget, economy, midprice, upscale, luxury)
- Lodging type (all-suite, extended stay, convention hotel, casino hotel, standard hotel, bed-and-breakfast)
- Chain affiliation (chain affiliated or independent)
- Size, expressed in terms of number of rooms
Three strategic priorities are considered, namely:
- Revenue enhancing strategies, e.g. yield management
- Employee productivity enhancing strategies, e.g. automation of manual functions
- Guest services enhancing strategies, e.g. customer relationship management
The survey results are reflective of the 4679 hotels who responded to the survey and had adopted at least one technology.
There were differences amongst the lodging establishments w.r.t. strategic priority, namely:
- Chain affiliated hotels adopt significantly more technologies than independent hotels, and specifically technologies that enhance employee productivity and also revenue.
- The more expensive the lodging segment the more technologies it adopts, and specifically revenue enhancing technologies.
- Convention and casino hotels implement more technologies than any other lodging type.
- Size influenced the extent of technological adoption and specifically the number of employee productivity and revenue enhancing technologies adopted.
Eras of IS Use in the Hospitality Industry
Source: Sigala M, Lockwood A & Jones P. (2001). Strategic Implementation and IT: Gaining Competitive Advantage from the Hotel Reservations Process
I found this article very useful in creating a perspective of IS use in the hospitality industry in the last decades. It basically differentiates between the following:
1) The DP Era (70’s +)
During this time the focus was on automation of manual functions. The first front-office process to be automated was the reservations process, starting with the recording of a guest reservation and ending with the invoicing of the guest, normally during check-out. During this era systems improved upon the firm’s efficiencies by doing the same “things” as before, but faster and using less manpower.
2) The PC Centric Era
This era coincided with the rapid propagation of PC’s into the marketplace. During this era, processing power was no longer an issue, hence more sophisticated pricing models could be devised. Property-level yield management pricing models replaced the old flat-rate pricing and instead determined the room rate based on demand and supply variables.
3) The Network Era
This era came into its own once with the increasing maturity of the WWW once connectivity had been enabled through the large scale rollout of networks. The Reservations Management function was increasingly performed at a centralised level. In line with this, yield management was done across properties, and this functionality was especially used by hotel chains, who often take demand across the geographic region into consideration when determining the room rate. Increased connectivity also enabled inter-system communication, and Point Of Sale (POS) and Telephone Management (TMS) Systems now commonly interfaced to the Property Management (PMS) System to post charges to the room.
4) The Content Era
This era is characterised by personalised applications, and the emphasis is on gaining competitive advantage through knowledge. Increasingly knowledge is inferred from customer interactions and this knowledge is then used to personalise the application. Marketing now focuses on “the segment of one”. The marketing thrust is on gaining a greater share of every customer, instead of simply focusing on attracting more customers.
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.
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.
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.
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