The Impact of New and Future Technological Development on the Hospitality Industry - Research Paper Example

 Hospitality industry and The impact of new and future technological development Abstract Technology has always had a great impact on hospitality industry. It worked to enhance guest experience, provide greater profitability, increase market share, and create possible competitive advantage. It is more of a necessity and issue of survival in today’s globalized and competitive environment. Various technologies are evolving and emerging that change the way we do business. It is high time for hotel industry to reap the benefits by proper planning and investment in technological application. The paper studies various researches on changing trends in technology for hotel industry and their impact on customer experience, profitability and gaining competitive edge. The impact of new and future technological development on the hospitality industry We are experiencing some of the most dramatic social changes in world’s history. Borders are no more limited, in fact, they are dissolved and countries, societies, people and businesses are connecting more than ever before. World is shrinking and so are the demographics. Increasing international trade agreements, global business activities, telecommunication networks and personal/educational travels have linked the whole world. These links and association are supported and stimulated by two flourishing industries, tourism and information technology (Sheldon,1997).To Poon(1993),there is no chance of any major player in tourism industry to be unaffected by information technology”(cited in Khosrow-Pour et al.,2002,p.209). According to Van Hoof, Collins, Combrink and Verbeenten (1995), more and more hotel managers are willing to make technology investments that support their business. In a survey applied in U.S. in 1994, 95.3% lodging properties answered that used some computer technology. On the other hand, this statistics contrasts sharply to a 1980 American Hotel and Motel Association technology survey, which reported that fewer than 10 percent of America’s lodging properties were using in-house computers for reservations, rooms management, front office cashiering and night audit, and marketing (Chervenak, Keane and Co.apud Van Hoof, Collins, Combrink and Verbeeten, 1995 cited in Khosrow-Pour et al., 2002, p.209). Hotel industry is a competitive market in which guests are becoming increasingly selective in their preferences. Increasing complexity of the systems and circumstances with increasing demands of travelers is bringing new challenges for the industry as well (Janes &Wisnom, 2003, p.23).With increasing competition in the industry, managers and professionals are striving for better ways to find their competitive advantage in order to attract new customers and retain existing ones (Berezina & Cobanoglu, 2010, p.25).According to Olsen, Connolly and Allegro (2000),in today’s world, information technology is considered to be the most powerful driving force in hospitality when it comes to change and gaining competitive edge. Based on the above findings, Berezina & Cobanoglu (2010, p.25) explain that IT is considered to be dominating the lodging industry in recent times and future as well. It will transform the way of conducting business, irrespective of the geographic location, business size and segment. Several researches, including Howell, Moreo and DeMicco (1993, p.115) and Skogland and Siguaw (2004) stressed the need to learn about guests’ needs and satisfaction in order to implement IT successfully. Singh and Kasavana(2005,p.24) explain that technology has already been recognized as significant determinant when it comes to enhancing hotel guest experience and satisfaction in addition to hotel selection(Cobanoglu,2001).Hotels frequently utilize technology as value-added luxury that facilitate hotel’s competitive edge and enhance customer experience which results in increased loyalty among clientele(Cobanoglu, Ryan,& Beck,1999).Hotel trendsetter Jeffrey Ornstein challenges traditional hotel mantra and states Location, location, location used to be the hotel mantra… (But it is to compare now)as even the wealthiest and sophisticated traveler check the internet to create their own personal experience and value proposition. Successful operators who deliver on their brand and reign in cost will boost their bottom line in the 20-10 decade. (Cited in greg1988, 2010) According to American Hotel and Lodging Association survey, major advantage of technology application results in improved guest experience and enhanced satisfaction (Brewer, Kim, Schrier, & Farrish, 2008 cited in