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Buhalis, D., and Main, H., 1998, Information Technology in small and medium hospitality enterprises: Strategic analysis and critical factors, International Journal of Contemporary Hospitality Management, Special Theme Issue: Small hotels: The

Buhalis, D., and Main, H., 1998, Information Technology in small and medium hospitality enterprises: Strategic analysis and critical factors, International Journal of Contemporary Hospitality Management, Special Theme Issue: Small hotels: The
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  [ 198 ] Information technology in peripheral small andmedium hospitality enterprises: strategic analysisand critical factors International Journal ofContemporary HospitalityManagement10/5 [ 1998 ]198–202 © MCBUniversity Press[ ISSN0959-6119 ] 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 hospitalityorganizations (SMHOs) areincreasingly recognized aspivotal in the ability of desti-nations to benefit fromtourism as well as to satisfytourism demand. However, itis recognized that they areoften marginalized from themainstream tourism industry,owing to their inability andreluctance to utilize informa-tion technologies (ITs). Thispaper is based on researchundertaken in peripheralSMHOs, located in ruralWales destinations, AlpineFrench resorts and the GreekAegean Islands. It exploresthe factors determining theadaptation of ITs by examin-ing the stakeholders of smallhospitality organizations, aswell as the push and pullfactors they exercise. It alsoillustrates a number ofcatalysts for ITs penetrationand future trends in thehospitality industry, e.g.disintermediation and masscustomization. Argues thatSMHOs which fail to adaptand utilize ITs will suffercompetitive disadvantagesand jeopardize the prosperityof destinations. Small and medium-sized hospitalityorganizations (SMHOs) The vast majority of accommodation estab-lishments worldwide are small or medium-sized, belong to local entrepreneurs, are fam-ily run, and predominantly employ membersof the host society. Despite their size, collec-tively, small and medium-sized hospitalityorganizations (SMHOs) are extremely impor-tant to European economies. They providestable employment opportunities and supportthe integration of local economies inperipheral areas, even during recessionperiods. They also enable the infusion of tourist expenditure at the local level and thusenhance all types of multipliers both locallyand nationally. SMHOs offer by definition lessthan 50 rooms, employ fewer than ten people,operate in the lower reaches of the marketand are often situated in tertiary locations,(Buhalis, 1995; Main, 1994; Moutinho, 1990;Wong, 1991).This paper analyses the research under-taken in SMHOs located in rural Wales desti-nations, Alpine French resorts and the Greek Aegean Islands (Buhalis et al . 1997; Main,1994) and attempts to identify factors whichwill enable SMHOs to incorporate ITs in theirstrategic and operational management. Inorder to understand the process of IT adapta-tion a detailed analysis of the stakeholders inthe operation of SMHOs is also undertaken,several critical trends in the hospitalityindustry are examined and several push andpull factors are identified. A total of about 600hospitality organizations in peripheral desti-nations serving dissimilar markets wereresearched, providing a broad basis for solidinferences. Information technologies inhospitality organizations Technology becomes a main source of sustainable competitive advantage and astrategic weapon, especially in the tourismand hospitality industries, owing to thepivotal role information plays in the descrip-tion, promotion, distribution, amalgamation,organization and delivery of tourismproducts (Poon, 1993; Sheldon, 1997). Technol-ogy can offer significant advantages in opera-tional (e.g. property management systems),tactical (e.g. financial modelling, yield man-agement) and strategic management (e.g.decision support systems) of SMHOs. Increas-ingly the use of ITs is a major prerequisite informing strategic alliances, particularly inthe supply chain ; developing innovativedistribution channels and communicatingwith consumers and partners. Bothcustomers and partners also tend to place agreater value on organizations which utilizeITs than their competitors (Edgar, 1996;Hewson, 1996; Senker, 1992).However, despite the technological revolu-tion experienced in the tourism industry,hospitality organizations have traditionallybeen reluctant to utilize ITs (Beaver, 1995;Whittaker, 1987). This recent research demon-strates that technology is under-utilized inSMHOs in most peripheral European destina-tions, such as the Aegean islands, ruralWales, and Alpine French resorts.Table I illustrates that most of the SMHOsinterviewed in this research underutilize ITs;and those that do tend to focus on operationaltasks, such as reservations, word processingand accounting. Very few SMHOs, 34 per cent,use technology for tactical or strategic man-agement decision making (Main, 1994).SMHO managers who use IT in this researchinto peripheral areas, and also research