This Blog’s main idea is to discuss the importance of the Information Systems (IS) and Information Technology (IT) for the global hospitality industry, explore recent business and technological trends in the industry, and evaluate which of them will become benchmarks of performance improvement and efficiency for hospitality in the future. To make the entire Blog easier to follow and more interactive, I would like to cover four different dimensions addressing the relevant questions about the future of IS and IT in the global hospitality industry: “What changes in hospitality industry--internal and external--will need IT support in the future? What IT innovations can be adapted to hospitality? How they can be implemented? Why it is important? Who are participants in this process and what do they need to know?” Hospitality managers, employees, students, or anyone who has an interest in the topic or valuable information to share are welcome to participate in the discussion. Today I would like to discuss the importance of IS for the hospitality industry and address the following questions: Is it worth investing in IS projects today? Is this investment a needless expense or cost-saving practice for the hospitality industry players? How to invest in IS “smart”?

With development of computers and later the Internet companies began to enjoy the benefits of using IT and later IS for their internal processes. Historically business processes were organized on a hierarchical or functional perspective. Therefore IS supported those processes providing great help in performing some particular functions along organizational levels or in department. Basically companies used internal IS tools as ‘calculators with advanced functions’ and underestimated their potential for company business process organization and profitability. However, recently many companies discovered a “revolutionary way” of organizing their business based on the process perspective: BPR (Business Process Reengineering). When BPR just first introduced there was a lack sufficient IT to support this process, but today it is available in the form of EIS (Enterprise Information System). EIS offers great opportunities for hospitality companies not only in collecting and storing data, but most of all in analyzing all the information and using it to make strategic managerial decisions. Some hospitality players, for example casinos, adopted this new approach very quickly, implemented the latest IS to support and enjoy the benefits of it in the form of increased profitability and customer loyalty. But other hospitality companies, for example restaurants and independent hotels, still do not see any added value in implementing EIS and instead use a “middleware interfaces” approach to interconnect different internal applications. Even five-star luxury hotels in Central Park area in Manhattan where I had my winter externship use this approach. It did not work effectively, was very time-consuming, and created a lot of errors in the finance department, which were very hard to find and fix later.

One of the biggest barriers for hospitality managers to adopt EIS today is the expensive implementation and coordination costs. High cost is a crucial issue especially today when forecast for the future of the hospitality industry does not look bright in light of the global economic recession: significant decreases in ADR, occupancy rates, and RevPar; very limited new hotel development; cost-cutting polices. Thus the recent events have forced the big hotel and restaurant chains and independent operators to re-evaluate their priorities in spending in order to lower costs and try to maintain profitability. However, despite all these “dark” forecasts for the future, some experts are finding the current economic environment a perfect time for companies to replace their current information systems or adopt new ones. For example, Eric Kimberling, President and founder of Panorama Consulting Group, in his Blog discusses “top 10 benefits and results of implementing ERP (Enterprise Resource Planning)--type of EIS--in the current economic environment:
1. Reduce total cost of ownership2. Increase revenues 3. Increase productivity 4. Improve business process efficiency 5. Ability to choose from multiple ERP delivery options 6. Scale for growth and economic recovery7. Leverage available resources
8. Prepare for mergers and acquisitions 9. Force management to focus on benefits realization 10. Increase rationalization of ERP investments.”
In my opinion, supported by Mr. Kimberling analysis, hospitality managers should consider EIS today not as an expensive investment increasing the total operating costs, but as a valuable tool that will help them not only gain a competitive advantage in the future but also cut operating costs today. I think the benefits of using EIS for the hospitality industry are obvious and taking into account the rapid growth of IT in recent decade it will be the ”only way” of doing business soon.

However, hospitality managers should be “smart” in selecting the appropriate IS for their company needs. Even before the recent economic downturn many of the companies invested in IT “blindly” without considering how the particular IS or IT innovation can be useful for their company. Thus, as a result, “between 1999 and 2001, U.S. companies spent $130 billion on IT they never used,” according to the analysis of Andrew McAfee, Associate Professor in the Technology and Operations Management area at Harvard Business School. Thus hospitality companies should invest “selectively” only in the IS or IT innovations that align with their business strategy. For example, it does not make sense for a small family-owned restaurant or bar to invest in a gigantic EIS project, simply because they do not need to use all the functions of EIS in their business process and implementation and coordination costs will be higher than the benefits. I found out about this problem in my conversation with the owner of the ‘Pixel’ Lounge in Ithaca, NY who developed a novel inventory control and purchase system for small and medium size bars and restaurants and is trying to market it. Thus, there is a lack of EIS for small and medium size businesses in hospitality today which need more simple and less expensive IS for their business processes. It represents an opportunity for some IT providers to work in this direction today.