1 Adoption of Information Technology (IT) in Hospitality
LEARNING GOAL
- Understand the importance of information technology adoption in hospitality
OBJECTIVES
- Know several critical concepts in IT
- Understand the role of hospitality IT
- Distinguish among the factors leading to IT adoption
Critical concepts
Information technology (IT) represents one of the most important aspects of contemporary life. Since the emergence of the computer and related devices, humans have continuously found new ways to interact with technology and develop new applications that make our life easier. Hospitality is no exception. Although it seems to be counterintuitive, hospitality, which is fundamentally grounded in human interaction, has found clever ways to use IT to optimize the way businesses are managed and to create great experiences for consumers. This section covers the role of IT in hospitality and explains several critical concepts that define IT in hospitality.
Information technology (IT)
IT in hospitality refers to the information and communication technologies used by hospitality and tourism business, which help organizations fulfill their business functions that result in value for all stakeholders: consumers, businesses, governments, the public. It is a broad concept that includes a variety of technologies and systems and has impacted the hospitality and tourism industry for a long time (Gretzel et al., 2020). For example, it includes general IT concepts such as, computers, servers, networks, Wi-Fi connectivity, but also hospitality-specific systems, such as property management systems, inventory management systems, or dining room management systems.
Systems
Within the context of this course in hospitality IT, the word “system” refers to any computer or computer-based IT that allows a user to complete a task. For example, the software and hardware used for paying for a meal in a restaurant, generally called “point of sale system”, is one of the most commonly-used systems in hospitality.
Information systems (IS)
While there are many accepted definitions of information systems, this course uses Piccoli and Pigni’s (2018) definition of information systems as “a formal, socio-technical, organizational system designed to collect, process, store, and distribute information” (Piccoli & Pigni, 2018).
It is very important to view IS as tools that help users to complete tasks (Ferratt & Vlahos, 1998). In the world of IT, a task represents an activity that can be done by using an IS. For example, checking-in into a hotel is considered a task, which can be completed using the computers at the hotel’s front desk and the property management system available to the staff members using those computers. Also, making reservations on an online travel agency’s website can represent a task. It can be completed using multiple systems, which include a website, a payment gateway, data provided to the website through multiple distribution systems, and the networks that allow for the transmission of data.
Role of hospitality IT
It is very important to understand the role of IT in hospitality. It is difficult to conceive that there could be hospitality organizations that do not have access to technology or do not use any technology at all. In fact, many small businesses or even individual vendors use technologies to facilitate certain tasks that are fundamental to the commercial process. For example, vendors at the farmers’ market use technologies such as mobile payment systems or apps to take advantage of convenience and security during their transactions with their consumers. It is also very important to recognize that IT is one of the greatest forces of change in almost any industry, but especially in hospitality. The hospitality is very diverse from multiple points of view, and using IT is critical to optimizing some of the specific tasks of the hospitality industry and creating superior value.
Traditionally, when looking at the evolution of IT in hospitality, one could see that IT started being used predominantly in the back-of-the-house (e.g., business office), to reduce the errors and perhaps to crunch numbers. Over time, as it evolved, new utilization contexts have been found for many of the technologies available today have become available for use in all operational areas of a business. For example, one area that traditionally did not use a lot of technology was inventory management. Today’s development in IT has created opportunities for restaurants to use software that allows them to have a better understanding of the items entering and exiting inventory, which illustrates better how the restaurant is managed. But perhaps the most interesting aspect of IT in hospitality is its continuous evolution. Systems become obsolete quite quickly, and the vendors of hospitality IT are always competing against the clock to develop new systems that are increasingly powerful and reliable. This creates an evolutionary state that gives hospitality businesses a variety of choices. Now hospitality organizations adopt IT to their own way of conducting business to offer better services and become more strategic and efficient.
Co-creating value using IT
It is very important to recognize that consumers always seek value when they interact with a business. They pay money to receive a specific bundle of products and services, generically called “experiences”. In return, they expect that the consumption of the experiences results in value. In the simplest way, value is defined as the difference between benefits and the costs resulting from the use of a product/service. In other words, if a consumer obtains more benefits from the consumption of an experience than the costs, the consumer will appropriate value. Consumers will always seek to maximize that value. They do that by learning as much information as possible about the products, services, or experiences they plan to buy prior to buying them.