inIreland by O’Connor (1995), have tended to be“dabblers”, i.e. have bought technology piece-meal with no long-term plan or even specificbusiness use; or “technophiliacs” who haveinvested, expensively, in technology in theearly stages and have lost faith when thetechnology did not live up to expectations.Sixty-five per cent of those who do utilize thetechnologies available admit to not makingoptimum use of IT (Buhalis, 1995; Main, 1994).There are several identifiable reasons forthe lack of use of technology in SMHOs:•the lack of training;•the age, educational level, and familyarrangements of the SMHOs’ proprietors;•the deficiency of rational management andmarketing functions; and•the short-term, operational focus of man-agers.These are some of the most critical factorswhich determine the under-utilization of ITs  [ 199 ] Dimitrios Buhalis andHilary Main Information technology in peripheral small and medium hospitality enterprises: strategic analysis and critical factors  International Journal ofContemporary HospitalityManagement10/5 [1998] 198–202 in SMHOs highlighted by this research. Inaddition, the perceived cost of software andhardware as well as the feeling of dependencyon IT experts are significant deterrents forunder-resourced and under-qualifiedproprietors. Stakeholder analysis for small andmedium hospitality organizations In order to understand the behaviour of SMHOs towards ITs an analysis of the needsand wants of their key stakeholders isrequired (Atkins and Lowe, 1994). The stake-holders’ theory states that, for a firm toremain viable, it needs to satisfy the require-ments of key stakeholders. Atkins and Lowedetect increased stakeholder involvement intimes of technological turbulence, as theexternal environment of organizationschanges shape and both interests and benefitsof stakeholders need to be re-addressed.Figure 1 identifies key stakeholders in theSMHOs and demonstrates the extent to whichthey will be catalysts in the introduction of technology by providing push/pull effects.Owners/proprietors are the most apparentstakeholders of SMHOs, as they are oftenmain investors and managers. Owners/ proprietors need to utilize technology inorder to facilitate both their operational andstrategic functions. However, often they tendto lack the expertise in selecting, installingand operating computerized systems as wellas marketing and management skills. There-fore, they tend to fear that they will lose partof their control, should they allow externalITs experts to undertake these jobs for them.Employees, and in particular managers,also tend to be interested in the prosperity of SMHOs, as their employment and quality of working life. To the extent that ITs relieve therepetitive elements of jobs, employees wouldbe interested in utilizing more technologyand, therefore, be able to concentrate on thecreative elements of their role. Consumersare also stakeholders of SMHOs, as they arekeen to increase the value for money they getfrom service providers, as well as to maxi-mize their satisfaction. ITs improve the effi-ciency of SMHOs, as well as enable them todifferentiate their product through theprovision and promotion of specialized prod-ucts. Thus, consumer expectations couldforce the introduction of ITs in SMHOs andtheir satisfaction would increasingly dependon this provision. Institutional customers,such as travel agencies, tour operators andother intermediaries are interested in having Table I The utilization of ITs by European peripheral SMHOs Mean telephoneAt leastAt leastAt leastVideotext/ Regionlines (%)one telex (%)one fax (%)one PC (%)Networks (%)Minitel (%)Greece 4.62867.144.711.3n.a. Wales n.a.n.a.37.830.110.06.9 France n.a. Note: adapted from Buhalis et al. (1997) and Main (1994) Figure 1 Stakeholders and push and pull factors determining the introduction of ITs in hospitalityorganizations Education &TrainingEuropean Union,Government &Public AgenciesStrategic PartnersParadigm ShiftCustomerDemandInterconnectivity,Intranet/ExtranetInternetTravel TradeAccountingSystemsSMALL ANDMEDIUM SIZEDHOSPITALITYORGANISATIONS PUSH FACTORSPULL FACTORS  [ 200 ] Dimitrios Buhalis andHilary Main Information technology in peripheral small and medium hospitality enterprises: strategic analysis and critical factors  International Journal ofContemporary HospitalityManagement10/5 [1998] 198–202 easy access to up-to-date information onavailability and rates for SMHOs. Thus, theutilization of ITs for representation in theelectronic marketplace, through global distri-bution systems and Web technology, is pivotalfor a harmonious and profitable co-operationbetween SMHOs and intermediaries. Thedevelopment of extranets in particular willenable institutional customers to developsuitable interfaces with SMHOs and toenhance their efficiency and connectivity.Suppliers of raw and other materials areinterested in the wellbeing of their customersand need to ensure that SMHOs operate effi-ciently and profitably in order to maintaintheir custom. Suppliers need to increase theirown efficiency in order to enhance theircompetitiveness. Communication andco-ordination with their customers