Berezina & Cobanoglu, 2010, p.25) another trade journal article associate inappropriate technology use with increased guest dissatisfaction. In this scenario it is crucial to identify in-demand technology applications, services and luxuries to enhance customer experience (Cobanoglue, 2009 cited in Berezina & Cobanoglu, 2010, p.25). Collins & Cobanoglu (2008) and Kasavana & Cahill (2007) explain since its beginning in 1970s, information technology is being adopted by hospitality industry on a vast scale and this practice is continuously evolving. Hospitality industry is exemplary when it comes to transforming itself according to changing customer preferences and demands (Lee, Barker, & Kandampully, 2003, p.423).For industry, technology adoption proved to be beneficial and challenging at the same time. Generally, as the complexity of hospitality amenities increase the dependence on automation also raise, for instance, food and beverage outlets, overnight accommodation, spa treatments and recreational activities (Piccoli & Torchio, 2006; Siguaw, Enz, &Namasivayam, 2000). Technology is implemented at two levels in hotel: at managerial and operational level and for guest service in rooms. In-room technology implementation has not only enhanced the service but also provided advanced entertainment opportunities (Lee et al., 2003, p.425).Amenity applications are used to enhance customer experience and improvement in staff performance while in-room technology is specifically designed to enhance comfort level and provide security, for instance, electronic locks, alarms, mini bars, climate controls, security systems, entertainment systems, and desktop computers (Collins & Cobanoglu, 2008).Hospitality industry experts stress the need of in-room technologies in order to keep pace with increasingly technologically savvy travelers(Higley,2007;Munyan,2008;Squires,2008 cited in Berezina & Cobanoglu, 2010, p.27). In this competitive industry, to maintain an edge, it is crucial to identify and understand the key drivers of guest decision making. This knowledge will not only help hoteliers to develop new product but also to regulate existing offers according to customers’ needs and requirements that will appeal and attract them easily(Kotler, Brown,& Makens, 2003; Lazer, Dallas, & Riegel, 2006 cited in Berezina & Cobanoglu, 2010, p.27).Numerous studies work on identifying the factors contributing to hotel accommodation selection. Traditionally, price, service and location are prime factors for travelers selection of a certain hotel (Verma, Plashka, Dev, & Verma, 2002).Ananth, et al. (1992) discovered price to be the prime factor, security at second while location is identified to be the third. According to Chu & Choi (2000) study in Hong Kong identify six groups of values as distinguishing factors for hotel selection. Cobanoglu (2001) studied the importance of technological amenities in hotel selection and identified that automated services and devices are major determinants for business travelers in particular. Verma et al. (2002, p.23) worked on identifying the value drivers between leisure and business travelers. Hotel amenities, price, eating options, loyalty programs, type/location, office/technology choices and customization were considered the prime factors. The study discovered that “core offering” of a hotel, for instance, price, location and room still constitute about 70 percent of the factors while 30 percent of the decision making is directed by the value drivers such as loyalty points, technology and customization options. Therefore, this study suggests that office or technology options amount to five to ten percent of overall decision making process of travelers(Berezina & Cobanoglu, 2010, pp.27-28). A study conducted in Thailand identified dominant influence of technological facilities on guest experience and satisfaction without any socio-demographic constraints (Prayukvong, Sophon, Hongpukdee, & Charupas, 2007). Major attribute of hotel information technology is delineation of major factors, for instance, reliability, guarantee, receptiveness and empathy which contribute to not only meeting but exceeding customers’ needs (Chathoth, 2007). From over 12 months, social phenomenon is taking over hotel industry and trend of booking applications for the Apple iPhone and Blackberry smartphones is increasing. Numerous hotels have launched facebook pages to reach new guest segments and some are offering special deals through updates on twitter (Horner, 2010).Monitoring the activity on several social media networks make reaching potential customer more conveniently. Some of the major impacts of social media networking come