Given the hospitality industry’s products characteristics, it is difficult to assess the value prior to purchasing. Yet, given the interactive nature of hospitality products and services, consumers can actually change the value proposition initially offered by businesses by interacting with business during the process of consuming the experiences. For example, a consumer in a restaurant can tell the server to add or remove ingredients from a dish, making it customized for that particular consumer. This way, by interacting with the server, the consumer receives a higher value, as the benefits of a customized product overweigh the cost. At the same time, the business obtains more value because now the consumers is happier. So this encounter resulted in a better value for both the business and the consumer, in a process that is called co-creation of value. In other words, consumers and businesses interact during the process of service consumption to figure out the best way to improve that experience, and appropriate more value. Hospitality technologies facilitate these kinds of interactions, especially when both organizations and consumers are connected through apps, texting platforms, review websites or simply communicate properly.
Why hospitality IT
It is very important to understand why hospitality should use it. Not all hospitality businesses are the same in terms of their number of consumers, number of employees, type of business that they are in, or experiences they sell. However, they all have something in common: they produce experiences that they try to sell to a carefully-selected group of consumers. It is important to recognize that, despite the diversity, hospitality organizations are ultimately in the business of producing and selling a combination of goods and services (experiences), therefore having unique characteristics. Such unique characteristics call for a different utilization of IT than in other organizations. Therefore, it is important to recognize these characteristics in order to better understand how IT can be used successfully and eventually result in value for the consumers. This logic assumes that hospitality is information-intensive, due to several characteristics.
Heterogeneity
First, the industry is heterogenous. It means that, despite the best efforts of the hospitality businesses to provide experiences that are consistent and similar over time, due to the human factor involved in hospitality, the experiences may vary from one service setting to another. For example, the consumer can go to a restaurant and purchase their favorite dish, but that experience could be different if the consumer goes to the same restaurant at different times or is served by different servers. Therefore, to reduce the heterogeneity or at least to communicate to the consumers that it’s OK to have some degree of heterogeneity, IT will go a long way. Specifically, review websites and apps can help consumers understand that various consumers with different tastes and preferences are generally happy with a restaurant and its services.
Intangibility
It is important to recognize that the hospitality industry experiences are generally intangible. That means that they cannot be smelled, touched, or felt before actually buying and consuming them. For example, a consumer wishing to stay in a hotel can go online and look at pictures of the hotel room that he or she wants to book. However, the consumer will not know anything about specific aspects of that stay in that room until he or she books the room and stays in it. For example, the consumer would not know how noisy the room would be, how the view would look like, how close to the elevator the room would actually be, how the room would smell, or how much light there would be in the room. IT can help take away some of this intangibility by providing a lot of information about how the experience will be provided. For example, there are many websites feature reviews, pictures, videos, that can provide more detailed information about the specifics of particular rooms or hotel properties. This way, consumers using such IT can make better informed decisions.
Perishability
Perhaps one of the most important characteristics of hospitality is perishability. It means that the products and services that hospitality sells cannot be stored and resold the following day. For example, if a flight has 150 available seats and the airline was only able to sell 100 seats before the departure time of the flight, it cannot repackage and resell the remaining 50 seats the following day. The opportunity to sell those seats would expire at the time when the flight departs. While this is one of the most critical problems of hospitality, IT can help in selling unsold inventory at the last minute. For example, there are websites that give consumers access to last-minute unsold inventory, which is pushed to these websites by hospitality businesses wishing to sell all their inventory according to their marketing strategies.
In conclusion, hospitality IT allows the industry to mitigate some of its characteristics and sell experiences that are valuable for both consumers and businesses. Without IT, it would be more difficult and expensive for businesses to sell these experiences, and will make it difficult for consumers to make informed purchasing decisions.
How users adopt IT
Importance of IT adoption
It is very important for hospitality businesses to deploy the right technologies. For this reason, businesses compete for resources and are trying to use technology strategically. However, one important question mark for businesses is whether or not the consumers would use the technologies that are available to them. For example, imagine that a hotel installs a check-in kiosk in the lobby and hopes that the consumers would use the kiosk instead of checking-in at the front desk. A very important question for the hotel would be to predict the extent to which consumers will actually use the kiosk. In other words, the hotel is interested in finding the rate of consumers’ “adoption” of the kiosk. In the world of IT, adoption is perhaps the most important concept. It reflects users’ intentions to use and their behavior of using a technology that is available to them (Herrero, San Martín, & Collado, 2018). Ideally, organizations that provide IT would like to know the rate of adoption before making the investments of installing such technologies, but this is difficult to know. However, in the past 30 years, IT researchers have found several ways to obtain insight into the potential adoption of IT by users. While researchers have developed multiple theories that predict how users adopt a new technology, several important factors that influence users’ adoption have been found. Such factors predict quite accurately the extent to which a user is likely to adopt a technology and are discussed below.
