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    Information technology in peripheral small and medium ... Information technology in peripheral small and medium ... Document Transcript

    • Information technology in peripheral small and medium hospitality enterprises: strategic analysis and critical factors Dimitrios Buhalis Senior Lecturer in Tourism, University of Westminster, London, UK Hilary Main Senior Lecturer in Information Technology, Swansea Business School, Swansea, UK Small and medium hospitality ogy can offer significant advantages in opera- organizations (SMHOs) are Small and medium-sized hospitality tional (e.g. property management systems), increasingly recognized as organizations (SMHOs) tactical (e.g. financial modelling, yield man- pivotal in the ability of desti- The vast majority of accommodation estab- agement) and strategic management (e.g. nations to benefit from lishments worldwide are small or medium- decision support systems) of SMHOs. Increas- tourism as well as to satisfy sized, belong to local entrepreneurs, are fam- ingly the use of ITs is a major prerequisite in tourism demand. However, it ily run, and predominantly employ members forming strategic alliances, particularly in is recognized that they are of the host society Despite their size, collec- . the supply chain ; developing innovative often marginalized from the tively, small and medium-sized hospitality distribution channels and communicating mainstream tourism industry, organizations (SMHOs) are extremely impor- with consumers and partners. Both owing to their inability and tant to European economies. They provide customers and partners also tend to place a reluctance to utilize informa- stable employment opportunities and support greater value on organizations which utilize tion technologies (ITs). This the integration of local economies in ITs than their competitors (Edgar, 1996; paper is based on research peripheral areas, even during recession Hewson, 1996; Senker, 1992). undertaken in peripheral periods. They also enable the infusion of However, despite the technological revolu- SMHOs, located in rural tion experienced in the tourism industry, tourist expenditure at the local level and thus Wales destinations, Alpine hospitality organizations have traditionally enhance all types of multipliers both locally been reluctant to utilize ITs (Beaver, 1995; French resorts and the Greek and nationally SMHOs offer by definition less . Whittaker, 1987). This recent research demon- Aegean Islands. It explores than 50 rooms, employ fewer than ten people, strates that technology is under-utilized in the factors determining the operate in the lower reaches of the market SMHOs in most peripheral European destina- adaptation of ITs by examin- and are often situated in tertiary locations, tions, such as the Aegean islands, rural ing the stakeholders of small (Buhalis, 1995; Main, 1994; Moutinho, 1990; Wales, and Alpine French resorts. hospitality organizations, as Wong, 1991). Table I illustrates that most of the SMHOs well as the push and pull This paper analyses the research under- interviewed in this research underutilize ITs; factors they exercise. It also taken in SMHOs located in rural Wales desti- and those that do tend to focus on operational illustrates a number of nations, Alpine French resorts and the Greek tasks, such as reservations, word processing catalysts for ITs penetration Aegean Islands (Buhalis et al. 1997; Main, and accounting. Very few SMHOs, 34 per cent, and future trends in the 1994) and attempts to identify factors which use technology for tactical or strategic man- hospitality industry, e.g. will enable SMHOs to incorporate ITs in their agement decision making (Main, 1994). disintermediation and mass strategic and operational management. In SMHO managers who use IT in this research customization. Argues that order to understand the process of IT adapta- into peripheral areas, and also research in SMHOs which fail to adapt tion a detailed analysis of the stakeholders in Ireland by O’Connor (1995), have tended to be and utilize ITs will suffer the operation of SMHOs is also undertaken, “dabblers”, i.e. have bought technology piece- competitive disadvantages several critical trends in the hospitality meal with no long-term plan or even specific and jeopardize the prosperity industry are examined and several push and business use; or “technophiliacs” who have of destinations. pull factors are identified. A total of about 600 invested, expensively, in technology in the hospitality organizations in peripheral desti- early stages and have lost faith when the nations serving dissimilar markets were technology did not live up to expectations. researched, providing a broad basis for solid Sixty-five per cent of those who do utilize the inferences. technologies available admit to not making optimum use of IT (Buhalis, 1995; Main, 1994). There are several identifiable reasons for Information technologies in the lack of use of technology in SMHOs: hospitality organizations • the lack of training; • the age, educational level, and family Technology becomes a main source of arrangements of the SMHOs’ proprietors; sustainable competitive advantage and a • the deficiency of rational management and strategic weapon, especially in the tourism International Journal of marketing functions; and Contemporary Hospitality and hospitality industries, owing to the • the short-term, operational focus of man- Management pivotal role information plays in the descrip- 10/5 [1998] 198–202 agers. tion, promotion, distribution, amalgamation, © MCB University Press organization and delivery of tourism These are some of the most critical factors [ISSN 0959-6119] products (Poon, 1993; Sheldon, 1997). Technol- which determine the under-utilization of ITs [ 198 ]