from collaboration, information sharing, teaming and innovation. From sharing best practices and innovative ideas for HR to other communication, it is the best source to keep up with people and particularly when demographics are shifting to younger generation. It keeps up with the brand image and customer perceptions about, either negative or positive and consequently suggests future strategy. Image reshaping and building can be best practiced by taking a proactive approach towards adopting social media networking (bfridley, 2009). Horner (2010) observes that with increasing iPhone sales, many hotels are incorporating Apple iPhones for communicating with staff and guests. For instance, Horner (2010) states: “Applications as a handheld point of sales, housekeeping software and productivity device, a guest enabled booking device, a check-in/check-out and folio review device, a restaurant reservation and room service bookings device, and real-time SMS text messaging application from guests to staff in hotels and vice versa. The deployment of Microsoft’s Surface Table Computing in several hotel lobbies in New York and Atlanta further encourages guests to use them for information purposed either for local attractions or hotel services.” Technology is serving and will go a long way to work for energy conservation. With increasing electricity cost and water consumption, investment in guest room technology has a huge impact on reduced energy consumption without making it obvious to the guests rather it adds to sophistication of overall experience. Enhanced integration is required between hotel’s front office, in-room lightening and heat or air-conditioning system and guest door locking system. The system identifies when guests leave the room for long time or checks out and it either dim or turn off the energy consuming systems in the room. The hotels that used these automated systems are observing a clear return on investment in a very short time (Horner, 2010). Another emerging guest room integrated technology provides guests with a single remote and TV to adjust the systems in room according to their preferences which ranges from lightening, heating and air-conditioning to music and even guest services. An automated welcome experience starts as the guest opens the door and everything opens gradually, such as blinds and TV. Integration with property management system is also installed to provide concierge-type service in addition to automated room that works on the basis on check-in and check-out status. The system not only empowers guest to get control of everything in room but also enables staff to be alert as problem arises (Horner, 2010). Hospitality organization utilizes it to capture more and more data about their customers, operations, marketing campaigns and franchisees.BI needs to be able to collect data and deliver actionable information at the right time and place (Bfridley, 2009). Bfridley (2009) further states: Real time analysis of slot play on the gaming floor delivered to a mobile device the casino manager; franchise performance scorecard, predictive forecasting of labor, sales and product for a store manager; campaign management …‘data exploration’ using common/intuitive tools. Internet revolution brought dramatic changes to customers searching, selecting and booking hotels and online sales already has given a considerable boost to hotel profitability without severe rate slashing. Hotels are welcoming customer at their decision making points by faster broadband connections, cloud computing technology and travel data explosion. Technology is making hoteliers smarter and investing in technology give hotels and edge over their competitors who cannot keep pace with new revenue management solutions. Some of the new technologies which result in greater profitability include automation and integration of hotel systems, dynamic pricing, real-time systems and user friendly RMS (Revpar Guru, 2010). According to hospitality industry analyst ABI Research (2010) sophisticated systems that are based on IP telephone will empower hotels with a variety of new services which will improve customer service. Worldwide revenue from these systems was $869 million in 2008, however, the revenue generation by the end of 2014 is estimated to exceed $2 billion annually. Despite all the benefits and positive impact of technology on customer experience, profitability, increasing market share and gaining competitive edge, there is general reluctance in investing in new ideas and innovative technology. Fourth International Hotel & Restaurant Association (IH&RA) Think Tank held and their major focus was on future of hospitality technology. The