are there-fore pivotal for their ability to deliver theright product at the right time and price. IT,and extranets in particular, enable inter-connectivity between enterprises and provideopportunities for suppliers to identify andsupport the needs of individual customers.Thus, suppliers can enhance their inter-action with SMHOs by utilizing technologyand, hence, increasing the value addedthrough the supply chain and establishlong-term partnerships.Increasingly, tourism regions are managedby destination managers, whose personalcharacteristics, development, and attitudesare critical for the position they adopttowards ITs. However, a rational destinationmanager would probably promote the net-working of destinations in order to facilitatepartnership and interaction between localsuppliers, as well as improve the communica-tion with consumers. Finally, the local com-munity tends to be represented as a stake-holder through owners and employees inSMHOs, while political parties and otherlobby groups may influence the direction of the local tourism industry. Thus, local peoplewould gain more benefits if tourism enter-prises utilize more advanced managementtechniques and new technology. These areimportant stakeholders in terms of integrating the SMHOs in the supply chainwithin peripheral locations.The relationships between stakeholders, aswell as their interests, are dynamic. Theychange according to the evolution of theexternal environment, while they also reflectthe developments of stakeholders’ needs.However, the above discussion demonstratesthat most of the major stakeholders of SMHOs could benefit significantly from theincorporation of ITs in the production andmanagement functions. Consequently, thiswill probably be implemented through theeffect of several push and pull factors, whichaim to influence the decision-making processof SMHOs’ stakeholders. Push and pull factors This research in the three peripheral destina-tions demonstrated that, should SMHOs havea choice, they would try to maintain a tradi-tional management approach; many man-agers could not perceive any benefits to utiliz-ing technology where ITs would only play aperipheral role. However, technology adapta-tion may be critical in their ability to satisfytheir stakeholders, as well as to improve theirperformance. Research identified a widerange of push and pull factors which deter-mine whether SMHOs will utilize ITs and thedegree of ITs’ future adaptation as illustratedin Figure 1. Push factors are external forceswhich oblige enterprises to use ITs in order toavoid potential threats or jeopardize some of their functions. Enterprises may not haverecognized a need that the technology mightfill. If the need has been recognized, enter-prises may not have matched a particulartechnology with the fulfilment of that need.Stakeholders seek to promote, garner,support and push a technology.Pull factors provide incentives for enter-prises to incorporate ITs in order to gainbenefits in their operation. In this scenario arecognized market need is present and enter-prises draw on ITs to fulfil it. Groth (1993)examines the significance of the push-pullfactor in harvesting benefit from technologyintroduction. He defines the pull factor assrcinating in political, social and economicforces which “pull” on the technology and thepush factor as relating to the efforts of thetechnology’s proponents. The push-pullanalysis is critical as it illuminates the atti-tude of enterprises towards ITs and elabo-rates on the reasoning for actionsundertaken.As far as push factors are concerned,several external influences force SMHOs tore-engineer their business processes andutilize ITs. Education and training push ITsin SMHOs, as the incorporation of technologyin the hospitality curricula and trainingprovision provides a catalyst and promotesITs to the industry.Increasingly, the public sector recognizesthat ITs are critical for the competitiveness of private firms. They also recognize that smalland medium-sized enterprises are instrumen-tal for regional development and have a muchmore significant contribution to sustainabledevelopment than their larger counterparts.As a result, the European Union (EU), as wellas national and regional governments, con-centrate their efforts in providing incentivesfor enhancing the utilization of ITs by small  [ 201 ] Dimitrios Buhalis andHilary Main Information technology in peripheral small and medium hospitality enterprises: strategic analysis and critical factors  International Journal ofContemporary HospitalityManagement10/5 [1998] 198–202 firms (EC, 1996). Strategic partners are othermembers in the supply chain who are closelyinterrelated with SMHOs, such as inter-mediaries and suppliers. Tour operators havebeen instrumental in compelling travelagencies and handling agencies to utilize ITs,in order to facilitate co-ordination andenhance efficiency. Similarly, destinationmanagement systems need SMHOs to utilizeITs in order to be able to participate in thenetworking of destinations and the develop-ment of on-line reservations, and the develop-ment of extranets through Web casting andWeb