Performance of a system
Performance expectancy (or usefulness) represents a user’s perception that a specific system would allow them to complete a task better than rival systems (Venkatesh, Thong, & Xu, 2012). For example, consumers will adopt a check-in kiosk in a hotel lobby if that kiosk allows them to check in faster than using the front desk. Also, consumers will adopt a mobile payment system, such as Apple Pay in a restaurant, if this payment system allows them to pay faster and more securely than paying with cash or handing a physical credit card to a server. Of the variety of factors that influence consumers adoption of IT, performance expectancy is the most important. This is why, companies installing technologies in hospitality have to ensure that such systems do actually help the consumers complete their tasks, instead of just being nice artifacts. It is also critical for hospitality businesses to do their due diligence and only install technologies that are reliable and allow consumers to complete their tasks predictably, securely, and without error.
Effort necessary to use a system
Effort expectancy (or ease of use) represents a user’s perception that a specific system allows them to complete a task without much mental or physical effort (Venkatesh et al., 2012). In other words, for users to adopt an IT, it has to be easy to use and intuitive to learn. Consumers do not want to spend a lot of time figuring out new systems, and systems that are not necessarily easy to use could be rejected easily especially in dynamic environments such as hospitality. This is why many systems today are designed with ease of use in mind, with intuitive interfaces, with large buttons, with a similar navigation structure and flow of views as a lot of other software or devices that are used outside hospitality. For example, hotel websites include the sign up/sign in buttons on the top right corner of the websites’ home pages, which is similar to many other websites outside hospitality. By using these kinds of designs, businesses are likely to guide users through effortless use of such technologies and facilitate adoption.
Research are still debating the role of effort expectancy. Some researchers found that ease of use is not as important as performance expectancy (Morosan, 2016). That is, users are likely to adopt technologies that are even difficult to use when such technologies allow them to complete tasks clearly better than other systems. For example, Microsoft Excel has increasingly incorporated advanced features, and it takes a while for a user to become familiar with these features. However, Excel is superior in many ways to competing products, and users are likely to eventually learn to use Excel despite the steep learning curve that is necessary to master some of its advanced features. The same can be said about a variety of other systems that are designed for other specific tasks, such as Adobe Photoshop or Adobe Dreamweaver.
Other factors
Apart from performance and ease of use, which are critical factors in the adoption of new IT, there are many other contextual factors that influence adoption. For example, consumers’ social influences are critical to IT adoption (Graf-Vlachy, Buhtz, & König, 2018). In other words, a user is influenced to use a particular system if their friends, family, or coworkers that have an influence on the user are generally agreeing that using such a system is a good idea. This is especially important as consumers can find a lot of information about the use of specific IT on online media, such as review sites or social media. Moreover, factors such as customers’ habits also could lead to adoption (Morosan & DeFranco, 2016). For example, if a consumer has a smartphone and likes to use their mobile wallet app to pay for a variety of things whenever possible, that consumer is likely to use the same app when purchasing from a hospitality business. Therefore, if a restaurant or cafe accepts mobile payments, the consumer is likely to use that particular system. Another important factor in adoption is the playfulness of a system, which denotes the ability of a system to allow the user to interact spontaneously with the system, playing and having fun with it (Morosan & Jeong, 2008). For example, many IT vendors include entertainment features in their systems, such as games, fun challenges, which allow consumers to entertain while they are using such systems. This kind of entertainment value produces engagement, and consumers are more likely to develop positive attitudes towards such systems when they are engaged, facilitating adoption.
Another group of factors influencing IT adoption is represented by users’ perceptions of security and privacy. Security refers to the perception that a system is secure, and that it can be used without being breached. In contrast, users’ perceptions of privacy refer to the extent to which consumers using the system believe that using such system influences their privacy. These two factors are extremely important, especially when using systems that rely on consumers to disclose their personal information. For example, some consumers may not be comfortable using biometric systems or digital assistant technology when traveling or staying in hotels. Finally, there are some factors that pertain to the very specific nature of the user. For example, consumers’ demographics have been shown to influence adoption. Needless to say, younger and more affluent customers tend to have a stronger technology orientation than other people, which could create use outside of hospitality, which in turn could result in adoption of hospitality IT.
Overall, the factors discussed above could influence adoption. However, it is important to note the not all the factors have exactly the same impact on consumers adoption of all technologies. A business wishing to install new technologies must do their due diligence to find exactly how their specific target consumers would interact with such systems prior to installation. This way, businesses can avoid costly installations, and develop an IT infrastructure that consumers can happily adopt to increase the value of their experiences.
Evolution of hospitality IT
To better understand the role of IT in hospitality, is important to know its evolution. This provides a good sense of where hospitality IT is going, what have the users adopted over time, and what types of tasks it allows us to complete.