    • Dimitrios Buhalis and Table I Hilary Main The utilization of ITs by European peripheral SMHOs Information technology in peripheral small and medium Mean telephone At least At least At least Videotext/ hospitality enterprises: Region lines (%) one telex (%) one fax (%) one PC (%) Networks (%) Minitel (%) strategic analysis and critical factors Greece 4.6 28 67.1 44.7 11.3 n.a. Wales n.a. n.a. 37.8 30.1 10.0 6.9 International Journal of Contemporary Hospitality France n.a. 42.0 60.0 70.0 6.7 45.0 Management Note: adapted from Buhalis et al. (1997) and Main (1994) 10/5 [1998] 198–202 in SMHOs highlighted by this research. In proprietors need to utilize technology in addition, the perceived cost of software and order to facilitate both their operational and hardware as well as the feeling of dependency strategic functions. However, often they tend on IT experts are significant deterrents for to lack the expertise in selecting, installing under-resourced and under-qualified and operating computerized systems as well proprietors. as marketing and management skills. There- fore, they tend to fear that they will lose part of their control, should they allow external Stakeholder analysis for small and ITs experts to undertake these jobs for them. medium hospitality organizations Employees, and in particular managers, also tend to be interested in the prosperity of In order to understand the behaviour of SMHOs, as their employment and quality of SMHOs towards ITs an analysis of the needs working life. To the extent that ITs relieve the and wants of their key stakeholders is repetitive elements of jobs, employees would required (Atkins and Lowe, 1994). The stake- be interested in utilizing more technology holders’ theory states that, for a firm to and, therefore, be able to concentrate on the remain viable, it needs to satisfy the require- creative elements of their role. Consumers ments of key stakeholders. Atkins and Lowe are also stakeholders of SMHOs, as they are detect increased stakeholder involvement in keen to increase the value for money they get times of technological turbulence, as the from service providers, as well as to maxi- external environment of organizations mize their satisfaction. ITs improve the effi- changes shape and both interests and benefits ciency of SMHOs, as well as enable them to of stakeholders need to be re-addressed. differentiate their product through the Figure 1 identifies key stakeholders in the provision and promotion of specialized prod- SMHOs and demonstrates the extent to which ucts. Thus, consumer expectations could they will be catalysts in the introduction of force the introduction of ITs in SMHOs and technology by providing push/pull effects. their satisfaction would increasingly depend Owners/proprietors are the most apparent on this provision. Institutional customers, stakeholders of SMHOs, as they are often such as travel agencies, tour operators and main investors and managers. Owners/ other intermediaries are interested in having Figure 1 Stakeholders and push and pull factors determining the introduction of ITs in hospitality organizations PUSH FACTORS PULL FACTORS Education & SMALL AND Customer Training Demand European Union, MEDIUM SIZED Interconnectivity, Government & Intranet/Extranet Public Agencies Internet HOSPITALITY Strategic Partners Travel Trade ORGANISATIONS Accounting Paradigm Shift Systems [ 199 ]
    • Dimitrios Buhalis and easy access to up-to-date information on aim to influence the decision-making process Hilary Main availability and rates for SMHOs. Thus, the of SMHOs’ stakeholders. Information technology in utilization of ITs for representation in the peripheral small and medium electronic marketplace, through global distri- hospitality enterprises: strategic analysis and critical bution systems and Web technology, is pivotal Push and pull factors factors for a harmonious and profitable co-operation This research in the three peripheral destina- International Journal of between SMHOs and intermediaries. The tions demonstrated that, should SMHOs have Contemporary Hospitality development of extranets in particular will a choice, they would try to maintain a tradi- Management enable institutional customers to develop tional management approach; many man- 10/5 [1998] 198–202 suitable interfaces with SMHOs and to agers could not perceive any benefits to utiliz- enhance their efficiency and connectivity . ing technology where ITs would only play a Suppliers of raw and other materials are peripheral role. However, technology