In this regard, Higgins (2002) reports that Micros Systems Inc. introduced a custom application specifically for the hospitality industry early on, and despite the lingering effects of the September 11, 2001 terrorist attacks on the market, this company and others such as BDM International Inc. are continuing their efforts to provide hotels, restaurants and other organizations competing in the hospitality industry with the information technology they need to become more competitive (Bear 1999). More recently, companies such as Avendra have started offering integrated software applications that are specifically designed for various segments of the hospitality industry. This companys integrated software application provides purchasing support for food and beverage operations, room operations, engineering/building and construction, administrative, professional and financial services; cleaning solutions and sanitizing systems; grounds and agronomy maintenance; as well as gift shop and spa equipment operation and products (Avendras purchasing programs 2010).
According to Richer (201), a trend that has experienced substantial growth recently is the ability for online systems to collaborate in a networked fashion to search bed banks and other third party product suppliers to provide customers with real-time availability and booking options. In this regard, Richer notes that, “Virtually every system supplier is offering operators the ability to sell far more than their own stock. Systems now offer seamless connectivity to bed banks, transfers, flights and other products” (4). It should be noted, though, that Richer also cautions, “There is a danger that with universal connectivity to relatively few bed banks, tour operators will all end-up selling the same stock, so commoditizing the industry. It is very important for operators to maintain their own unique identity and remain competitive by continuing to negotiate contracts directly with the hotels which they sell most. They should only use third parties to supplement their own stock, so widening the range of product on-sale but maintaining a unique core” (5).
Besides the foregoing, companies competing in the hospitality industry can launch a sophisticated Web site for free or a modest monthly charge that promote their business and provide the means for potential customers to arrange their own reservations at hotels or restaurants (Domke-Damonte & Levsen 2002). Taken together, there are three basic ways that ICT can help companies competing in the hospitality industry better reach their market:
1. Gaining information about the industry in general and specific local competitors;
2. Developing Web sites to transfer information about a specific hotel to prospective customers; and,
3. Developing a Web site where customers may make and check reservations directly with a specific hotel through the Internet (Domke-Damonte & Levsen 2002, 31).
Besides the foregoing information-gathering function, ICT can also be used by companies competing in the hospitality industry to custom-tailor their message for existing and potential customers. According to Spillane (2001), “There are many different ways to tailor the service to meet the needs of individual customers” (16). The customization process can take place along two dimensions at a minimum:
1. Companies must consider whether the characteristics of the service and its delivery system lend themselves to customization; and
2. Companies must determine how much judgment customer contact personnel can exercise in defining the nature of the service received by individual customers; some service concepts are relatively standardized, while other services offer customers a wider range of options (Spillane 2001, 16).
In addition, hotel franchisees typically purchase specific interfaces for the franchising brands own reservation system (Luftman 2003).
Porters Five Forces Analysis
According to Kermally (2003), Porters five forces framework can provide an improved analysis and understanding of the competition that exists in a particular industry. This author points out that, “In order to construct a competitive strategy, an organization needs to know what is likely to happen in the markets in which the organization delivers its products and services. It also has to know who its competitors are in a particular industry structure” (Kermally 2003, 58). In order to accomplish this type of strategic analysis, it is helpful to refer to the rules of the competition governed by the five competitive forces described by Porter in his five forces model, and these forces are applied to the hospitality industry and its competitive environment in Table 1 below.
Porters Five-Force Hospitality Industry Analysis
Analyses and Comments
Power of Buyers
ICT provides travelers and other potential customers with the ability to shop and compare offerings and prices and can even give them a virtual tour of a companys facilities before they make a purchase decision.
Internet usage statistics point to more than one billion users worldwide, with an astronomical growth rate of about 15% per month, a growth rate that translates to 180% per annum, compounded monthly (Eger 2006). The Internets most popular component is the World Wide Web which has been widely integrated into the marketing, information, and communications strategies of almost every major corporation, educational institution, charitable and political organization, community service agency, and government entity in the developed world; there has never been an innovation in communications that has been so widely or rapidly adopted by the public (Eger 2006, 18).
ICT levels the playing field for companies competing in the hospitality industry, with small- to medium-sized enterprises enjoying the same opportunities for promotion and customer relationship marketing as their larger counterparts. This point is made by Richer (2010) who advises, “New entrants into the marketplace are using the latest development languages to construct straightforward yet reasonably comprehensive reservation systems that are specifically designed for online sales” (3). In addition, Richer notes that, “Selling online need no longer be an expensive exercise. There has never been a better time for smaller operators to compete on a level playing field with their larger competitors who can more easily afford heavy investment in technology” (4).
Power of Suppliers
ICT provides hospitality organizations with the ability to customize their offerings and promote them in a cost-effective fashion based on current trends and the analysis of their customer relationship marketing data. In addition, hospitality organizations can use information technologies to improve their internal operations by automating many human resource functions and by improving communication throughout the organization (Conophy 2005).
The cost-effectiveness of information technology applications mean that smaller marketing budgets can be translated into more competitive pricing levels.
Threat of Substitution
The hospitality industry survived for thousands of years without ICT, but it is reasonable to suggest that the ubiquity of these technologies and their importance to the operation of businesses of all types today indicate that there are no viable substitutions currently available to replace them.
Some low-tech alternatives remain useful in the hospitality industry; for example, customer comment cards are an effective way to collect customer satisfaction feedback and brochures and fliers continue to be used as responses to mailed inquiries for information.
Threat of Entry
The barriers to entry for the hospitality industry are directly related to what type of enterprise is involved. Restaurants or bars can be launched for far less, for example, than a hotel.
Major chains enjoy brand recognition creating a major hurdle for start-ups.
The research was consistent in showing that although ICT has made the hospitality industry more competitive, some hospitality organizations collaborate with their competitors (and others) to help redefine their destination and improve business for all.
For instance, Domke-Damonte and Levsen note that, “A firm may collaborate with direct competitors, customers, suppliers, and other organizations providing services to their customers in an effort to build its competitive position” (31).
Overall Industry Assessment
As part of the travel and tourism industry, the hospitality industry has regained much of the business that was lost immediately following the terrorist attacks of September 11, 2001;
The current global economic downturn has affected this industry as well.
Using IT Technologies to Achieve a Competitive Advantage
Perhaps the most important contribution that information technologies have made to the hospitality industry in recent years is the manner in which it has improved customer service and the level of professionalism among hospitality organizations, and these outcomes can be used to gain a competitive advantage. In this regard, Jafari emphasizes that, “During the past several years, nothing has increased professionalism or more greatly enhanced customer services within the tourism industry than automation. Technology will continue to change the way companies plan, co-ordinate, control and evaluate operations” (46). Given recent trends in the widespread use of information technologies by industries of all types, these trends will likely continue into the foreseeable future until the march to ubiquitous computing is achieved. Even then, though, software engineers will be working on “the next big thing” in information and communications technology.
Just a few years ago, computers were prohibitively expensive, cumbersome, difficult to use and required a significant amount of training to use effectively. By sharp contrast, the situation is much different today and even computer novices.