While hospitality existed for many years, the use of IT is relatively recent. Some of the first types of applications where the early accounting systems, where the computers have been used in order to reduce the number of errors and provide an accurate representation of transactions in the accounting systems. The use of such applications was mostly used to improve efficiency, to reduce errors, and speed up some routine operations. Then, in the 1960s, some hotels and airlines introduced early computerized reservation systems. This was important because the travel market was growing, and more consumers than ever before were traveling. As a result, it was difficult to handle the larger number of reservations without error. For example, a reservation at a Hilton hotel had to be made by a person calling a call center, which would make an expensive long-distance phone call on behalf of the consumer to the location where the reservation needed to be made. This was laborious and prone to error. Computers helped with the accuracy of such reservations and freed up human resources to do other tasks.
In the late 1960s and early 1970s, central reservation systems have been developed, as the market was growing at unprecedented rates, and a larger number of users making reservations exceeded the capabilities of non-computerized labor. Central reservation systems are large computer systems that allow information about reservations to be stored and processed, giving hotels, travel agents, and the ultimate consumers an opportunity to make and change reservations automatically without error. The 1970s and the 1980s marked the development of property management system integration with central reservation systems, therefore allowing individual hotel properties to electronically manage their inventory of rooms and room rates, and push that information electronically to travel agents. This kind of integration also contributed to reducing errors and optimizing the speed of communication between hotels and other businesses that are involved in the sale of hotel rooms.
An important development in the evolution of IT was the Internet in the late 1980s and early 1990s. Businesses realized the value of developing websites and eventually published websites that allowed customers to buy products directly online. This created situations where the websites became the primary promotional and marketing tools for a lot of hospitality businesses. Recognizing the importance of websites for purchasing hospitality experiences, a new type of businesses has emerged: online travel agencies (OTAs). They offered substantial value to consumers by providing comparisons and opportunities to purchase from multiple vendors on the same website. This level of functionality and convenience facilitated strong adoption by the consumers and eventually changed the dynamic of distribution of hospitality experiences. In other words, the traditional brick-and-mortar travel agencies no longer held significant power in the hospitality value chain, and they were replaced by OTAs such as Expedia, Travelocity, or Booking.
The 2000s marked a new step in the development of hospitality IT. Social media became important in gathering reviews about any hospitality business, and new types of websites were developed to sell hospitality products. For example, websites such as TripAdvisor or Yelp, provided reviews, helping consumers decide which hospitality products to buy, and giving them a voice to create reviews, post photos, and basically share their experiences online. In addition, given the high rate of adoption of OTAs, quite a few OTAs have emerged. Therefore, the multitude of such websites made it difficult for consumers to find the best deal easily, as they had to go to multiple websites looking for the best deal. This created opportunities for new businesses to develop websites designed to help consumers search better. For example, websites such as Kayak or Google Flights allow consumers to go online and find the best hotel rate or airline ticket using searches across multiple websites with only a few clicks. This level of optimization and convenience offered to consumers facilitated a high adoption rate for these kinds of systems.
A new wave of development was caused by the strong adoption of mobile devices, especially of smartphones. Along with the smartphones, the consumers adopted mobile applications or apps. Apps offered convenience for the consumers on devices that were always on, connected to the Internet, and easy to carry with them. This facilitated a new wave of adoption of hospitality-related apps, as now the consumers could buy hospitality experience using their mobile devices. They could basically complete all the tasks that were previously available only from a computer from their mobile device, increasing the level of convenience and optimization. In addition, new behaviors emerged, such as texting, using smartphones during downtime, which allowed consumers to learn more about various experiences that they could buy, or be persuaded by push marketing.
Finally, in the 2020s there are a lot of new trends in hospitality IT. In addition to incorporating advanced IT such as artificial intelligence, big data management, robotics, businesses have started to realize the true value of IT for both businesses and the consumers. On the one hand, many businesses have figured out the balance between the amount of technology that they want to incorporate on their experiences and the amount of traditional hospitality interactions that they want to provide to their guests. On the other hand, new businesses have found opportunities to consolidate and offer to consumers yet additional levels of convenience. For example, the emergence of super apps, which incorporate multiple apps into the same app platform, allow consumers to book various aspects of a trip without leaving the app, such as booking the hotel, finding transportation, finding a flight, buying meals, writing reviews, buying attraction or event tickets, and making payments.
As one can see, there are plenty of opportunities for hospitality businesses to incorporate IT and deliver superior value to their guests. There are virtually unlimited ways in which IT can be used to facilitate new tasks for consumers, and to rewrite the rules of hospitality and blend it with IT. This creates a hospitality industry that could be seamlessly integrated by IT, while retaining its legacy function of providing great hospitable services. In the next chapters we will learn more about how specific IT do that and how can hospitality businesses and consumers retain the best value from these efforts.
References
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