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Distribution Channel Efficiency in the Hospitality Industry

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Published: Wed, 04 Jul 2018

Advances in technology combined with its more effective use are generally assumed to be a good trend for the global expansion of trade and commerce. Technological advances are commonly believed to quicken the globalization process with improved economic growth and business profitability is consequently assumed to be the beneficial results. Globalization and the use of improved technology increase the potential for increasing efficiency as the electronic and digital transfer of information and financial transactions means that customers can be gained on a global, regional, or national level. Like most other industries or economic sectors, the hospitality and tourism industries have been affected by the use of and improvements in technology in recent years. Hospitality as will be argued, is an industry like any other that can potentially increase its distribution channel efficiency through more widespread or more effective use of technology. Traditionally the use of technology was confined to improvements in the mode of transport available to travellers. Hotels and places of hospitality have been strategically placed for the benefit of travellers. For instance the development of trains, cars, ships, and planes all helped to expand the tourism and hospitality industries as people found it easier, quicker, and more cost-effective to travel further distances. However, it is the use of technology such as television advertising, personal and business computers, and the Internet that arguably has the potential to increase the distribution channel efficiency in hospitality. For the purpose of this essay it would be sensible to remember that the hospitality industry deals with two main types of customer, tourists or holiday -makers alongside business travellers. Whatever motivates people to travel is not as important as the factors that makes pick a place to stay and possibly tempts them to stay there again and again. As will be discussed the use of technology is not the sole factor in distribution channel efficiency in the hospitality industry, yet it can be the decisive factor.

To begin with the hospitality industry has always been reliant upon the transport infrastructure available at any given time, the less developed that infrastructure the less likely people are willing to travel great distances or so often. Prior to the onset of improvements in transport and communications technology during the 19th century there were little pressures for the hospitality industry to have Distribution Channel Efficiency. Poor roads and sail powered ships meant that most travellers only went short distances. Only the very wealthy could afford the time and the expense of travelling widely. Luxury hotels existed in small numbers to cater for their needs. More generally hospitality was confined to small hotels and inns, often located on main roads. Without the development of the railways, steam powered ships, and later the car, the modern hospitality industry would not have evolved. The railways made short breaks and day trips affordable for the masses, whilst steam ships reduced the sea voyages from weeks to days (Cooper, Fletcher et al, 1998 p. 395). Transport costs are still a vital consideration for the hospitality industry to consider. For instance the greater availability of charter flights made package holidays more affordable from the 1960s (Vellas & Becherel, 1995, p.79). For instance, for a time after the 9/11 attacks higher insurance costs as well as safety concerns reduced the number of travellers (Higley, 2004). The expansion of newspaper sales combined with the invention of the telegram and the telephone made international and national communications quicker and more effective. Such developments meant that hospitality was able to develop marketing and advertising strategies on a national and sometimes an international basis. The need for Distribution Channel Efficiency in hospitality developed in conjunction with the expanded opportunities that resulted from improving technology (Cooper et al, 1998, p.424). Income levels also have an impact upon the hospitality industry; people who cannot afford to travel will not be effected by Distribution Channel Efficiency (Vellas & Becherel, 1995, p.91).

The appropriate use of modern information technology equipment can certainly help improve Distribution Channel Efficiency in hospitality although it does not guarantee commercial success. Individual travellers and hotels can use computers systems and databases to make travel and accommodation arrangements with increasing ease (Outhart, Taylor et al, 2000 p. 16). The use of automated booking and payment arrangements means that customers no longer have to make travel and accommodation arrangements in person or via correspondence. As long as hotels are linked to national and international databases and network bookings can be made at any travel agency, booking office and even online. The automation of the payment process began once the use of credit cards became more widespread, especially in North America, Japan and Western Europe. Credit cards, debit cards, and the use of automated credit transfers allowed transactions to take place anywhere in the world at any time of day. Travel agencies, transport companies, and hotels have developed booking systems that allow tourists and business travellers to arrange their travel and accommodation more effectively (Killingworth-Baird and Carter, 1996 p. 12). The expansion of automated payment systems has had the greatest impact on hotel reservations, with hotels and booking agencies using computer databases to know the level of vacancies and reservations at every hotel within a local area network or now across the globe. As with other areas of commerce the efficiency and speed of those systems has improved markedly with adaptation of Internet technology (www.gcis.ca).

