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.
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
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
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