The Impact of Information Technology Systems on Hotels

Executive Summary

This report explores the use of modern technology to improve service delivery in the hospitality industry. The study uses maps and graphs to illustrate the development in the adoption and use of technology in the hospitality sector. In order to answer this question objectively and comprehensively, the paper has reviewed the relevant information and data available on this subject. Research findings indicate that the use of information systems facilitates, strengthens and promotes effective and efficient service delivery for both consumer and hotel operators. IT systems enhance customer experience, increase revenue, distinguish products, boost cost effectiveness and eventually increase security. The recommendations include: embracing and implementing information technology systems that reflect the current trends in the global business environment and the need to have the staff in the industry compliment the information provided over the internet.

Executive summary
Overview of the hotel industry
Drivers of Technology Adoption in the Hotel and Hospitality Industry
Literature Review
Data presentation and Analysis
Charts and interpretations
Recommendations
Conclusion
References

Table of Figures

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Overview of the Hotel Industry

The hotel industry has grown significantly over the years as it seeks to meet the changing customer needs in the modern digital age. This has been prompted by the emerging technological innovations that currently characterize daily life in almost all spheres. The hotel industry has kept pace with modern times in recognition of these changes by embracing and integrating technology as a key component of hotel operations. Currently, hotels operate real-time service delivery through efficient websites, booking systems and fully automated management systems. Indeed, the Hotel Investment Conference convened in Durban identified technology as the driver of change and innovation in this broad industry (Reynard, 2012). The benefits of technology-based solutions not only accrue to the hotel operators, but also to the customers served by the industry. This paper seeks to answers the question: should a hotel invest in Smartphone-based check-in and information systems?

Drivers of Technology Adoption in the Hotel and Hospitality Industry

The major technological innovations that have changed the trends in the hotel industry are largely driven by the globalized business environment. As a result of globalization and increase in international trade, traveling and efficient international links are becoming an increasingly important aspect of the global hotel industry. This implies that the technology systems should offer global solutions so as to cater for the varied needs of customers in different locations. Secondly, the unprecedented growth and relevance of social media platforms has completely changed the approach to business operation in the hotel industry. Social sites like Facebook, LinkedIn, TripAdvisor, Twitter, and YouTube are becoming important tools to connect with customers all over the globe, and this has greatly impacted on how hotels market their services to potential customers. Giebelhausen et al. (2014) add that these social sites are now available in mobile devices like smartphones, which in turn prompts hotel operators to develop applications that can be used by customers to access information and services conveniently and in a timely manner. This relates to mobility, which enables customers to check online and interact with hotel operators in different locations on a real-time basis. This helps hotel operators to have their preferences and needs taken care of even before their arrival at the hotel.

Thirdly, the current developments towards cloud services imply that hotel managers and operators can gather, store and access data on customers in different locations. This in turn implies that hotels can efficiently manage their costs since no infrastructural costs are incurred to set up complex information technology departments. Kim, Farrish, &Schrier (2013) note that, the integrity, timeliness and safety of the data stored should be emphasized in order to ensure reliability and authenticity of the services offered by the hotels to their customers. These technological elements have unlimited potential to improve the competitiveness of the hotel industry both in the short term and in the long term.

Literature Review

From this understanding, it is worth mentioning that innumerable studies have confirmed that over 70% of the hotel business comes from repeat or referred customers (Market Segmentation, 2014). This implies that the hotels are implored to take proactive measures to advance technologically as they strive to build service quality and customer loyalty in the long term. This has the potential to tap into the most common customer needs through the effective use of information gathered. It is indeed plausible to assert that such information is substantially instrumental in building desired customer loyalty and in turn gaining a competitive advantage in the long term. It is therefore not surprising to note that hotels are now taking significant steps to compete for strategic locations, as well as customer information (Šerić, Gil-Saura& Ruiz-Molina, 2014). Gathering this information helps the hotels to take advantage of the external business environmental factors, which ultimately helps in sustaining their growth in a competitive environment.

To this end, the current technological advances have helped hotels in the innovation of new products, procedures and efficient service delivery to a wide clientele. For instance, the exponential growth in online reservations suggest that hoteliers need to integrate other services in the online platforms so as to capture the changing trends related to customer needs and preferences (Kucukusta et al., 2014). Through such networking platforms, the hotel industry is in a position to interact with customers before, during and after their experience in the hotels. Such feedback helps the hoteliers to improve their services and also to create a better experience in future.

Additionally, marketing is a vital element for any business organization including hotels. Kwon, Bae& Blum (2013) explain that the use of social media has emerged as an important marketing tool for hotels and the entire hospitality industry. This has been enhanced by the increased availability of internet connection to include mobile devices like phones, personal computers and other devices. This has in turn improved communication within organizations as well as with the outside world. It is, therefore, necessary for hotels to develop means to engage potential customers as well as facilitating a platform where customers can share their experiences. Law et al. (2012) elucidates that this helps to create formidable relationships with current and potential customers. In addition, the social platforms can be utilized by hotel operators to increase brand awareness, grow sales volumes, provide relevant information to customers, improve customer experience, and to monitor brand reputation. As such, these platforms provide visibility and awareness to the target market, which is essential in creating customer loyalty.

These trends are confirmed by a report by Deloitte dubbed, Hospitality 2015, which notes that the new patterns that characterize consumer behavior in this industry require the hotels to engage customers and clearly differentiate what they offer to existing and potential customers. This entails delivering a brand experience in a consistent manner and at a transparent pricing point. The report also asserts that the benefit of loyalty is still a key differentiator for consumers in this industry. In view of these aspects, it is irrefutable that the growth of internet based platforms to reach out to customers holds the key to unlocking the massive potential in the hospitality industry. The expanding access to the Internet through personal devices like smartphones offers a great opportunity for hoteliers to tap into the global market even as other factors continue to influence the market trends in this industry (Deloitte, 2015).