It was developments in the United States that led to the modernisation and expansion of hospitality industry through the invention of computer reservation systems. The computer reservation systems are usually referred to as global distribution system or GDS. The most widely used GDS systems are Sabre, Galileo, Amadeus, and Worldspan. Once compatibility problems were resolved these systems have proved invaluable for the global hospitality industry. For travellers the main benefit of GDS is that it gives them the ability to make their arrangements in advance, provides a good level of customer service and it means that holidays or business trips are efficiently planned. For the parts of the hospitality industry that have fully automated bookings and payment procedures the ability to make bookings in advance is a great help for the achievement of Distribution Channel Efficiency. The companies that pioneered GDS such as Thomson used it to expand rapidly (Outhart, Taylor et al, 2000 p. 16). The taking of advanced bookings means that hotels can budget for a known amount of income coming in at any given time and set staffing levels accordingly. Hotels have more time to attract more visitors if they know that the hotel will have a higher number of vacancies and therefore offer discounted stays at short notice to hire out as many rooms as possible. Logically the more accurate information that hotels have about the number of bookings already made and the amount of bookings still available then they can make suitable arrangements for extra marketing, discounted room hire and the holding of special events. The development of GDS when combined with the increase in charter flights and package holidays meant the rapid growth of the hospitality industry on a greater scale and fashionable new destinations such as Benidorm in Spain (Outhart, Taylor et al, 2000 p. 149).

The hospitality industry had already began to make use of improved Distribution Channel Efficiency before the internet became widely available and dramatically altered the prospects for commerce and marketing. For the hospitality industry the use of the internet has made it possible for hotels to advertise their vacancies and their locations on a global basis. Individual hotels and international hotel chains were quick to realise how the internet could increase the chances of improving Distribution Channel Efficiency through the effective use of technology. The internet allows the opportunity for hotels to advertise and make bookings online, as well as gaining bookings through travel agents as well as being in brochures and tourist information offices. Many customers now prefer to make their own travel and accommodation arrangements online so the hotels have their own websites or can be booked through other websites have a stronger opportunity to increase their sales compared to those hotels that cannot be booked online. The internet provides the chance to book hotel rooms as customers can view what the hotel is like without going there in person. Customers can learn about a hotels precise location, transport links to the hotel, and the closeness of tourist attractions or important business sites that could be nearby (www.gcis.ca). The internet is also a great media for showing other features of the hospitality and leisure facilities available at hotels. For instance, hotels no longer just provide somewhere to sleep and eat. Facilities, which can be attractive to customers, include gyms, swimming pools, bars, and restaurants. Customers’ expectations of what hotels should provide them with have also altered due to changes in technology. Whereas travellers would have once been happy with a bed, tea- making facilities with en-suite bathroom, now they would like televisions, mini bars and phone sockets so they can access the internet via their laptops (Outhart, Taylor et al, 2000 p. 17).

For larger hotels and hotel chains the hospitality they provide has certainly changed for the reasons mentioned above. Hotels are no longer about having a bed for the night; they are about having an enjoyable experience, which means the customer will wish to use the hotel company again. It could be argued that providing such services and facilities make the hospitality industry more expensive to run, yet such expenditure could be justified if hotels are able to increase the number of happy guests and keep the loyalty of their customers. The Distribution Channel Efficiency of technology will, if used effectively, prove more profitable to the companies that are prepared to implement changes as soon as they become possible. Keeping pace with technological changes allows hotels and other hospitality providers to improve and maintain their standards of customer service. Hotels are not able to provide their guests and customers with a higher level of service when it comes to providing information about travel and the leisure activities available at the hotel itself or within the surrounding areas of it. It is possible if the hotel or hospitality provider is linked with travel and leisure companies that customers can arrange to pay for all other services not provided by the hotel when they make their hotel bookings. Smaller hotels and hospitality providers might not be able to match all the services provided by a larger or chain of hotels, yet they can still provide their customers with a higher level service than they did before the internet became widely available (Higley, 2004).

