ICT In The Hospitality Industry

Information and Communication Technology (ICT) is supposed to be one of the basic building blocks of the modern society and it is a necessary component of business culture. Information and Communication Technology plays a vital role in the hospitality industry and its importance has dramatically increased over the years. In today’s world, each and every business uses ICTs and it is no more a distinct characteristic or a unique quality of any business, but using ICTs in a more effective and efficient way will help in obtaining a competitive advantage.

Hospitality industry belongs to the service industry and consists of number of fields such as restaurants, lodging, theme parks, transportation, event planning and various other fields within the tourism industry. The hospitality industry always depend upon two main factors: one is the availability of leisure time and the other is the disposable income. Hospitality industries is one of the world’s largest and most permeant industries, the industry has exposed itself to the forces of change, especially by the ongoing developments in ICTs. E-commerce has been negatively influenced by few factors such as the current political developments and the slowing economy, but it is still booming in the hospitality industry. In the hospitality industry, the internet is not only used for gathering information, but it is also being used for acceptance of ordering services over the internet.

Information and communication technology and hospitality are two of the most dynamic drivers of our global economy. In the case of hospitality industry, many authors have claimed that tourism must be treated as an information-intensive industry (Poon 1993; Sheldon 1997; Inkpen 1998), whereas, travel and tourism can be defined as an information business. Hospitality industry is a business that is related to information in all the ways, because information is one of the most important quality parameters to support actions for the tourism area as a service industry.

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Information is also used in various means in the hospitality industry, mainly they are observed in areas where gathering of information, generation, application, processing, application and communication of information is as important for day-to-day operation. Hospitality industry is also considered as a hybrid industry because more than any other services, they are more dominated by information.

In the whole tourism sector, hospitality industry is considered as the forefront and it is always sensitive to the competitive pressure which keeps increasing constantly. The industry is also sensitive to the operational needs that are effective and control tools which are always the growing need. In order to overcome all the competitive pressure and to be effective, the use of ICTs will be the only solution as it is capable of bringing in new business opportunities as well as help in the overall business development.

NEW INFORMATION AND COMMUNICATION TECHNOLOGIES

“Innovation is a process that mediates between two streams of human activity. Market and technology develop in parallel and independently, save for a linkage through innovation. Innovation, therefore, is a response to changes in one or both of these streams. As the market changes, firms have to innovate with new products and services, frequently having to seek out new technology in order to accomplish this. On the other side, rapidly changing technology creates new opportunities and sometimes even creates changes in market structure. As a consequence, the more rapidly that stream changes, the greater the pressure will be for firms to be innovative.” (Morton 1991)

ICT always has a significant impact on all the industries and the growing importance of ICT in the daily business started causing threats and opportunities for the business. The current markets are changing, becoming bigger, faster, getting more standardised, it is always being segmented properly and all these makes it completely competitive. ICT has created a all new information infrastructure which resulted in a new way of accessing information between the buyer, seller and the middleman.

Over the past few years, there has been a transformation from an industrial economy to an information economy in the industrialized world (Parker, 1998). ICT has been completely changing the business world and will also be changing the forms, processes as well as the substance of the firms and organisations.

One of the most important scenes in the current world is that ICT has been driving the productivity as well as the profitability of any business. The scenario is not just about the decrease in computing costs or the increase in computing speeds and capacities, it is all about the new ways of using the computers and technology which would influence the existing business processes as well as the value chain in the hospitality industry (Thompson 1990; King 1998).

Porter and Millar (Porter and Millar 1985) contend that ICT is also affecting the competition in major ways:

ICT can change the structure of an industry, and alter rules of competition.

ICT can be used to create sustainable competitive advantage and provide companies with new competitive weapons.

ICT enables new business which can be developed from a company’s existing activities.

Porter (Porter 1985; Porter and Millar 1985; Porter 1995; Porter 2001) recognizes that ICT is reshaping industries and organizations’ competitiveness by changing the nature or conduct of business. ICT enhances the ability of organizations to manage their resources, increases their productivity, to communicate their policies and market their offerings, and to develop partnerships with all their stakeholders, namely consumers, suppliers, public sector, etc. We can state that ICT supports the development and maintenance of organizational competitiveness and competitive advantage.

ICTs ADOPTION IN HOSPITALITY INDUSTRY

In the hospitality industry, technology is considered as an important of sustainable competitive advantage and a strategic weapon (Poon, 1993; Sheldon, 1997; Connolly and Olsen, 2000; Rao, Metts and Monge, 2003). Various studies (Buhalis and Main, 1998; Evans and Peacock, 1999; Vich-i-Martorell, G.A., 2004; Tang and Louvieris, 2004) have found that the hospitality industry have been always keen in adopting information technology.

