Introduction
The
hospitality industry began to utilize information technology (IT) more than
three decades ago well before many other industries (Berchiolly, 1997 &
Hensdill, 1998 as cited in Heart, Pliskin, Schechtmen & Reichel, 2001).
According to Laudon & Laudon (2010), IT infrastructure is defining as the
shared technology resources that provide the platform for the firm’s specific
information system application. IT infrastructure is including investment in
hardware, software and services that shared to the entire business unit in the
firm or organization. Cost for implementation the IT infrastructure is very
expensive and higher based on the services that includes during the
investments. For example, investments in infrastructure account for between 25
and 35 percent of information technology expenditures in large firms (Weil et
al. 2002 as cited in Laudon & Laudon, 2010).
Cost
benefit ratio or profitability index will define as contrast of the present
value of an investment decision or project with its initial cost (Business
Dictionary.com, 2011). In other word, it defines as a ratio of whether or not
how much profit will result from an investment. In this situation, the cost
benefit ratio of purchasing IT infrastructure in hotel means the comparison of
future profit that will get after purchase the IT infrastructure with
preliminary cost of purchase itself. This ratio will calculated by taking the
net present value of IT infrastructure and dividing by the original cost of
purchasing the IT infrastructure. If the ratio is greater than one, it
indicates that the purchase decision for the IT infrastructure in hotel is a
viable or practical to the organization.
The hospitality industry is one of the fastest
growing industries worldwide. In the US alone, according to the US Department
of Commerce, the number of non-American tourists increased by 23% from 39.4
million in 1990 to 48.5 million in 1999, while revenues from these tourists
grew by 64% from $58.3 billion in 1990 to $95.6 billion in 1999 (Heart,
Pliskin, Schechtmen & Reichel, 2001). It is generally understood, however,
that without advanced IT infrastructures any industry’s ability to compete
globally could be jeopardized and in danger. It is also becomes a question
whether hotels are equipped with the appropriate IT infrastructures required
for eBusiness and eCommerce competition in global markets or not.
Content
Nowadays,
the implementation of IT infrastructure in hotels is very important. The IT infrastructure
has advantages and disadvantages to the hotel. It is depend on the how the
hotel organization manage the IT infrastructure itself. The advantage that
hotel will get are improve performances of hotel services and increase the
revenue of the hotel itself. The performance of hotel services will improve by
using IT because all the management and operation tasks will be done using the
IT infrastructure. For example, during reservation or check-in process of hotel
guest is done using the specific software such as Fidelio or Opera. The hotel
revenue also will increase when IT infrastructure is implement in the hotel
using promotion that are done by sales and marketing department in the website.
Hotel guest will make online reservation for check-in to the hotel. This will
lead to the increase in sales revenue of hotel rooms.
However, the disadvantages of IT
infrastructure is cost that need for the investment and controlling is quite
expensive. The hotel organizations should calculate the cost-benefit ratio
first before purchase the IT infrastructure to ensure that they will get
benefits from the investment. The calculation that need to be consider are cost
for instituting and maintaining control systems of the IT and benefits or
saving that hotel derived by purchasing the infrastructure. The hotel
organization also need to know about the actual cost of owning technology
resources including the original cost of acquiring and installing hardware and
software and ongoing administration costs for upgrades, maintenance, technical
support, training and even utility and real estate costs for running and
housing the technology (Laudon & Laudon, 2010).
According to the cost-benefit ratio,
hotel organization will make its own decision whether or not they purchase
their own IT infrastructure or rent them from external provider. If too much is
spent on infrastructure, it lies redundant and constitutes a drag on hotel financial
performance. If too little spent, important business services cannot be
delivered and the hotel’s competitors that spent the right amount will
outperform the under-investing hotel. Thus, hotel will identify on how much
should the hotel spend on IT infrastructure using six questions from
competitive forces model for IT infrastructure investment.
The first point is market demand for
hotel services. The hotel should make an inventory of the services that it
currently provides to the customers, suppliers and employees. Do some research
or survey to each group and identify if the service that provide meeting the
needs of each group or not. For example, is there any complaint received from
customers, employees and suppliers about the hotel services such as slow
response to customer’s queries regarding prices, difficulty for finding the
right information about jobs and difficulties of discovering hotel production
requirements. All the information about the market demand is important to the
hotel for establish their own business strategy.
The second point is hotel business
strategy. The business strategy is a detailed plan for achieving success in
business (Oxford Advanced Learner's Dictionary, 2010).
Every organization has to figure out what it wants to achieve and then how it
is going to make it happen, with its products, services, customers and
operations. For example, the hotel should analyze five-year business strategy
or future strategy of the hotel and try to assess what new services and
capabilities will be required to achieve strategic goal. The hotel establish
their own goal which is to gain more profit every year after invest in the IT
technology. The hotel provides better quality of services to ensure that
customer is satisfied and return to buying their services or products.