Data Presentation and Analysis

The data presented in this section is drawn from various sources related to the growth in the hospitality industry, which is then matched to the technological advances applicable in this industry. It is estimated that approximately 2 billion people have access to the internet today. While the means to access the Internet may vary, the overall usability using personal devices like smartphones has increased exponentially over the last five years. It is, therefore, imperative for hotel operators to embrace the global online community in the delivery of their brands. Li, Andy & Law (2012) point out that this can be achieved through multiple channels available to connect and engage with customers from all over the globe.

Okumus (2013) is of the view that in this digital era, the social media hype is, to a great extent, integrated with the travel and hospitality decision-making process. While this frenzy presents considerable benefits and opportunities to this industry, it is also worth mentioning that challenges and threats also exist. This is particularly viewed in light of the inconsistencies that may arise from the brand execution strategy and the brand pledge in the social sites. As such it is important to point out that social media transparency is a vital element in creating brand loyalty both in the short term and in the long term.

The use of smartphones in the hospitality industry is primarily dependent on the growth of the internet, internet based applications to execute different operations, as well as the means to access the content over the internet. O’Connor (2008) explains that technology-savvy consumers are an emerging segment that will characterize the hotel industry in days to come. Today, customers can make hotel bookings through the internet and this phenomenon indicates the growing base of value-conscious customers, who subsequently take advantage of the unlimited scope of online information to compare prices and customer experience on a global scale.

Besides the significant impact of Internet-based services, the demographic trends indicate that more than 50% of the world’s population is in the middle-class category. As the CEO of Starwood Hotels and Resorts Worldwide noted, the middle class needs hotels as well since their disposable income allows them to spend on hotel services. These are individuals aged between 45 years and 65 years commonly referred as ‘boomers’, who account for over 40% of the hotel spending globally (Davidson, McPhail& Barry, 2011). Additionally, it is mentionable that domestic traveling is the key driver of a sustainable hospitality industry in 75% of the global hospitality markets (Market Segmentation, 2014). For instance, in Britain, the number of visitors aged 55 and above increased by 92% compared with 42% for visitors aged 55 and below in the last five years. According to Jayawardena et al. (2013), the changing demographic trends suggest that the emerging class of customer needs to be catered for by building strong brand awareness and loyalty among the middle-class populace. In terms of technology, this group of customers is indeed the most technology savvy among the luxury hotel customers.

As such, it is imperative for hotel operators to rethink how to incorporate innovative, efficient, and reliable technological innovations in midscale to luxury hotels that cater for the emerging classes. Market research indicates that ‘boomers’ tend to adopt travel attributes that were previously associated with younger generations, with technology being a key factor in these habits. In particular, experimental travel is one of the common dimensions that characterize their travel preferences hence the need to provide relevant brand information in order to unlock the untapped opportunities from this class of customers (Jayawardena et al., 2013).

The geopolitical shifts witnessed over the last decade are also an important aspect to consider in assessing the suitability of technological advances in the hospitality industry. Muller (2010) remarks that, while leisure and tourism expenditures are expected to rise in the foreseeable future, the rise of China and India as economic powerhouses in Asia has greatly changed the traditional view of hoteliers in the recent past. China’s leisure expenditure is expected to overcome that of the UK by 2019. This is associated with the unprecedented growth of 73.2% in both personal and business travel between 2010 and 2015. Notably, the internet is cited as the most popular medium for Chinese customers seeking travel information. In addition, the growing Chinese market is characterized by a strict emphasis on value for money and bargain priced luxury brands. This implies that, as hoteliers shift their focus eastwards, the use of internet based services is imperative. This is the only way to create value for money for this expanding market, where transparency and reliable pricing is of paramount importance (Cobanoglu et al., 2013).

Given the views articulated above, it is worth mentioning that, while spending on information technology has significantly increased in the hospitality industry, there is enormous potential to tap from the opportunities associated with the current levels of technological advances. The industry reported that in 2013, spending on information technology grew by 4.2% from the previous year, with estimates of approximately 0.9% to 2015. It is arguable that information technology spending should at least strive to match the global internet penetration, which was estimated at 42% in 2014. In this regard, hotel bookings remain the most popular method, with over 50% of the bookings in major hotel brands being made through the internet (Deloitte, 2015). This leaves no doubt that the overall competitiveness of hotels is largely dependent on how well they manage their internet market.

To this end, it is estimated that over 75 million Americans have video streaming technology embedded in their phones. This trend indicates the irrefutable fact that mobile phones and smartphones are currently the most preferred communication devices, although the augmented capabilities to access various services via the internet are not fully utilized. This trend was evident after the launch of the iPhone application by Hilton hotels, which recorded over 6,000 downloads within a week after its launch. This mobile based technology promotes customer loyalty by ensuring that the services are aligned with the customer needs. This has the potential to grow sales revenues in the long term. For instance, after Marriot Hotels launched their smartphone based website, the hotel reported that its sales were in excess of $1.3 million in the first 100 days (Jayawardena et al., 2013).

Apart from growing sales and marketing, the technology embedded in the smartphone also includes other interactive series that are undoubtedly useful to hotel operators and their customers. Such services include Interactive GPS maps and destination locators, reward programs for various packages on offer, as well as confirmations on bookings before arrivals. It is also possible to have individual customization via smartphones, which enables customers to communicate specific needs and preferences in a timely manner (Muller, 2010). Networking through social media platforms is also expanded with the use of appropriate applications installed on smartphones. Such technological channels provide hotel operators with significant opportunities to enhance customer experience and to cultivate brand loyalty. The following charts provide reliable information to support the points argued above.