adapta- interested in the wellbeing of their customers tion may be critical in their ability to satisfy and need to ensure that SMHOs operate effi- their stakeholders, as well as to improve their ciently and profitably in order to maintain performance. Research identified a wide their custom. Suppliers need to increase their range of push and pull factors which deter- own efficiency in order to enhance their mine whether SMHOs will utilize ITs and the competitiveness. Communication and degree of ITs’ future adaptation as illustrated co-ordination with their customers are there- in Figure 1. Push factors are external forces fore pivotal for their ability to deliver the which oblige enterprises to use ITs in order to right product at the right time and price. IT, avoid potential threats or jeopardize some of and extranets in particular, enable inter- their functions. Enterprises may not have connectivity between enterprises and provide recognized a need that the technology might opportunities for suppliers to identify and fill. If the need has been recognized, enter- support the needs of individual customers. prises may not have matched a particular Thus, suppliers can enhance their inter- technology with the fulfilment of that need. action with SMHOs by utilizing technology Stakeholders seek to promote, garner, and, hence, increasing the value added support and push a technology . through the supply chain and establish Pull factors provide incentives for enter- long-term partnerships. prises to incorporate ITs in order to gain Increasingly, tourism regions are managed benefits in their operation. In this scenario a by destination managers, whose personal recognized market need is present and enter- characteristics, development, and attitudes prises draw on ITs to fulfil it. Groth (1993) are critical for the position they adopt examines the significance of the push-pull towards ITs. However, a rational destination factor in harvesting benefit from technology manager would probably promote the net- introduction. He defines the pull factor as working of destinations in order to facilitate originating in political, social and economic partnership and interaction between local forces which “pull” on the technology and the suppliers, as well as improve the communica- push factor as relating to the efforts of the tion with consumers. Finally, the local com- technology’s proponents. The push-pull munity tends to be represented as a stake- analysis is critical as it illuminates the atti- holder through owners and employees in tude of enterprises towards ITs and elabo- SMHOs, while political parties and other rates on the reasoning for actions lobby groups may influence the direction of undertaken. the local tourism industry Thus, local people . As far as push factors are concerned, would gain more benefits if tourism enter- several external influences force SMHOs to prises utilize more advanced management re-engineer their business processes and techniques and new technology These are . utilize ITs. Education and training push ITs important stakeholders in terms of in SMHOs, as the incorporation of technology integrating the SMHOs in the supply chain in the hospitality curricula and training within peripheral locations. provision provides a catalyst and promotes The relationships between stakeholders, as ITs to the industry . well as their interests, are dynamic. They Increasingly, the public sector recognizes change according to the evolution of the that ITs are critical for the competitiveness of external environment, while they also reflect private firms. They also recognize that small the developments of stakeholders’ needs. and medium-sized enterprises are instrumen- However, the above discussion demonstrates tal for regional development and have a much that most of the major stakeholders of more significant contribution to sustainable SMHOs could benefit significantly from the development than their larger counterparts. incorporation of ITs in the production and As a result, the European Union (EU), as well management functions. Consequently, this as national and regional governments, con- will probably be implemented through the centrate their efforts in providing incentives effect of several push and pull factors, which for enhancing the utilization of ITs by small [ 200 ]
    • Dimitrios Buhalis and firms (EC, 1996). Strategic partners are other issue, have formulated voluntary marketing Hilary Main members in the supply chain who are closely organizations or have joined international Information technology in interrelated with SMHOs, such as inter- hotel consortia in order to improve their peripheral small and medium mediaries and suppliers. Tour operators have representation in the whole marketplace. hospitality enterprises: been instrumental in compelling travel The above analysis demonstrates that strategic analysis and critical factors agencies and handling agencies to utilize ITs, several push and pull factors force SMHOs to in order to facilitate co-ordination and incorporate ITs within their operational and International Journal of Contemporary Hospitality enhance efficiency Similarly, destination . strategic management. Although these were Management management systems need SMHOs to utilize identified by research at the three destina- 10/5 [1998] 198–202 ITs in order to be able to participate in the tions to be the most important, a wide range networking of destinations and the develop- of additional factors emerges and encourages ment of on-line reservations, and the develop- hospitality organizations to re-engineer their ment of extranets through Web casting and business processes by incorporating technol- Web technology Hence, strategic partners, . ogy Perhaps the most pivotal change is the . such as intermediaries and suppliers, can revolution experienced through the develop- force SMHOs to incorporate ITs and be repre- ment of the Internet. The Internet is gaining sented in the electronic commerce. Finally commercial viability and is particularly ITs suppliers also emerge to promote applica- suited to small business, where it enables the tions for SMHOs and there is already small business to keep its doors open 24 hours strategic partnering emerging with IT suppli- a day, at minimal cost to customers all over ers, e.g. Fexco and the Irish Tourist Board the world. Already, there are some success and ATOS with the French tourism authority . stories of small businesses enlarging their Several pull factors can also be identified, distribution channels on the Web (Hart, 1995). as they provide incentives for SMHOs to Software is now designed for those extra-, incorporate technology Perhaps the most . intra- and Internet connections allowing important factor is customer demand and the access to internal databases and applications increasing number of computer-literate con- and secure access from external sources. sumers who are empowered by the Internet Hence, SMHOs which are not represented and tend to use networks for identifying and will fail to bridge their distance with con- purchasing various products. Hence, SMHOs sumers and suffer competitive disadvantages. should start to realize that, unless they sat- isfy this need, they will fail to attract con- sumers. Thus, as SMHOs attempt to increase Conclusions their market share, they would need to incor- porate more technology in order to enhance Research in these peripheral regions of their direct communication with consumers. Wales, France and Greece demonstrates that This also provides an opportunity for the incorporation of ITs in SMHOs is not disintermediation within the distribution always a rational managerial decision. It is channel and empowers innovative SMHOs to often associated with the dynamic relation- distribute their products directly to ships between stakeholders as well as a consumers enhancing their profit margins number of other variables which are related and reducing their dependence on inter- to their characteristics. Figure 1 illustrates mediaries (Hewson, 1996). Interconnectivity that there are several interested parties in the within the industry, facilitated by the devel- wellbeing of the SMHOs, mainly owing to opment of the Internet, as well as extranets their contribution to the local economies and and intranets, enables and empowers SMHOs regional development. Stakeholders adopt a to distribute and promote their hospitality number of push and pull factors to force products at an affordable cost. A cost and SMHOs to utilize ITs. Research demonstrates benefit analysis should illustrate that they that some key stakeholders exercise a more can displace some of their current marketing influential role in forcing SMHOs to utilize and promotional expenditure to the new ITs, particularly technology partners. media, as price differentials are offered in the Perhaps most important, the public sector, as new channels, which promises a much wider a stakeholder, increasingly appreciates the coverage of the market and an efficient reser- benefits introduced by ITs and undertakes vation/payment mechanism. initiatives to assist SMHOs to take advantage Similarly with their strategic partners, by improving their equipment and by formu- SMHOs realize that in order to co-operate lating networks. Hence, the EU has recently with the travel trade they will need to utilize offered funding to develop systems to ITs. The cost of locating and arranging increase the utilization of ITs by SMHOs and accommodation in hotels not represented in to represent them on the Internet (EC, 1996). electronic media, as well as attempting to These initiatives will be critical in the adap- collect their commission afterwards, far tation process. Moreover, consumers may be exceeds the benefit (Beaver, 1995). Indepen- the key stakeholders in the industry, pulling dent SMHOs, which appreciate the above technology through to hotels. SMHOs do not [ 201 ]
