Final Blog – The last word.

In my blog I have surveyed how Information Systems are used in hospitality, the challenges posed to IT and businesses professionals who acquire them, and ultimately those in their firms who use them. I have explored new technologies (social media and video) and how they are being used today and might be used in the future to connect travelers with providers of hospitality services.

This blog is a “diary” so to speak of my growing knowledge of technology in the hospitality business. Expressing my ideas and thoughts about the business is a great exercise for me to measure what I learn.

What’s clear is the hospitality business is undergoing dramatic change. New technologies in travel marketing have shifted control to the buyers of traveler. Hotels and resorts in my view will need to become creators of information about what they offer to the traveler. So much information is consumed as travelers plan business trips and vacations, hospitality providers will need to supply that pool of information content they create that features their property and offering.

However in the new world of travel discovery on the Internet, content can’t seem like advertising—it will need to appear authentic. Any content and information contributed by the property will be judged against reviews, feedback, critiques of the experience encountered by other travelers.

How hotels and resorts manage their messaging in a tangled world of blogs, social media, search engines, travel sites will have a huge impact of their future success.

In my opinion, more and more of the basic hotel information systems such as accounting, rooms and F&B management, payroll—general ERP and CRM systems—will be available to all hotel firms, especially as cloud computing and SaaS architected systems bring down costs. Therefore in order to achieve a sustainable competitive advantage using information technology, hotels and resorts will need to exploit the social marketing and Internet media world to which their customers turn to plan and buy travel.

In my opinion every hospitality manager in any part of the world understands the importance of IT for the present and future business success. But why then are there are still many examples of IT implementation failures and profit losses? I think the main challenge for the successful IT selection and implementation is IT governance. Or in other words—what decisions should be made and who is making these decisions? Is it the CEO, CIO, functional managers, end-users, or all of them? The reality is that a majority of employees, including middle level managers, in many companies cannot identify who is responsible for IT governance. Therefore the decisions are usually made by either the CEO or CIO. The CEOs in most companies have a great strategic vision and business knowledge but lack technology expertise. Thus often they cannot define very clearly exactly what IT functionality is required to reach the company’s goal. On the other hand CIOs are experts in technology but do not necessarily know which IT solution is the best match for the company’s strategy. Therefore these inconsistencies lead to the poor IT decisions in the hospitality industry. Hence companies just buy expensive IS based on so-called ‘best practices’ which are not necessarily the best for their particular needs or more often ‘survive’ with some simple functional applications developed in-house.

But moving into the future hospitality companies need to change their IT governance practices-- because many companies may gain a competitive advantage by using IT to support their business goals. Thus what is the most effective and efficient way of managing IT governance for hospitality players in the future? First, ongoing IT education for the senior management will be required. And, very important, this education should be provided by independent consultants, not by ERP sales representatives trying to ‘sell’ their systems. At these educational seminars, managers should receive up-to-date information about IT innovations and all the existing IS product choices on the market. Thus the acquired knowledge will enable CEOs to think more ‘out of the box’, significantly increasing their ability to evaluate different IT options, and align them with the overall company strategy. Second, the role of the middle level managers and their participation in the decision-making process should be increased. The middle level managers in hospitality are usually from a younger generation and often more familiar with IT innovations. Also they work in different departments and know very well what each department needs in terms of IT functionality are how to make it work best for the business. Last, but not the least, the end-users should receive the required amount of training before the new IS implementation. Today every employee in the hotel should be familiar with IT and in-house IS all the way to housekeepers and maintenace. Therefore high-quality end-user training is crucial for the success of IS implementation. This should also be a responsibility of the departmental managers.

In conclusion I think that the role of the hospitality middle level managers in successful IT selection and implementation will gain in importance in the future. These managers, having knowledge in both: business practices and IT could become the CEOs best advisers for the IS selection. Also they would be the key people responsible for the successful IS implementation and customization. That’s why IT is a required course at all the best business schools today. I took it at the Cornell Hotel School and it changed my paradigm about why it was important for hospitality managers.