Improvements in technology do not automatically equate to a better Distribution Channel Efficiency for hotels and other hospitality providers. There are certainly actual and potential drawbacks to the greater use of technology within the hospitality industry. Staff and managers have to have enough training to use new technology properly, whilst not all customers may be able to use new technology and will need to make their hospitality arrangements by more traditional means such as going to a travel agent, booking by telephone, or even by letter. For smaller companies and hospitality providers it might not be cost effective to use every piece of new technology as their income and resources would not be increased by as much as the cost of upgrading their equipment. Smaller hospitality providers have tended to avoid such drawbacks by forming links with the larger companies such as Thomson. The use of GDS suits small operators as the larger companies fill up their rooms, whilst the arrangements suit the large companies as it increases the number of bookings from customers that they can meet (Outhart, Taylor et al, 2000 p. 16). For smaller hospitality providers there is another potential drawback that new technology becomes obsolete too frequently. Once again strong links with the larger tour operators can mean that even with older technology that the smaller hospitality providers can still stay connected to global databases or booking systems such as GDS. It also means that the efficiency of the payments they send and receive is increased (www.gcis.ca).

Another drawback that could provide problems for the hospitality industry when it is seeking Distribution Channel Efficiency is that when tour operators and smaller hospitality providers are so busy meeting current demands that they do not plan adequately for the expansion or contraction of tourist destinations. When growth levels in certain resorts are very strong hospitality providers have found it difficult to match demand with actual capacity. Tourism booms that in some holiday resorts may seem destined to last for a long period yet such resorts are prey to the changing tastes or budgets of tourists. Unplanned or too rapid an expansion of holiday resorts could lead to the areas becoming spoilt and burdened with declining popularity and profits. Experience has shown that the decline of popularity in some holiday resorts can be as rapid as previously high levels of tourists staying. Perhaps the classic example of a tourist resort expanding rapidly and suddenly declining in popularity is Benidorm. For the best part of two decades the demand for bookings was barely met as new hotel construction only just stayed ahead of demand. Rapid expansion had spoilt the original character and attractiveness of the area for tourists and the level of hospitality provided varied greatly across the resort. The popularity of Benidorm fell sharply at the end of the 1980s with bookings down by a third. Expansion is never infinite and the consistent adoption of technology to Distribution Channel Efficiency cannot make people go to certain destinations (Outhart, Taylor et al, 2000 p. 149). The popularity of hospitality providers and holiday resorts can be affected by factors outside of their control such as poor weather, changes in tastes and income, or especially relevant after the 9/11 attacks on the United States by security concerns. Regional conflicts can have detrimental affects on tourism and hospitality as people are unwilling to travel near war zones (Outhart, Taylor et al, 2000 p. 196). American hotels frequently responded to the downturn in business after 9/11 by shelving or reducing company training programmes which arguably affected efficiency and certainly lowered customer services standards. To some extent the availability of online training has addressed some of those training needs (Higley, 2004).

To some extent the Internet provides an alternative way of making hotel and travel arrangements. People that use the Internet are in a position to make their own plans, as they are able to bypass travel agents and make bookings directly from travel and hospitality providers themselves. People that want to arrange things independently of other people are using the technology developed by the hospitality providers to do so. The main alternative to the evolving electronic booking and payments systems would be to use older less efficient offline versions although they would still work they would not be as fast or as accurate (www.gcis.ca).

Therefore the use of technology can greatly assist the Distribution Channel Efficiency of the hospitality industry. However technology alone does not make or break hospitality operators. A combination of information technology, plus advances in transport, changes in consumer tastes, and effective marketing can make all the difference between success and failure. Technological advances since the 1960s have radically altered the ways in which hospitality is provided, booked, and paid for. The expansion of charter flights and the development of GDS allowed large international travel and hospitality companies like Thomson to flourish and to form links with hotels, airlines, and other transport providers to offer complete travel packages that could be booked and paid for at the same time. Perhaps the most single important technological advance that affects Distribution Channel Efficiency in the hospitality industry is the Internet. On the Internet customers can make their own travel and accommodation arrangements by assessing operators deals and taking advantage of the payment and GDS that are part of websites and hospitality networks.

Bibliography

Cooper C, Fletcher J, Gilbert D, & Wanhill S, (1998) Tourism – Principles and Practice, 2nd edition, Longman, London and New York

Higley J, Hoteliers need to rediscover training benefits, Hotel & Motel Management Sep. 6 2004

Outhart T, Taylor L, Barker R, & Marvell A, (2000) Advanced Vocational Travel and Tourism, Collins, London

The General Center for Internet Services Inc, The Internet has greatly helped to increase the efficiency of transactions, July 15, 2002 from www.gcis.ca

Vellas F & Becherel L, (1995) International Tourism – An Economic Perspective, MacMillan Business, Basingstoke


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