The third point is the hotel
information technology (IT) strategy, infrastructure and cost. The hotel must
examine information technology plans for the next five years and assess its
alignment with the hotel business plans. For example, the hotel plan that in
future they want to upgrade the IT technology for improve their performance in
giving service to the customer. So, the hotel should do the budget about the
cost that includes in the upgrading process. The total IT infrastructure costs
also must be determined in order to perform a total cost of ownership analysis.
There are nine infrastructure components in total cost of ownership which are
hardware and software acquisition, installation, training, support,
maintenance, infrastructure, downtime and space and energy. If the hotel has no
IT strategy, they need to devise one that takes into account the hotel’s
five-year strategy.
The fourth point is information
technology assessment. The hotel should avoid them from behind the technology
curve or at the bleeding edge of information technology. This is because an
organization not desirable to spend resources on advanced technologies that are
still experimental, often offensive and sometimes unreliable. The hotel needs
to spend on technologies that have well established standards. The IT vendors
also should be well chosen because they are competing on cost, not design and
they are multiple suppliers.
The fifth point is competitor hotel
services. The hotel organization should try to assess what technology services
competitors’ offer to their customers, suppliers, and employees. They should
know the new services or techniques that used in the competitor organization.
Try to compare with our own services and establish quantitative and qualitative
measures. If our hotel’s service levels fall short, our hotel is at a
competitive advantage. The hotels must looking for the solution for improve our
hotel service levels if it fall in long period of time. The quick solution from
problem that occurs will help our hotel develop and improve the performance.
The last point in purchasing
decision for IT infrastructure is the competitor of hotel IT infrastructure
investments. Hotel should benchmark their expenditures for IT infrastructure
against our competitors. Many companies are quite public about their innovative
expenditures on IT. If competing firms try to keep IT expenditures secret, the
hotel may be able to find IT investment information in public companies’ SEC
From 10-K annual reports to the federal government when those expenditures
impact a firm’s financial result. The hotel did not to spend as much as their
competitors but perhaps it is discovered much less expensive ways of providing
services and its can lead to a cost advantage.
Conclusion
As
a conclusion, hotel business nowadays has its own challenge which is the
business growth rapidly. There are many new hotel was develop in order to cater
the demand of customer for lodging accommodation and food and beverage
services. The existing of new hotel will lead the management of the hotel to do
an aggressive business strategy for attract customer to come to their hotel.
Therefore, the technology-based business model is one of the solutions of this
problem. Hotel organization needs to invest in IT infrastructure for
formulating their business strategy. They must used IT for update the
information about the hotel, services and product that are provide in the
hotel, doing the promotion, sales marketing, managing the operation of hotel
and communicate with the customer, supplier and workers in the hotel itself.
The
IT investment that hotel make must give benefits to them. They should not
purchase the IT assets if it will make them suffer the higher cost or expenses
without giving any advantages to them. The top level management of the hotel
must evaluate the cost-benefit ratio before make decision to buy the IT
technologies. All the important factors in making purchasing decision must be considered
to avoid any loss to the hotel organization. But, if the hotel spends far less
in the IT investment than their competitors, they will experience commensurate
poor performance and losing market share in the business.
Besides
that, the hotel also will take another solution besides purchasing the IT
infrastructure which is rent them from external provider. This solution will
help the small hotel for operating their services without need to invest more
money for purchase the IT assets. It also gives an opportunity to the small
company for implement the use of IT in their organization. Rent from the external
provider is also one of the good solutions. Lastly, the solution guidelines
include using a competitive forces model to determine how much to spend on IT
infrastructure and where to make strategic infrastructure investments, and
establishing the total cost of ownership of information technology assets.
References
American Hotel & Lodging Association. (2006). Hotel
technology infrastructure. Retrieved November 10, 2011, from http://www.ahla.com
Heart,
T., Pliskin, N., Schechtmen, E., & Reichel, A. (2001). Information
technology in the hospitality industry: The Israeli scene and beyond. Information Technology & Tourism, 4,
41-64.
Laudon,
K. C. & Laudon, J.P. (2010). Management
Information Systems: Managing the digital firm. New Jersey: Pearson
Prentice Hall.
Oxford Advanced Learner's Dictionary (8th ed). (2010). New York: Oxford University
Press.
Reid,
R. D., & Sandler, M. (1992). The use of technology to improve service
quality. Cornell Hotel & Restaurants Administration Quarterly, 33(3),
68–73.
Van
Hoof, H. B., Collins, G. R., Combrink, T. E., & Verbeeten, M. J. (1995).
Technology needs and perceptions. Cornell Hotel & Restaurants
Administration Quarterly, 36(5), 64–69.
Zwass,
V. (1996). Electronic commerce: Structure and issues. International Journal of Electronic Commerce, 1(1), 3-23.
