The Impact of IT on the Hotel Industry - Case Study Example

The Impact of IT on the hotel industry. Introduction. Information Technology basically refers to the management of computer information systems. It plays around the concept of software management, computer hardware repair and maintenance. (Senn 2006). Virtually all organisations employ an information technology system regardless of whether they are profit oriented or non profit organisations. Kamel 2003 argues that government departments are also key users of IT systems. “A CEO of a large corporation makes decisions based on information gathered and presented to him courtesy of an IT system”.(p.17). In the same breathe, an airline depends on a well managed information technology system to manage its online bookings and issue e-tickets. Elsewhere a consumer can do shopping or book a holiday from the comfort of his house due to advanced IT systems employed by retail shops as well as top of the range hotels. The above examples are clear proof that IT surrounds our every day life. According to Zhou (2004, p.26) the full impact of the critical role played by IT did not come into the limelight until the age of the internet or the so called www age. “The computer and its software were not adequate to solve challenges that faced businesses such as more improved communication systems”. The internet opened a whole new chapter in the normal way of carrying out business. For instance it made communication easier courtesy of the electronic mail and also opened new business opportunities. Online business became a reality after the rise of the internet age. Technology giants such as eBay, Google, Yahoo among others owe their existence to information technology. (Mehdi 2003) According to Lockwood and Jones (2002) the hotel industry encompasses companies which offer accommodation, recreation and entertainment services. The industry is crucial to a country’s GDP and also greatly impacts on the employment levels in a country. Its success is mostly dependent on availability of disposable income as well leisure time for holiday enthusiasts. The development of modern information technology systems has had a tremendous impact on the operations of this crucial sector. This research will therefore attempt to look at the impact of IT on independent arms of the hotel industry. Impact of IT on the marketing and sales of the hotel industry. Buhalis (2003 p.66) states that marketing is the hallmark of any business without which one would be riding a dead horse. “Ogilvy notes that doing business without marketing is like winking at a girl in the dark. You know what you are doing but no one else does”. Buhalis further notes that IT has greatly helped hotels market their services hence tapping a wider market. A business executive in France with the intention of going for a holiday at the end of the year may be sending an email to a colleague. While at it, an advertisement pops up on discount offers by a hotel in Brazil. He gets interested and decides to get more information on the hotel offer so he clicks on the advertisement. Finally he thinks it makes a good offer and consequently decides to make an online booking. Courtesy of a good IT system our good French friend can choose the type of accommodation he desires and can also check its cost. In this case, IT has made it possible for the hotel in Brazil to sell its services in Europe. A good IT system also assists a hotel to efficiently handle its yield management. Ingold (2000) points out that a good yield management system helps a hotel to know the rates to charge for various rooms depending on the expected arrival time of the client and the length of stay. This ensures that customers get the right rooms at the right price. A yield management system calculates the cost of staying in a hotel using variables such as demand of the rooms and the length of stay. Room management A good IT system is also crucial in managing room allocations. (Whitaker 1992) “At a glance of a computer, a hotel manager can tell the status of a room”. (p.78). In this case it shows if a hotel room is occupied and for how long. The room management software can also show the expected arrivals as well as departures, which hotel staff is assigned to serve a given room. The manager is therefore able to trace employees who may not be serving hotel clients to their delight. Martin (2006 p.112) adds that the room management IT system also provides a platform where clients can directly communicate with the hotel management. “This helps management to collect feedback from their customers in regard to areas where they feel that more could have been done”. This ultimately assists a hotel to improve its services to meet customer needs hence more chances of repeat business. Telecommunications made easier Once in a while employees of an organisation will work in remote parts of the world far from the headquarters of a firm. While working in these remote areas employees camped in a hotel will want to give periodic updates or work together with their colleagues in other parts of the world. Kamel (2003) says that most hotels therefore install the latest satellite communications to enable professional colleagues work while in remote parts of the world. With such communications in place clients can engage in teleconferencing, send video messages and images or just keep in touch with family and friends. “A good satellite communication system can only be supplemented by a strong IT system”. (Mich, Sigala and Murphy 2007, p.115). Excellent communications systems can also be used by hotels as a positioning strategy in an effort of putting them meaningfully apart from their competitors. They are seen as offering unique services not available in other ordinary hotels. The intercontinental group of hotels was among the first hotels to be equipped with the latest satellite communication. It went ahead to boast that top government officials including heads of state stay at the intercontinental since they can run government affairs from the comfort of their rooms.(Bower 2005) Mich et al (2007) concludes that a good information technology system in a hotel is therefore not only good for its prestige but also crucial in managing the reservation system, least cost routing as well as call accounting system. A good reservation system ensures that there is no chance of double booking hotel rooms. The call accounting software is crucial in determining such things as the cost of telephone bills, income and outbound calls as well as monitor suspicious telephone calls. “In a hotel setting, the call accounting system is used to bill customers for telephone usage”.