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.