In my opinion the hotel and travel business has changed forever as a result of the consumer’s access to information about the destination they plan to visit and the ability to hunt for the best deals. Travel industry research authority PhoCusWright refers to this technology-driven trend in 2009 as the “Informationized Trip Experience”. Today customers can research any destination, see videos, and read reviews from other travelers online. Moreover they can download all this information on the smart phones when they get to the destination. I think the most important factor driving the customer’s hotel choice is the abundance of information available about the place they plan to visit. That is why the smart hotels and tour operators have started to use advanced video technology to differentiate their offerings and attract the customers.

A great hospitality industry example is InterContinental Hotels & Resorts who created mini video travelogues for all 135 of their properties. In each destination, the hotel’s virtual concierge takes visitor on a personal site-seeing, shopping, and dining tour of the city they are about to visit. They can download videos to iPhone for quick access during the stay. Also guests can email videos to friends or post to Facebook page to share the experience.











I believe in the future social applications will become critical in a hotel’s effort to “informationize” their properties for customers. One innovative twist on a social user-generated application recently launched by Marriott is called “Spirit to Serve’s Marriott Film Festival.”









In this application hotel employees are encouraged to capture their knowledge of the hotel and local area by filming short videos which they upload to a site that potential customers can view. But, even more important, the video assets can be syndicated by Marriott to blogs and social networks creating a marketing web to catch travelers while they search for information about the hotels. I think today’s travel consumer is looking for first-hand, authentic advice from knowledgeable and reputable sources. In a technology-driven world, they expect realistic visual information they can use to plan and take along on their trip.

My vision is that with the rapid IT development, hospitality players will go even much further in this direction. I think soon hotels will be able to use 3-D technology for virtual tours of the property and local area; it will let the traveler experience the unique feel of the hotel and destination as if they are really there. Customers could find themselves in the virtual hotel room, in the spa, in the dining room, at the roulette table or on the beach just by one click on TV.
A start-up German company called Tridelity is developing 3-D technology capable of transporting the customer into a virtual world.












At first Tridelity plans to make 3-D display devices available onsite at hotels and casinos, trade shows, shopping malls, and airports. But ultimately 3-D (glassless) display technology will make its way into the home TVs. This will be a revolutionary change in the customer’s experience and decision making process.

In my opinion, hotels and tour operators who can “informationize” the future trip for their customers will be able to gain a sustainable competitive advantage in the hospitality industry. The visual technology revolution in hospitality has just begun…

To continue the theme of the previous entry I would like to discuss how hospitality companies can either implement new IS applications or improve existing ones in the most effective and efficient way. To address these issues I would like to provide my vision on this topic by answering the following questions: What kinds of IS implementations hospitality companies are using now and how will they be used in the near and long-term future? What are the future trends of IT in the hospitality industry?

Despite its effectiveness, ERP (Enterprise Resource Planning), has not gained widespread adoption in the hospitality industry. The main reason why it is has not gained acceptance is due to the tremendous implementation and maintenance costs. Hence for most hospitality companies it violates the cost-benefit rule: the cost of ERP is much higher than its benefits. Moreover companies fully depend on one vendor in adopting ERP solutions to confront changing business conditions. This raises the long term cost of ownership. Do ERP systems have a future in hospitality? My opinion is: No they probably do not unless they reduce their costs. But the cost reduction could only be possible if the ERP industry becomes more competitive with more vendors competing in the marketplace. Also ERP should become more flexible in changing applications and accessing data and information over the Internet to compete with two emerging approaches: EIA and SOA.

Most hospitality companies “survive” today using applications for different tasks internetworked with each other: so called “information islands”. I guess such an approach has worked perfectly for them until now: it still is much cheaper than ERP. But as business processes becoming more complex and competition increases, companies need to implement new applications (e.g. Revenue Management). Also they need to modify existing applications more frequently. Thus if the step-wise approach was not a “big deal” before, today it has become more complex. The most efficient way to deal with this issue in the future is to adopt the EIA (Enterprise Application Integration) approach. However today it is still very “raw” and risky due to a number of reasons. First it is not clear what IT complexity level is required to manage the middleware. Second companies need to hire in-house IT experts. This could be problematic (expert shortage) and costly (security issues: cannot outsource it or use open systems code). Third all in-house applications will depend on middleware; if middleware crashes all systems will fail. I think this approach will become the most popular and widely used in hospitality in the future if the aforementioned issues are to be solved. A good example of EIA in hospitality is Stone Bond's Enterprise Enabler®, which had been successfully implemented by The Houstonian Club & Spa, an exclusive Houston urban resort.