(P.74). It can also be used to monitor employee effectiveness especially in customer service and take note of those who engage in non business related activities such calling and chatting with friends during working hours. Guest accounting Hotels use modern IT systems to manage client check in and check out dates, expected arrivals and departures, cancellation reports as well as determine room availability. Check in and check out in hotels is particularly important since it assists management determine when a room will be available and therefore book new clients. (Poon 2000 p.145). “A computer reservations system also enables customers to state their unique special needs”. Ritz Carlton is one of the most famous hotel chains in the world. A look at its online booking system shows that a client can choose his desired bed, decide whether he wants one fitted with smoking area, balcony, high floor or low floor among other special needs. This ensures that the special needs of a customer are adequately met. According to Poon (2000), another critical area in guest accounting is cancellation request. Using modern online hotel booking systems, a client can book to stay in a hotel for a period of two weeks. However due to some unseen circumstances, he is forced to postpone or cancel the trip altogether. Having already paid for the accommodation he can submit a cancellation request and the hotel system will instantly calculate the refund fee. On the other hand there could be clients in the waiting list and using modern IT system, the reservations manager can determine which client is put on stand by and whether he would take the new free room. Thus a good IT system is crucial in handling flexible bookings and cancellations. Finally a good IT system is helpful in automatic billing of clients. From the time a client checks in, all consumption patterns are captured including telephone calls and the entire bill can be presented for payment when the client is checking out. Importance of IT at the back office. A hotel just like any other business has other auxiliary services and duties which are crucial to maintaining its effectiveness. (Whitaker 1992). One of those crucial areas is the back office which handles crucial services like payroll management, purchasing department, inventory control and management reports. A crucial area such as purchasing must work together with the reservations department to ensure that clients checking in are given what they order. It is particularly important when clients have a unique consumption pattern which means that special purchases have to be made. A good IT system is important in ensuring that these two departments work harmoniously. Whitaker further observes that Payroll management and production of management reports is another area where IT comes in handy in hotels. A good IT system has a tally of all the employees and can show the number of overtime hours worked by an employee. Good inventory control management is important not only to a hotel but also in any business. In a busy holiday season and depending on the expected arrivals management can determine the levels of inventory to keep so as avoiding pitfalls associated with holding too much stock. Finally employees of a hotel file a daily report using for instance the Ms Office application and present the same to the supervisor who then sends it to the manager. A good IT system in a hotel therefore helps management to have a good grasp of what is happening in different departments and contribution of each employee. Energy management. Jones (2002 p.79) argues that “energy efficiency is one theme which has been widely discussed by energy enthusiasts around the world”. In a hotel setting it is sometimes difficult to implement energy saving measures while at the same time meeting the needs of diverse customers who are least bothered with your energy management goals. A hotel therefore has a difficult task of balancing between managing its energy consumption patterns effectively while at the same time meeting client’s needs. A considerable amount of energy is spent in lighting hotel rooms, ventilation and air conditioning. Research however shows that advances in Information Technology has helped hotels better manage their energy consumption rates. According to Jones (2002) hotels use automatic timers, occupancy sensors and load cycles to check on energy consumption within the hotel. “Other methods used include peak power demand control and ultrasonic temperature control”. (p.126-127). Load cycles refers to a energy management system where by parts of a building have full energy supply while others do not have normal supply. The system is automatically managed by a computer system. Most hotels use this system especially during low seasons to reduce energy costs. Occupancy sensors in hotels play two key roles. First they assist in saving energy consumption since the lights automatically go off when they don’t sense any movement in a room. Occupancy sensors can also be used by hotel owners to show class in the establishment. For instance they can be set in such a way that they automatically turn into nightlife at appropriate times which adds more aesthetic appeal to a room. (Lockwood and Jones 2002). Ultrasonic temperature control is important in heating a room and also measuring the temperature and transmitting the results to a controlled focal temperature point. It helps in maintaining the right temperature in a room. “All the above energy management techniques are made possible by advances in IT systems which program the energy systems in a hotel” (P.108-110). Food and drink control Good information technology systems also assist hotels to better manage the food and drinks departments. Conley and Galeson (2008) say that selling food or drinks particularly in top of the range hotels requires one to be keen on the ingredients used. Special attention is also paid to the number of calories present in food. Hotels pay special attention to the ingredients present in the products they receive from suppliers and the end product. This process is greatly simplified if an IT system is used. For example a software called the Recipe Enterprise Manager can tell the sugar level present in a given meal. “The software can conduct a complete nutritional analysis of any given meal”. (Senn 2006, p.158) A good IT system in the Food and drink control department also assists in managing the hotel menu, quality control, costing and purchasing. The Recipe manager for instance shows the stock level at which more supplies are needed. (Conley and Galeson 2008).”It would also detect when purchased goods exceed a given level of acceptable standards such as very sugar levels”(P.22). The recipe takes several factors into consideration such as the number of ingredients