The reason for the adoption of ICTs in hospitality industry is that they require a diverse range of information which basically made them encouraged to adopt the technology, as well as because of the widespread use of e-mail and the development of an on-line presence amongst the vast majority of organisations. Buhalis (2003) proposed that internet has been an ideal way of selling inventories on-line because of the broke up nature of the hospitality industry. Further investigation revealed that the level of ICTs adoption varies between various enterprises (Sigala, 2003).

In most of the small and medium organisation, these services are available rarely because of the inadequate on-line booking services (Fux et al. (2007). Most of the earlier studies have cited the issue about the problems in answering to e-mails and defensive adoption of e-mail marketing in the small organisations. (Frey et al., 2003; Murphy et al. 2003; Schegg et al. 2006; Schegg et al. 2007). The following indicates the ICT index in the hospitality industry for various activities.

Activities and ICT Index

4. ICT IN USE

4.1 Electronic Data Processing (EDP)

Electronic Data Processing is usually referred to the use of automated methods to process data. The technology adoption increased before many years but it was basically limited to only the operational and administrative areas. Most of the organisation does not utilize the information that is available in the information system in order to use them in their strategic planning and decision making processes.

4.2 Property Management System (PMS)

In the hospitality industry, ICTs are mainly used in booking systems which is considered as an internal technology. Property Management System acts as a central point that coordinates both the technology and hospitality operations. The main purpose of property management system is to manage room inventory, produce billing information and also to record the details of the guests or the customers. In order to integrate the billing and management reports, it often creates a interface with various other systems such as telephone system and food and beverages point of sales terminal.

4.3 Central Reservation System (CRS)

Central Reservation System is a computerised system that helps to store and distribute information. When an organisation has a chain or belongs to any franchise group, Central Reservation System always helps in various ways. The system helps to book between all the organisations in the chain and would also accept direct booking from the central reservation office. The systems always have a direct access into property management system which would automatically update information to the front office.

4.4 Global Distribution System (GDS)

Global Distribution System is also a computerised system which will include hotels, airlines, car rental and also other travel resources and they are most commonly used by travel agents. Global Distribution System is actually an operation in the computer reservation system and helps to book and sell tickets to multiple airlines. The system is not always connected to the main system and information will not be updated automatically, which means the information has to be updated manually.

4.5 Yield Management (YM)

Yield Management which is also known as revenue management is a process in which the consumer behaviour is understood, anticipated and also influenced. It will result in maximizing the revenue as well as the profit from the resources. In the hospitality industry, yield management is used widely and largely in the same way. Using yield management, the rates, rooms and restrictions on sales are calculated in order to maximize the return of the business. The revenue managers in the hospitality industry have acquired over the last few years and in such a global economy the right distribution channel, correct controlling costs and the right marketing mix plays a vital role in yield management. The services are sold to the right people, at the right time and at the right place.

Model of ICT

INTERNET AND ITS USAGE IN HOSPITALITY INDUSTRY

The Internet is a worldwide network and a global system that is interconnected to computer networks which use TCP/IP protocols to serve billions of users. The Internet plays a vital role in the hospitality industry and is being used in various forms. It also supports a wide range of services and tools that would enable communication and also data sharing. Some of the most important usage and activities on the internet are: (Cockburn and Wilson 1996)

5.1 Communication

The Internet helps a lot in communication especially in the hospitality industry. It represents the largest part of the traffic that crosses the Internet. eMail is one way to communicate and it is also better for many companies and a way to go online. The main reason eMail is efficient is because it is cheap (eMail costs less than long-distance charges for fax machines or the phone), fast (most Internet mail arrives at its destination only minutes after dispatch), easy to use, and links many companies. The other advantage of eMails is that the message that is being delivered to the destination will already be in the electronic form. It reduces the time to scan and re-enter the data into the computer. eMail is the most used communication medium today for internal as well as for external communication.

5.2 Collaboration

Collaboration is one other way the Internet can be used and most of the companies use the Internet to link themselves to the outside world. Usually, the connections are very easy to set up and also are very fast. In the hospitality industry, most of the companies are some way or the other linked with each other, so establishing a connection is very important and the Internet helps a lot. Staples, which is an American office that supplies store chain uses the Internet in a effective way and helps the customer to order various office supplies. Staples have also created their own customized supply catalogs which can run even in the intranet of the customers. All these catalogues will contain various items and their prices which are negotiated in the contract with each company. Using some of the eProcurement technologies, the customers are able to reduce cost of purchase order processing dramatically and also helps them to search and order items electronically (Ghosh 1998).

5.3 Information gathering

The Internet can also be used to gather information easily and faster. Many companies use the Internet to gather data and information which can be used as an additional resource, especially companies that are involved in research and development. Almost most of the information and data are available over the Internet free of charge which helps the company to reduce their overall operating costs. One such example is Magna International, which is a leading global supplier of automotive components, systems and also complete modules. The company has created a database of their own which stores all the information about several of their competitors, rivals and partners. Information about their activities, development and future plans are stored in the Internet, most of which are extracted from the Internet.