Another emerging IS trend—SOA (Service Oriented Architecture)—is a revolution in IS. Instead of spending money on in-house IT applications, companies can easily do the most of their business processes utilizing APIs to interconnect different systems package functionality. Starwood Inc. is a good example of successful SOA implementation in hospitality. "It was the best way to let us map our technology with our various brands," says Del Rio, Starwood's senior vice president of technology solutions. “Instead of having each of Starwood's hotel chains build their own applications, SOA allows the brands to share the same programs and features—but they can be customized specifically for each hotel's look and feel”. Despite this approach being relatively new and untested, it is a huge cost savings for the companies. For example, Del Rio predicted total $20mln savings in annual maintenance costs for Starwood Inc. from implementing SOA. However I think big hotel operators and casinos still would be wary of implementing it today due to the high complexity, lack of expertise, time consuming development, and data security issues. It took about five years for Starwood Inc. to work on it. However I think SOA will become the best way to go for hospitality companies in the future with further IT enhancements and more security provided. According to an IDC report, by 2010 companies will spend upwards of $33 billion on SOA services.

In conclusion I think the two approaches: SOA and EIA will find their place among different hospitality companies. ERP will probably become obsolete. But these two approaches they will need to be modified in order to compete with each other. This competition is in the best interest of customers: quality of all the products and solutions will continuously increase while costs will come down. Just a few years ago choice was limited to either ERP or “information islands”, but today it has become much broader due to IT development. And I predict that in the near future some new even more sophisticated products will appear on the IS market.

In this Blog entry I would like to concentrate on how IS is used and implemented by hospitality companies around the world in the most efficient and effective way. Recently the hospitality industry is becoming more and more global: most of the large hotel and restaurant chains, and gambling companies do not limit their presence to only one country or region but, just the opposite, they are trying to gain a competitive advantage through geographical diversification. It is not a secret that the U.S. and Western Europe markets are highly consolidated and penetrated for the hospitality industry today. Therefore many industry players see opportunities for future growth and promise for sustainable competitive advantage and big profits in the undersupplied emerging and developing country markets in the different parts of the world, such as Eastern Europe, Africa, Latin America, and some parts of Asia. However despite of great opportunities there are a lot of risks and challenges companies have to deal with as they grow internationally.

One of the biggest challenges for hospitality companies linked to their international expansion into the emerging or developing countries is the selection, implementation, and exploration of the appropriate IS which would enable companies to manage both: internal company needs for efficient business processes and external relationships with the local environment. This is not an easy task for CIOs and managers of these companies. When a company opens a new hotel or restaurant in the U.S. it usually selects and implements a common IS solution across all the other hotels and restaurants of the same brand or within the same industry of independent hotels. Only a few major IS vendors dominate the hotel information system marketplace. Therefore there is little competition between these major IS vendors and very high entry barriers for new entrants; which gives present IS sellers a lot of power over the buyers. Thus they can keep prices for the IS implementation and maintenance high, request system upgrade every three-to-five years, and produce very similar undifferentiated products. Usually the hospitality managers selecting IS are “bought” by the definition that a particular IS is created based on the “best practices” of the industry. However in most of the cases the “best practices” definition is no more than just an advertising trick made on by a small group of interested parties and is not supported by any independent research or evidence. What is the best way of doing business for one company is not necessarily the case for another especially within the international context. Despite some efficiency in performing business processes with the help of IT in U.S. and Western Europe, that could be called “best practices”, the other most important processes, such as accounting, payroll, taxes, for example, could be very different in other countries and would require a huge IS customization, which could be very costly. And depending on the cost of this required customization and implementation this particular IS solution, widely used in U.S. or Western Europe, may not be the best choice for other countries. Moreover managers should take into account the possibility to adapt IS applications for their foreign language, currency exchange rates, inflation rates, and other factors that could differ from U.S. and Western Europe. What’s more in some countries companies can face extra costs for local employee training and absence of vendor support and maintenance.