    • Dimitrios Buhalis and have the problem of “legacy” systems. Thus EC (1996), “Call for proposals for the establishment Hilary Main they can design their systems to take advant- of a European co-ordination structure aimed Information technology in age of the emerging technologies, particu- at promoting the usage of electronic com- peripheral small and medium larly Internet, extranets and intranets, with- merce through the Internet network among hospitality enterprises: small and medium-sized companies operating strategic analysis and critical out losing valuable data and, if any, technol- ogy investment. The rapid expansion on the in the tourism sector and located in the less factors Internet and the World Wide Web would seem favoured regions of the Union”, Brussels. International Journal of to provide a unique mechanism for SMHOs to Edgar, D. (1996), “Capacity management: yielding Contemporary Hospitality Management develop their marketing and distribution to the short break”, Yield Management Con- 10/5 [1998] 198–202 ference, Birmingham. mix. ITs also support SMHOs to develop part- Groth, J.C. (1993), “Critical factors in exploiting nerships with the entire range of players in technologies”, Management Decision, Vol. 13 the tourism industry and to establish net- No. 3, pp. 34-48. works which will enable them to acquire Hart, P. (1995), “Introducing TravelWeb”, virtual size (Buhalis, 1997). ABTECH Conference, London. Two of the major trends which will affect Hewson, D. (1996), “To the seaside via the hospitality market in the near future are hyperspace”, The Sunday Times, 26 May, p. 10. “mass customisation” and “disintermedia- Main, H. (1994), “The application of information tion”. Given that channels of distribution are technology in the independent hotel”, MPhil already evolving towards disintermediation, thesis, University of Wales. this direct contact will be crucial as suppliers Moutinho, L. (1990), “Strategies for destination of hospitality products who will need to be development – the role of small businesses”, able to deal directly with customers and in Goodall, B. and Ashworth, G. (Eds), Market- establish effective “one to one marketing” of ing Tourism Places, Routledge, London. their products. This will only be possible with O’Connor, P. (1995), Using Computers in Hospital- the effective use of technology . ity Management, Cassell, London. Groth (1993) concurs that the likelihood of Poon, A. (1993), Tourism, Technology and Competi- success in introducing technology is tive Strategies, CAB, Oxford. enhanced in a pull environment and that it is Senker, P. and Senker, J. (1992), “Gaining competi- possible to convert from a push to a pull tive advantage from information technology”, scenario, which is what SMHOs have been Journal of General Management, Vol. 17 No. 3, exposed to over the last few years. This is pp. 33-47. where interconnectivity, as well as customers Sheldon, P. (1997), Tourism Information Technol- and the travel trade, will provide the neces- ogy, CAB, Oxford. sary marketing pull. Despite the current lack Whitaker, M. (1987), “Overcoming the barriers to of co-ordination between stakeholders, it successful implementation of information seems that a certain level of co-operation will technology”, International Journal of Hospi- be essential in order to facilitate the ITs’pene- tality Management, Vol. 6, pp. 229-35. tration to the benefit of peripheral locations. Wong, S.Y. (1991), “Strategic use of IT for small business”, Singapore Accountant, September, References Vol. 7 No. 9, pp. 15-21. Archdale, G. (1993), “Computer reservation sys- tems and public tourist offices”, Tourism Further reading Management, Vol. 14 No. 1, pp. 3-14. Buhalis, D. and Main, H. (1997), “Catalysts in Atkins, M. and Lowe, J. (1994), “Stakeholders and introducing technology”, ENTER 1997 the strategy formation process in small and Conference, January, Edinburgh, Springer- medium enterprises”, International Small Verlag, Vienna, pp. 275-85. Business Journal, Vol. 2 No. 3, pp. 12-25. Cho, W. and Connolly, D.J. (1996), “The impact of Beaver, A. (1995), “Lack of CRS accessibility may information technology as an enabler on the be strangling small hoteliers, the lifeblood of hospitality industry”, International Journal European tourism”, Tourism Economics, of Contemporary Hospitality Management, Vol. 1 No. 4, pp. 341-55. Vol. 8 No. 1, pp. 33-6. Buhalis, D. (1995), “The impact of information Porter, M. (1985), “Technology and competitive telecommunication technologies on tourism advantage”, The Journal of Business Strategy, channels: implications for the small and Winter, pp. 60-70. medium-sized tourism enterprises”, PhD Price, R. (1992), “Technology transfer in the hotel thesis, University of Surrey, Guildford, UK. Buhalis, D. (1997), “The virtual tourism enter- industry”, International Journal of Hospital- prise: concepts, practices and lessons”, Foro ity Management, Vol. 11 No. 1, pp. 3-23. Annual de Turismo: Fundacion Cavanilles de Ruohonen, M. (1991), “Stakeholders of strategic Altos Estudios Turisticos, Benidorm, Spain, information systems planning”, The January November. Strategic Information Systems (UIC), Decem- Buhalis, D., Keeling, S., Lacorte, A. and Reynolds, ber, Vol. 1 No. 1, pp. 15-29. N. (1997), “Technology in hospitality organiza- Wardell, D. (1987), “Hotel technology and reserva- tions: the case study of La Plagne in France”, tion systems: challenges facing the lodging ENTER 1997 Conference, January, Edinburgh, industry”, Travel and Tourism Analyst, No. 2, [ 202 ] Springer-Verlag, Vienna, pp. 265-76. June, pp. 33-47.