5.4 Direct marketing and advertising

The Internet and worldwide web is a useful resource which most of the companies use to improve their overall performance and profitability of the company. The Internet is an ideal medium in the business world that helps to promote the company as well as their services and products. The Internet marketing is one way of promoting the hospitality industry to the entire world which is also flexible and interactive. It helps to deliver all the required information to the consumers or the customers. Most of the companies in the hospitality industry have created their own homepages on the web which helps to get in contact with millions of people all over the world. It is helpful in one way or the other for the small companies to compete with larger ones.

5.5 Direct online selling

Nowadays people are not required to go to some shopping centres or malls to do their shopping. They can do all that at the convenience from their house, companies have got their virtual experience into the web, where the customers can browse through the entire range of catalogs, and also examine their products more in detail. Whereas in the hospitality industry, customers are able to order food, book air tickets, rail tickets, browse through the events, and books the hotels with all the customized options. One good example of online selling will be the companies like Dell and Amazon. Dell sells their computers online, where the customers can choose their required configuration and they sell computers online at the rate of about $1 million a day. The travel platform Tiscover has almost initiated about 500,000 reservations and bookings in the year 2008.

Different Forms of eCommerce

CHALLENGES FOR THE FUTURE OF HOSPITALITY

The hospitality industry has started realizing gradually that the revolution of ICT has changed all the operational practices and various paradigms; it has also altered the competitiveness of all the major hospitality actors in the market. In order to take advantage of the capabilities of the Internet, the hospitality industry has integrated the front office as well as the back office in a framework. Greater speed, connectivity, information-sharing and transparency is achieved by the convergence of all the technological devices. Because of which, all the organisation in the hospitality industry are focusing more on knowledge-based competition and are in the need for continuous innovation. The management are also under pressure and are forced to stay abreast on all the developments that occur in the market (Connolly et al., 2000).

The organisations in the hospitality industry are focussed on increasing their online booking and online services by promoting their presence in the web more aggressively. The organisations have also capitalised on various collaboration and partnership marketing. In order to help the organisations connect to the wide range of distributors in the market, a multi-channel strategies are used. Some of the reports say that there are almost 35,000 websites where the consumers are able to book rooms in various hotels. All these developments have given way to wide range of challenges, integrity of rates, perception of brand, customer value and also segmentation. Because of the advancement in technology, the consumers are able to contact various organisations constantly which in return increase the transparency. The increase in transparency has made the entire organisation in the hospitality industry to rethink about their pricing strategies.

The Internet has come up with many new tools for communicating with partners and consumers, which has implication on the distribution of the industry. The personalisation of products, information and processes has resulted in the emergence of high-tech and high-touch opportunities which the industry itself has to appreciate. The industry now has the opportunity to create a relationship with the customers and basically makes it to adopt the customer-centred approach. The organisations are able to add value at each and every stage of consumer interaction just because all the departments in the organisation are coordinated using ICT-enabled processes.

In order to demonstrate the benefits and to illustrate the innovation of small properties, the ICTs are utilised strategically. The organisations are also enhancing their virtual size and compete with larger players by developing links with other properties. Whereas, all larger organisations are benefitted from the multi-channel distribution strategies, economies of scale and also from streamlining their operations through e-procurement. Globalised agenda are developed and are ensured that their operations and strategies are coordinated throughout the world by all the larger chain of organisation. In any case, ICTs and the Internet will be critical for the competitiveness of both large and small hospitality organizations.

CONCLUSION

The aim of the research is to explain the various uses of Information and Communication Technology (ICT) in the hospitality industry. ICT has been already used by all the key players in the industry which gives them the required competitive advantage, whereas small organisations are at a lower level. However, the Internet can be used as a powerful instrument to overcome all the disadvantages and helps to establish a competitive advantage in the market. Using ICT will not offer a competitive advantage, because the entire world is well aware about the technology and its usage. So the organisation should focus on using the right technology more effectively and efficiently.

Basically, there are three objectives which the industry as well as the organisations in the industry has to focus on:

Define a framework with which competitive advantage can be gained, and make the process systematised and evaluated from eCommerce solution

Consolidating the business values of the Internet

Explore the ways in which the competitive advantage can be enhanced and improved

The advantages of the internet can be classified into two main categories: one as a primary tool for distribution, reducing the overall costs and by increasing the occupancy rate, and secondly it can be considered as a tool to increase the direct contact with the consumers or the customers. To extend the success factor in the hospitality industry, the internet can be used in product development, online surveys, online booking and also for various personalisations.