technology. Hence, strategic partners,such as intermediaries and suppliers, canforce SMHOs to incorporate ITs and be repre-sented in the electronic commerce. FinallyITs suppliers also emerge to promote applica-tions for SMHOs and there is alreadystrategic partnering emerging with IT suppli-ers, e.g. Fexco and the Irish Tourist Boardand ATOS with the French tourism authority.Several pull factors can also be identified,as they provide incentives for SMHOs toincorporate technology. Perhaps the mostimportant factor is customer demand and theincreasing number of computer-literate con-sumers who are empowered by the Internetand tend to use networks for identifying andpurchasing various products. Hence, SMHOsshould start to realize that, unless they sat-isfy this need, they will fail to attract con-sumers. Thus, as SMHOs attempt to increasetheir market share, they would need to incor-porate more technology in order to enhancetheir direct communication with consumers.This also provides an opportunity fordisintermediation within the distributionchannel and empowers innovative SMHOs todistribute their products directly toconsumers enhancing their profit marginsand reducing their dependence on inter-mediaries (Hewson, 1996). Interconnectivitywithin the industry, facilitated by the devel-opment of the Internet, as well as extranetsand intranets, enables and empowers SMHOsto distribute and promote their hospitalityproducts at an affordable cost. A cost andbenefit analysis should illustrate that theycan displace some of their current marketingand promotional expenditure to the newmedia, as price differentials are offered in thenew channels, which promises a much widercoverage of the market and an efficient reser-vation/payment mechanism.Similarly with their strategic partners,SMHOs realize that in order to co-operatewith the travel trade they will need to utilizeITs. The cost of locating and arrangingaccommodation in hotels not represented inelectronic media, as well as attempting tocollect their commission afterwards, farexceeds the benefit (Beaver, 1995). Indepen-dent SMHOs, which appreciate the aboveissue, have formulated voluntary marketingorganizations or have joined internationalhotel consortia in order to improve theirrepresentation in the whole marketplace.The above analysis demonstrates thatseveral push and pull factors force SMHOs toincorporate ITs within their operational andstrategic management. Although these wereidentified by research at the three destina-tions to be the most important, a wide rangeof additional factors emerges and encourageshospitality organizations to re-engineer theirbusiness processes by incorporating technol-ogy. Perhaps the most pivotal change is therevolution experienced through the develop-ment of the Internet. The Internet is gainingcommercial viability and is particularlysuited to small business, where it enables thesmall business to keep its doors open 24 hoursa day, at minimal cost to customers all overthe world. Already, there are some successstories of small businesses enlarging theirdistribution channels on the Web (Hart, 1995).Software is now designed for those extra-,intra- and Internet connections allowingaccess to internal databases and applicationsand secure access from external sources.Hence, SMHOs which are not representedwill fail to bridge their distance with con-sumers and suffer competitive disadvantages. Conclusions Research in these peripheral regions of Wales, France and Greece demonstrates thatthe incorporation of ITs in SMHOs is notalways a rational managerial decision. It isoften associated with the dynamic relation-ships between stakeholders as well as anumber of other variables which are relatedto their characteristics. Figure 1 illustratesthat there are several interested parties in thewellbeing of the SMHOs, mainly owing totheir contribution to the local economies andregional development. Stakeholders adopt anumber of push and pull factors to forceSMHOs to utilize ITs. Research demonstratesthat some key stakeholders exercise a moreinfluential role in forcing SMHOs to utilizeITs, particularly technology partners.Perhaps most important, the public sector, asa stakeholder, increasingly appreciates thebenefits introduced by ITs and undertakesinitiatives to assist SMHOs to take advantageby improving their equipment and by formu-lating networks. Hence, the EU has recentlyoffered funding to develop systems toincrease the utilization of ITs by SMHOs andto represent them on the Internet (EC, 1996).These initiatives will be critical in the adap-tation process. Moreover, consumers may bethe key stakeholders in the industry, pullingtechnology through to hotels. SMHOs do not  [ 202 ] Dimitrios Buhalis andHilary Main Information technology in peripheral small and medium hospitality enterprises: strategic analysis and critical factors  International Journal ofContemporary HospitalityManagement10/5 [1998] 198–202 have the problem of “legacy” systems. Thusthey can design their systems to take advant-age of the emerging technologies, particu-larly Internet, extranets and intranets, with-out losing valuable data and, if