key aspects include encouraging investment in technology developing cost-benefit analysis model and clear assessment of technology application on return on investment and share prices. E-commerce is explained as part of e-business and it is revenue generating share. For generating revenue and decreasing cost, business should attract new customers and retain the existing ones by enhancing value. More focus should be on customer relationship management and building loyalty. Another technological issue addressed by Think Tank was commoditization (‘The Future of Hospitality Technology’, 2009).It is further stated: This has come about as a result of the increasing uniformity of the hotel product and the arrival of priceline.com and similar intermediaries selling on price only…(commoditization) negative impact has not been fully recognized, and that there has already been significant brand erosion as a result of the trend. In fact, they concluded, hotel brand erosion could further increase and priceline.con and other intermediaries could take control of information on clients and, through their own data warehousing and mining, become a brand of future themselves. (‘The Future of Hospitality Technology’, 2009) Work Cited Berezina, E. and Cobanoglu, C. (2010).Importance-Performance Analysis of In-Room Technology Amenities in Hotels. In Gretzel, U., Rob Law &Matthias Fuchs (Eds.), Information and Communication Technologies in Tourism 2010(25-40).Austria: Springer Wien New York. Janes, P.L., & Wisnom, M.S. (2003).The use of importance performance analysis in the hospitality industry: a comparison of practices. Journal of Quality Assurance in Hospitality &Tourism, 4(1/2), 23-45. Olsen, M.D., Connolly, D.J., & Allegro, S.M. (February 2000).The Hospitality Industry and Digital Economy. International Hotel and Restaurants Association, Lausanne. Howell,R.A.,Moreo,P.J.,& DeMicco,F.J.(1993).A qualitative analysis of hotel services desired by female business travelers. Journal of Travel and Tourism Marketing.1 (4), 115-133. Skogland,I.,& Siguaw,J.A.(2004).Understanding switchers and stayers in the lodging industry. Cornell Hospitality Resport.1 (4). Singh,A.J.,&Kasavana,M.L.(2005).The Impact of Information Technology on Future Management of Lodging Operations. Journal of Tourism and Hospitality Research,6(1),24-37. Cobanoglu, C. (2001).Unpublished Thesis. Analysis of business travelers’ hotel selection and satisfaction. Oklahoma State University. Cobanoglu,C.Ryan,B.& Beck,J.(1999).The impact of technology in lodging properties. International Council on Hotel, Restaurant, and Institutional Education Annual Convention Proceedings. Collins,G.R.&Cobanoglu,C.(2008).Hospitality information technology: Learning how to use it(6th ed.).Dubuque,IA:Kendall/Hunt Publishign Company. Kasavana, M.L., & Cahill J.J. (2007).Managing technology in the hospitality industry (5th ed.).Lansing, MI: Educational Institute of the American Hotel and Lodging Association. Lee,S-C.Barker,S.,& Kandampully, F.(2003).Technology, service quality, and customer loyalty in hotels: Australian managerial perspectives. Piccoli,G.,&Torchio,P.(2006).The strategic value of information: A manager’s guide to profiting from information. Cornel Hospitality Report, 7(6). Verma, R. Plashka, G, Dev,C.,& Verma A.(2002).What today’s travelers want when they select a hotel. HSMAI Marketing Review, Fall 2002, 20-23. Ananth,M.,DeMicco,F.J.,Moreo,P.J.,& Howey,R.M.(1992).Marketplace lodging needs of mature traverlers. Cornell Hotel& Restaurant Administration Quarterly, 33, 12-24. Chu,R.K.S.,&Choi,T.(2000).An importance-performance analysis of hotel selection factors in the Hong Kong hotel industry: a comparison of business and leisure travelers. Tourism Managament, 21(4), 363-377. 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(2009, April 23).Technology Trends in Hospitality.[Web log].Retrieved from http://blogs.msdn.com/b/bfridley/archive/2009/04/23/technology-trends-in-hospitality.aspx ABI Research (2010, January 22).IP Telephony Revenue in the Hospitality Industry will top $2 billion in 2014, says ABI Research [Weblog].Retrieved from file:///F:/Hospitality-industry/future%20revenue.htm Greg1988 (2010, March 31).Hospitality Industry Mega Trends.[Weblog].Retrieved from http://asnycnowradio.wordpress.com/2010/03/31/hospitality-industry-mega-trends/ Revpar Guru (2010, January 4).Boosting hotel sales in today’s automated world. Retrieved from file:///F:/Hospitality-industry/revenue%20generation.htm The Future of Hospitality Technology.(2009).Eurhotec,Hospitality Net. Retrieved from http://www.hospitalitynet.org/news/4004309.search?query=future+hospitality+technology Read More