ABSTRACT
This paper reviews recent research
on information technology in the hospitality industry. The analysis revealed
three broad research areas: the Internet's effects on distribution; on pricing;
and on consumer interactions. Similar to aftermath of the dot com boom, the
hospitality industry is realising that information technology has unintended
effects and prognosticators are often wrong. While the reviewed articles
provide sound advice for hospitality operators and a rich stream of future research
for academics, poor rigor and a lack of relevance throughout the reviewed
journals underscore a worrying trend in hospitality research.
Introduction
Information systems form a
fascinating and rapidly expanding field of study.
Hospitality traditionally lags other
sectors in adopting information technology (Buick,
2003) but this has changed in recent
years and research into its application has
followed suit. This paper represents
our analysis of the information technology
themes that emerged in a dozen
hospitality and tourism journals: Annals of Tourism
Research, Cornell Quarterly,
Information Technology in Tourism, International
Journal of Contemporary Hospitality
Management, International Journal of
Hospitality Management, Journal of
Hospitality and Leisure Marketing, Journal of
Travel and Tourism Marketing,
Journal of Travel Research, Journal of Vacation
Marketing, Tourism and Hospitality
Research, Tourism Management, and Tourism
Review. We reviewed their tables of
contents from January 2003 to July 2004 and
selected articles touching on
information technology and hospitality. While by no
means comprehensive, this systematic
approach focused on peer reviewed
publications and provides a useful
overview of current information technology themes
and active researchers.
INFORMATION TECHNOLOGY AND
DISTRIBUTION
ELECTRONIC DISTRIBUTION
Developments in electronic
distribution are the most recurrent theme throughout the
period under review, reflecting
topical developments since it has changed how people
book hotel rooms. Two articles
provide useful overviews. Carroll & Siguaw (2003)
describe the major players involved
in distribution, and highlight how economic
issues are forcing hotels to provide
increasing amounts of inventory to third party
intermediaries. Using economies of
scale and scope, the latter are gradually gaining
control over both the sale of the
hotel product and the selling price. In particular,
Carroll and Siguaw highlight the
growth of the “merchant model”, which changes the
relationship between intermediary
and supplier. Unlike commission based models,
with the merchant model
intermediaries determine the selling price by adding a
margin to discounted rates given to
them by hotels. This lack of control is problematic
given the ease with which consumers
can compare rates on the Web. Carroll and
Siguaw maintain that the adoption of
the merchant model has pressured rates
downwards, thus softening hotel
profitability and making hotels more dependent on
intermediaries in the future. They
stress using merchant channels selectively to avoid
commoditisation, drafting terms and
conditions carefully to effectively fence rates,
and that hotels need to strive to
drive business to their own websites.
O’Connor and Picolli (2003) follow a
similar theme in their retrospective on Emmer
et al’s classic 1993 article
Marketing Hotels Using Global Distribution Systems.
They highlight the strategic threat
posed by online intermediaries, the dangers of
over-reliance on the merchant model,
the need to develop a logical pricing strategy
and the need to drive customers to
direct websites to help regain ownership of the
shopping experience and to gather
valuable customer data. They council hoteliers to
rethink their approach to
distribution. Currently most use a shelf space approach –
being present on as many channels as
possible – in the mistaken belief that more is
better. They fail to realise that as
the number of channels increases, so too does the
complexity of the infrastructure
needed to support them. A good strategy involves
knowing what channels to include – a
theme returned to by O’Connor and Frew
(2004) below. They also emphasise
customer ownership as a key strategic issue.
Online intermediaries attract
consumers based on their convenience, rich feature set
and highly competitive prices.
Supplier sites cannot compete on these dimensions and
instead need to leverage their
customer relationships to build and retain loyalty. They
suggest that by using sophisticated
CRM techniques, hotels can combat the online
intermediaries. By developing close
customer relationships, they reduce the danger of
substitution, thus helping to insure
long term profitability.
Dale (2004) provides an analysis
explaining why electronic distribution has become
so complex. Using strategic network
theory, he shows how electronic intermediaries
need to form strategic alliances in
order to prosper. In a competitive business
environment, independently
developing the competences and capabilities to insure
success is a massive task, so
companies enter into stable inter-organisational
relationships (for example,
strategic alliances, joint ventures and long terms supplier
relationships) to leverage the
capabilities of partners. Dale maintains that establishing
such virtual clusters leads to
“synergistic strategic value”, with each partner
reciprocally and mutually benefiting
from the relationship, generating inimitable and
non-substitutable network resources.
This synergy helps offset the newness of the
firm and helps compete with more
established players.
Dale identifies five categories of
relationships: Channel, which enables one company
to access the distribution channels
of another; Collaborative, where competitors
cooperate with each other to achieve
goals that would be difficult in isolation;
Communicative, where content from
infomediaries enriches and adds value to partner
websites; Complementary, where
companies cross sell products normally bought
together (e.g. flights and hotel
rooms); and Converse, where the partners distribute
unrelated products, thus allowing
each one to access the distribution channels of the
other in a non-threatening manner.
He highlights how this framework explains current
developments in travel, where
intermediaries have created a large number of
networks, with each partner gaining
from the competitive advantage this brings. He
speculates that competition in the
future will be dictated more by the network of
partners as a whole than by a single
intermediary, and advises firms to participate in
such networks unless they want to be
left at a competitive disadvantage.
Given that electronic distribution
is likely to grow more complex, how can suppliers
decide which of the growing range of
channels to use? O’Connor and Frew (2004)
address this issue by developing an
evaluation methodology for electronic channels of
distribution. Having reviewed
literature on the evaluation of technology projects, they
argue that existing approaches have
major limitations. They thus use a Delphi study to
develop and prioritise a portfolio
of factors for use in channel adoption and continued
use decisions. In contrast to
contemporary literature, which stresses evaluating
projects on strategic, financial and
marketing criteria, their findings suggest that
technical and operational factors
should drive the evaluation process. While the
decision to continue using a
particular channel is more multifaceted, technological
and operational issues remain at the
fore, suggesting that performance should be the
key determinant. The study
highlights the complex nature of such evaluations, as well
as how the increasingly complex
environment makes the use of formal methodology
important.
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