One of the possible solutions for this problem could be implementation of local open source software solutions in the countries that have ability to develop them. These solutions could be even more effective and efficient for business process support in the local environment than traditional “best practices” IS and would not need a lot of customization. Furthermore open source IS would be much cheaper to implement, explore, and maintain. Also these open source IS solutions often will not require the large investments in hardware and software and frequent updates. Therefore open source IS implementations instead of traditional “western” IS vendor solutions will give companies huge cost savings, more flexibility, permanent support by local vendors, and a bigger pool of local employees familiar with the system. Only one possible downside can occur for big hotel and restaurant chains - the interoperability of this local open source IS with IS used in the entire company and the ability to codify the data collected by local IS into the standard format used across the worldwide enterprise. But I think with the recent KMS development it is not a problem anymore. However CIOs and managers should analyze their development strategy taking into account the economies of scale and economies of scope in each particular country and make the appropriate IS selection based on this analysis. For example, if a company plans to open only a few hotels in some region maybe it would not make any economical sense to trade-off the traditional IS for a local solution. But if the company’s strategy is rapid growth in some location it would be wise for managers to evaluate all the alternatives including local open source IS in the decision making process instead of just “blindly” choosing the IS application based on so-called “best practices”.

Today I would like to discuss how hospitality industry players could collect and use information about their customers more efficiently while maintaining and respecting customer privacy. Today in the tough competitive environment it is hard to imagine any hotel, restaurant, or casino which does not want to know what their customers needs are and how to satisfy them. The rapid IT growth in the last decade enabled companies to collect and store huge amounts of data about customers through the appropriate IS implementation. Moreover modern database technology allows companies to go even further: combine their data about customers, collected through in-house CRM (Customer Relationship Management), with other databases widely available online and create a “full” picture of the customer. But the relevant questions arise:
· How realistic is this “full” picture of the customer?
· How to deal with customer’s privacy issues?

Most hospitality organizations collect the data about their customers through CRM applications based on the actual transactions. Despite CRM applications being the most effective way of managing the relationship with the customer today, they have some serious limitations. First, with the help of CRM, hospitality players collect data only about the existing customer segments based on the real transactions and ignore new potential customer segments. Second, customers are usually asked to provide information only about their particular and often one-time experience with the hotel, restaurant, or casino. This limits the available data about the customer and reduces the possibility to know their other interests and future plans to analyze the data, in order to offer a truly unique experience next time. Third, how much information customers are willing to provide and what is the quality of this information (how reliable and useful is it)? Customers are becoming more and more cautious about sharing their private information because IT tracking and data mining capabilities are growing at much faster pace than its regulation and its ability to protect customers’ privacy. Customers want to have control over their personal life and information and share only information they want to share. But unfortunately it cannot be 100% guaranteed today and there are many examples of “function creep” when the data is used for a purpose other than originally intended. For example, I received so much useless “junk” mail in my old e-mail address that I just gave up to clean it and closed it. Also I am receiving phone calls offering some stuff which I never will buy. But I do not have any idea how and where these people got my personal information. Therefore I’ve become very reluctant to share my personal data.

Thus to gain a substantial competitive advantage today and maintain it in the future, hospitality managers should search for more efficient and effective ways of collecting information and maintaining relationship with their customers. In my opinion one of the promising options for hospitality companies could be advanced CRM applications combined with CMI (Customer Managed Interactions). CMI is an emerging concept in the customer relationship management today. It could be mutually beneficial for both hospitality companies and customers. CMI would enable companies to collect much broader information about their customers’ interests, future plans, lifestyle, needs and tastes, which they would use to conduct a very detailed analysis to find hidden patterns about existing and potential customers. Moreover by using CMI data, companies can gather and analyze the data about new potential customer segments. Customers on the other side would have total control over what data to provide and with whom they would like to share it. Therefore the privacy of their personal data will be protected. Also the further development of the KMS (Knowledge Management System) databases could make the process of creating and maintaining the personal CMI files a fast, easy, and fun process for the customer, because they would be able to submit personal data in any encoded form, even in a simple Word text file, picture, or video. However there has not been enough research conducted on CMI so far and its full potential is not yet known. Also it is time-consuming for the customer and many do not see a real value in CMI for them. But despite the fact CMI is only an emerging trend today and the hospitality industry has not yet embraced it, I think it definitely has huge potential for creating and maintaining the most efficient and effective way of interacting with customers–crucial hospitality companies’ success in the future. Also it provides customers with total control over their personal data and safeguards their privacy.

