Changing Business Environment and Future Growth of Tourism and Hospitality - Literature review Example

Tourism and Hospitality: Changing business environment and future growth Introduction Tourism is a global phenomenon separated in time and space. Also, tourism is about informing and enticing travel since 'tourism product is a "confidence good" for which 'a priori comprehensive assessment of its qualities is impossible.' With only information on the product available on both sides of consumer and supplies, the imperative option relates to the process of establishing information distribution and value addition channels. For a product as abstract and intangible as tourism, the faster the product is consumed the minimal is damage to the operational efficiency of the provider. Faster information dissemination and usage is also significant considering the competitive nature of the tourism product. Information and Communication Technology (ICT) techniques are seen to be an answer to such a dynamic business environment. Five themes driving the future of international hospitality industry include information technology, assets and capital management, capacity control, safety and security, and management skills (Olsen in Olson and Connolly, 1999). With the example of airline reservation systems in the 60s to the Central Reservation Systems to the current Global Distribution Systems providing holistic tourism products such as information, reservations and linkages with stakeholders, ICTs have become indispensable. Further with the society changing into 'information knowledge society', business organizations are turning to newer information technologies for survival and competitiveness (Gratzer et. al, 2003). ICT: Driver for globalisation of tourism Go (in Buhalis, 1998) identifies some of attributes of ICTs acting as drivers of tourism globalisation. These include, 'cost drivers' in terms of increased efficiency, low distribution cost, low communication cost, low labour cost, minimisation of waste factor and facilitator of flexible pricing; 'market drivers' satisfying sophisticated demand, offering flexibility in operation, supporting specialization and differentiation, providing last minute deals and accurate information, supports relationship marketing strategies for frequent flyers / guests, there is quick reaction to demand fluctuation, multiple / integrated products can be offered and results in better yield management, corporate research and marketing research; 'Government and regulatory drivers' such as support from Government, deregulation and liberalisation and 'competitive drivers' as strategic tool, managing network of enterprises, value-added skill building, flexibility, knowledge acquisition and a barrier to entry. ICTs: Implications for Tourism Industry Poon (in Gratzer et. al, 2003) has described the implications for tourism industry caused by information and communication technologies (ICT). These include, change of rules in the industry; change in role of each player involved in the process of value-creation; facilitation of 'new, flexible, and high quality travel and tourism services that are cost-competitive with mass, standardized, and rigidly packaged options' and transformation of tourism from 'mass, standardized, and rigidly package nature into a more flexible, individual-oriented industry.' Marcussen (in Gratzer et. al, 2003) cites the example of European online travel market to be worth 14 billion Euros by 2006. Buhalis (1998) suggest a multi-dimensional strategic framework for use of information technology and illustrates the strategic implications of information technology for the tourism industry. Strategic Framework for Information Technology in Tourism (Source: Buhalis, 1998, pp. 417) Buhalis (in Buhalis, 1998) illustrates role of information technology in facilitating both intra- and inter-organisational communications and functions. Within a tourism organisation, information technology facilitates management functions such as 'strategic planning, competition analysis, financial planning and control, marketing research, marketing strategy and implementation, pricing decision and tactics, middle term planning and feedback, management statistics / reports and operational control'; facilitates communication between departments such as networking and information exchange, coordination of staff, operational planning, accounting / billing, payroll and supplies management; facilitates communication and function with branches such as coordination of operations, availability/prices/information, orders from headquarters / administration, share of common resource database for customer and operation information. Information technology facilitates consumer communication with tourism industry in the form of electronic commerce, travel advice, requests regarding availability/prices/information, reservation and confirmation, amendments for a reservation, deposits and full settlements, specific requests/enquiries and feedback / complaints. Further, information technology facilitates inter-organisational communication and functions between tourist product suppliers and intermediaries in the form of pre-travel arrangements such as general information, availability / price enquiries, negotiations and bargaining, reservations, confirmations and ancillary services; travel related documentation such as lists of groups / visitors, receipts / documents, vouchers and tickets production and post-travel arrangements such as payments and commissions, feedback and suggestions, and complaint handling. ICTs also facilitate communication between tourism and non-tourism enterprises such as with other suppliers and ancillary services (vaccinations, travel formalities and visa), insurance companies, weather forecasting, entertainment and communications, banking / financial services, credit cards and other business services. In short, information technology has transformed the strategic position of organisations by altering their efficiency, differentiation, operational cost and response time. With ICTs, the focus is shifting towards individual travel, dynamic packages, and mini target segments. With the requirement of closer co-operation, standardisation of the tourism industry and interconnectivity, ICTs are bound to play a major role in improving service and in provision of a seamless travel experience. Drivers of Change Olsen and Connolly (1999) cite three patterns of change likely to appear across hospitality industry. These include emergence of a traveller always in search of better deals, emergence of hospitality enterprise as the main provider of experiences and emergence of 'hospitality employee as a value-adding stakeholder to the firm.' The drivers of such of change are 'real time' (demand of convenience in terms of any time, any place in the world, on own terms and immediate action); 'Internet, Intranets and Extranets' (technologies that have emerged and which provide customers with real-time access to rates, availability, and product information along with opportunities for hotels and restaurants to redesign platforms for interface with employees, suppliers and franchisees); 'regulating cyber space' (with growth in global commerce through Internet, standards and regulations for use of Internet such as rules of conduct, cyber laws, etc., are 'beginning to be addressed by Governments, consumer interest groups and technology companies worldwide'); 'data warehousing and data mining' (with increasing volume of transactions and difficulty in managing information, technologies have emerged to address such a problem); 'segment-of-one' (with shift from mass customisation to segment-of-one, the importance is on personalised service): there is shift in competition from traditional methods of pricing, location and amenities to the paradigm of knowledge; 'technology and architecture' (the future developments in hospitality industry require further contribution of technology for development of newer platforms considering the competitive nature of the industry); 'elevating information technology to the executive level' (with information technology impacting all aspects of the hotel value chain, hotel executives are increasingly being oriented in technology to focus on enterprise solution) and 'the value-adding dimension' (new forms of information technology requires capital investment and in an era where customer are finding technology as a major facilitator, hotels are exploring various options for funding technological innovations). Conclusion With variable guest requirements and increasing competition, information and communication technologies have emerged as one of the important themes impacting change in tourism and hospitality industry. Information technologies are facilitating intra and inter-organisational management and communication functions. With value addition becoming synonymous with the state of the tourism industry, technological capabilities need to be continuously upgraded requiring substantial investment. On one hand while information technology is helping firms to meet the demands and be competitive with the requirements of the customers, however, on the other hand, the associated costs are proving to be a hurdle. Therefore, the need is tools to balance costs and benefits associated with information and communication technologies. References Buhalis, D. (1998). Strategic use of information technologies in the tourism industry. Tourism Management, 19 (5), 409 - 421. Gratzer, M., Werthner, H. and Winiwarter, W. (2003). Electronic Business in Tourism. Retrieved on December 1, 2005, from www.ifs.univie.ac.at/ww/ijeb.pdf. Olsen, M.D. and Connolly, D.J. (1999). Antecedents of Technological Change in the Hospitality Industry. Tourism Analysis, 4(1), 29 - 46. Read More