any, technol-ogy investment. The rapid expansion on theInternet and the World Wide Web would seemto provide a unique mechanism for SMHOs todevelop their marketing and distributionmix. ITs also support SMHOs to develop part-nerships with the entire range of players inthe tourism industry and to establish net-works which will enable them to acquirevirtual size (Buhalis, 1997).Two of the major trends which will affectthe hospitality market in the near future are“mass customisation” and “disintermedia-tion”. Given that channels of distribution arealready evolving towards disintermediation,this direct contact will be crucial as suppliersof hospitality products who will need to beable to deal directly with customers andestablish effective “one to one marketing” of their products. This will only be possible withthe effective use of technology.Groth (1993) concurs that the likelihood of success in introducing technology isenhanced in a pull environment and that it ispossible to convert from a push to a pullscenario, which is what SMHOs have beenexposed to over the last few years. This iswhere interconnectivity, as well as customersand the travel trade, will provide the neces-sary marketing pull. Despite the current lack of co-ordination between stakeholders, itseems that a certain level of co-operation willbe essential in ordertofacilitate theITs’pene-tration to the benefit of peripheral locations. References Archdale, G. (1993), “Computer reservation sys-tems and public tourist offices”, Tourism Management  , Vol. 14 No. 1, pp. 3-14.Atkins, M. and Lowe, J. (1994), “Stakeholders andthe strategy formation process in small andmedium enterprises”,  International Small Business Journal , Vol. 2 No. 3, pp. 12-25.Beaver, A. (1995), “Lack of CRS accessibility maybe strangling small hoteliers, the lifeblood of European tourism”, Tourism Economics ,Vol. 1 No. 4, pp. 341-55.Buhalis, D. (1995), “The impact of informationtelecommunication technologies on tourismchannels: implications for the small andmedium-sized tourism enterprises”, PhDthesis, University of Surrey, Guildford, UK.Buhalis, D. (1997), “The virtual tourism enter-prise: concepts, practices and lessons”, ForoAnnual de Turismo: Fundacion Cavanilles deAltos Estudios Turisticos, Benidorm, Spain,November.Buhalis, D., Keeling, S., Lacorte, A. and Reynolds,N. (1997), “Technology in hospitality organiza-tions: the case study of La Plagne in France”,  ENTER 1997 Conference , January, Edinburgh,Springer-Verlag, Vienna, pp. 265-76.EC (1996),“Call for proposalsfortheestablishmentof a European co-ordination structure aimedat promoting the usage of electronic com-merce through the Internet network amongsmall and medium-sized companies operatingin the tourism sector and located in the lessfavoured regions of the Union”, Brussels.Edgar, D. (1996), “Capacity management: yieldingto the short break”, Yield Management Con-ference, Birmingham.Groth, J.C. (1993), “Critical factors in exploitingtechnologies”,  Management Decision , Vol. 13No. 3, pp. 34-48.Hart, P. (1995), “Introducing TravelWeb”,ABTECH Conference, London.Hewson, D. (1996), “To the seaside viahyperspace”, The Sunday Times , 26 May, p. 10.Main, H. (1994), “The application of informationtechnology in the independent hotel”, MPhilthesis, University of Wales.Moutinho, L. (1990), “Strategies for destinationdevelopment – the role of small businesses”,in Goodall, B. and Ashworth, G. (Eds),  Market-ing Tourism Places , Routledge, London.O’Connor, P. (1995), Using Computers in Hospital-ity Management  , Cassell, London.Poon, A. (1993), Tourism, Technology and Competi-tive Strategies , CAB, Oxford.Senker, P. and Senker, J. (1992), “Gaining competi-tive advantage from information technology”,  Journal of General Management  , Vol. 17 No. 3,pp. 33-47.Sheldon, P. (1997), Tourism Information Technol-ogy , CAB, Oxford.Whitaker, M. (1987), “Overcoming the barriers tosuccessful implementation of informationtechnology”,  International Journal of Hospi-tality Management  , Vol. 6, pp. 229-35.Wong, S.Y. (1991), “Strategic use of IT for smallbusiness”, Singapore Accountant  , September,Vol. 7 No. 9, pp. 15-21. Further reading Buhalis, D. and Main, H. (1997), “Catalysts inintroducing technology”, ENTER 1997Conference, January, Edinburgh, Springer-Verlag, Vienna, pp. 275-85.Cho, W. and Connolly, D.J. (1996), “The impact of information technology as an enabler on thehospitality industry”,  International Journalof Contemporary Hospitality Management  ,Vol. 8 No. 1, pp. 33-6.Porter, M. (1985), “Technology and competitiveadvantage”, The Journal of Business Strategy ,Winter, pp. 60-70.Price, R. (1992), “Technology transfer in the hotelindustry”,  International Journal of Hospital-ity Management  , Vol. 11 No. 1, pp. 3-23.Ruohonen, M. (1991), “Stakeholders of strategicinformation systems planning”, The JanuaryStrategic Information Systems (UIC) , Decem-ber, Vol. 1 No. 1, pp. 15-29.Wardell, D. (1987), “Hotel technology and reserva-tion systems: challenges facing the lodgingindustry”, Travel and Tourism Analyst  , No. 2,June, pp. 33-47.
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