In this entry I would like to discuss why IS is important for the hospitality industry, and how it can be used as a competitive advantage to drive up company profitability today and especially in the future. Nicholas G. Carr in his controversial article “IT Doesn’t Matter”, published in Harvard Business Review (Vol. 81, No. 5) in May 2003, argues that IT has become a “commodity” today, a “part of infrastructure” and it does not matter how much companies spend for IT innovations, it cannot give them a competitive advantage over rivals anymore.

I agree with Mr. Carr’s opinion in the first part of his assertion. I think IT has become an indispensible part of everybody’s life today. It’s almost like the air we breathe. And with information technology’s rapid growth in the last decade, it is hard to imagine how people could live without it today, and to what degree our life will depend on IT innovations in the future. The Internet and especially dynamic Web 2.0 platform inventions enable people from around the world to communicate, shop, share videos, and do many other activities online. There are already many goods and services only available on-line. Thus IT innovations not only continuously modernize previously IT-unrelated activities, but also become cannibalized by the new ones making old innovations obsolete.

As IT innovations proliferate and standardize, costs are also decreasing as more and more people around the world are able to afford to use these innovations. Thus IT has become a part of “infrastructure” in both trivial everyday activities and business processes. Therefore for a majority of hospitality companies, it is absolutely necessary to implement standard IT and IS solutions to be active participants in the “hospitality industry infrastructure”. For example, if the owner of an independent hotel decides to franchise his property with a big branded hotel chain, he will be required to purchase the Property Management System used by every hotel of the company; this could cost up to $150,000 today. The relevant question arises: will each hotel or the corporate office of this branded hotel chain have a competitive advantage over rivals if they feel compelled to acquire the latest IT innovations and update their Property Management System every time a “hot” new product arrives on the market? Probably they won’t if this new IT product is just a “nice-to-have” and does not support radical improvement in the company business strategy. Therefore the benefits from this new Property Management System implementation will be offset by the huge investment cost across all the hotels in the chain and company will just simply lose money. Moreover even if the company can gain a short term competitive advantage with the new IS implementation, competitors will react very quickly by deploying a similar IS solution of their own, erasing the advantage.

However I would like to challenge the second part of Mr. Carr’s assertion. I do think IS applications can provide a competitive advantage for a company in support of a well-conceived strategic plan. The main question here is: When and from what angle should a company start to think about deploying a new IS application and what is its role in the organization? It is a mistake to plan an IS project for the sake of IS itself. . First and the most important step is the correct choice of the future company strategy and all the goals that have to be accomplished to succeed with this strategy. Then company managers should evaluate all the possible alternatives helping to reach these goals. IT is usually only a part in the process of accomplishing the goals—an important part, but not the main. Often companies are not required to use the newest IT innovations to achieve the desired results along the strategic path. There are many examples in the hospitality industry of how a competitive advantage could be achieved using just widely available IT applications on the market: Harrah’s Loyalty Program, Marriott Rewards, Starwood Preferred Guest Program, and others. Hence I think the most important factor that gives a company a competitive advantage not IS itself, but the context: a great strategic idea bundled with the IT! Only in this case IS is a differentiator used in support of this particular company goal that will drive up company profitability. Without context and purpose IT is not a competitive advantage, but just a required “commodity”. Can companies accomplish their strategic goals without the IT as a foundation? - Yes perhaps some small hospitality family-owned companies can. But for the major players in the market: big hotel chains, multi-billion dollar casinos, and restaurant chains, dealing with warehouses of data, relevant IS, aligned with the company’s strategic initiatives, is crucial for success. Because it is only IT that can help hospitality “giants” discover and profit from the “hidden” information about their customers, which cannot be distinguished otherwise.