used to determine the right price for a meal. In most hotels the recipe manager is integrated with the purchase order system to improve efficiency and effectiveness. It is therefore accurate to state that IT has made it easier for hotels to manage their food and drinks department more efficiently. Security. Safety is a major concern for travelers and holidaymakers. While on trip individuals want to be assured that their personal belongings are safe. Security is multifaceted and touches several fronts. For example a tourist wants to be sure that the credit card information he gives while settling a hotel bill will not be hacked. In the same breath, a business person would also be careful about business data that he accesses in a hotel computer. These are just some of the wide range of security concerns that hotels grapple with. (Mich et al 2007) A good IT system however solves a good number of them. “Tiny security cameras fitted in all parts of hotels are programmed such that they can be controlled from one central point” (p101). For instance, suspicious people in a restaurant can be easily identified and their movements monitored from one location. An integrated key lock system which uses a key reader issued to a client on check in ensures that safety of personal belongings is assured. For instance the terrorists who attacked the Ritz Carlton in Indonesia were identified using the CCTV cameras fitted in the hotel. The tiny cameras are made to look like part of the lighting but they are for security purposes and are all programmed. Negative impact of Information Technology on the hotel industry. While information technology has had a positive impact on the hotel industry, there are also several black spots associated with this advance in technology. While not limited to the hotel industry this vice is closely linked to the nature of hotel operations. Credit card fraud. The rise in online hotel booking and bill settlement has been pointed out as one of the key developments that have exacerbated credit card fraud. Fraudsters in collaboration with some crooked hotel employees use a special software which taps the credit card details of a client in a hotel. They then proceed to use the same information to make online purchases and withdrawals. (Mehdi 2007). Only recently in San Antonio, authorities arrested 7 people and charged them with identity theft. The seven who were former employees of the hotels printed credit card information and went ahead to make hefty purchases. While online booking and payment of hotels have been made easier the, dark shadow of credit card still hangs over this great innovation. Misrepresenting online advertising. Ingram (2001) states that misrepresenting advertising is also not limited to the hotel industry but it is more common here. “Using computer technology a not so classy hotel can illegally use the ambiance and décor of a more famous one to advertise its services which may not be as good”. (P.78). A traveler who is not very knowledgeable in travel matters may end up choosing a hotel because it is cheap and can easily compare with a more famous brand. So the traveler makes an online booking and proceeds to check in at the hotel. Soon he realizes that the services offered are not as good as what was promised prior to making the booking. Since cancellation would amount to new default fees, the clients decides to stick a long against his wishes. While this is a minor problem it has been noted as one of the major headaches associated with the boom of information Technology in the hotel industry. To solve this problem travelers are always advised to use the services of a know travel agent although it comes at an extra cost. Conclusion. Information technology plays a key role in our everyday life. In a modern world almost everything revolves around information technology. You wouldn’t get your daily newspaper if the IT system of a company is down. It would also be such a herculean task even to book a simple train ticket. What looks like an ordinary run of the mill would not be possible without a running IT system. The hotel industry is one area where the effect of improved IT system can be easily pointed out. Online booking of hotels has been made possible by advances made possible in the world of information technology. There have been increased profits as a result of better advertising courtesy of the internet. Running a hotel has been made easy by developments in IT. Room management has been made easy and instances of overbooking now belong to history. Keeping in touch with employees and family while on holiday is now simple as a result of telecommunication systems installed in hotels. Perhaps the most notable positive impact brought by IT in hotels is better management of food and drinks. Better security is also another key contribution of Information Technology in the hotel industry. On the other hand, credit card fraud and misleading advertising stand out as the major low points when assessing the impact of IT on the hotel industry. Reference: Bower, GA 2005, The diffusion and value of information technology in the hotel industry, Rand Corporation, Melbourne. Buhalis, D 2003, eTourism: information technology for strategic tourism management, Financial Times Prentice Hall, London. Conley, TG & Galeson, W 2008, Information technology in the hotel industry, International Journal of Hospitality Management. Vol 27 pp. 11-15. Poon, A 2000, Tourism, technology and competitive strategies, CAB International, Oxfordshire. Jones, P 2002, Introduction to hospitality operations: an indispensable guide to the industry, Cengage Learning EMEA, Florence, KY. Lockwood, A, Jones, P 2002, The Management of Hotel Operations, Cengage Learning EMEA, Florence KY. Martin, H 2006, Information and technology advances in the hotel industry, Prentice Hall, London. Mehdi, K 2003, Information technology and organizations: trends, issues, challenges and solutions, Volume 1, Idea Group Inc (IGI), Hershey, PA. Mich, L, Sigala, M & Murphy J, 2007 Information and communication technologies in tourism 2007: proceedings of the international conference in Ljubljana, Slovenia, Springer, New York, NY. Kamel, S 2003, Managing globally with information technology, Idea Group Inc, Hershey, PA. Senn, JA 2006, Information technology, New Age International, New Delhi, India. Ingold, A 2000, Yield Management, Routledge, Oxford. Ingram, H, Medlik, H 2001, The business of hotels, Butterworth-Heinemann, Oxford. Whitaker, M 1992, The impact of information technology on the hotel and catering industry , Brighton Polytechnic, Baltimore, MD. Zhou, Z 2004, E-commerce and information technology in hospitality and tourism, Cengage Learning, Florence, KY. Read More