The Application Of Information And Communication Technologies

Published Date: 02 Nov 2017

e-business may be defined as the conduct of industry,trade,and commerce using the computer networks.The term "e-business" was coined by IBM's marketing and Internet teams in 1996.

Electronic business methods enable companies to link their internal and external data processing systems more efficiently and flexibly, to work more closely with suppliers and partners, and to better satisfy the needs and expectations of their customers. Firms use more private and hence more secure networks for more effective and efficient management of their internal functions.

In practice, e-business is more than just e-commerce. While e-business refers to more strategic focus with an emphasis on the functions that occur using electronic capabilities, e-commerce is a subset of an overall e-business strategy. E-commerce seeks to add revenue streams using the World Wide Web or the Internet to build and enhance relationships with clients and partners. Often, e-commerce involves the application of knowledge management systems.

E-business involves business processes spanning the entire value chain: electronic purchasing and supply chain management, processing orders electronically, handling customer service, and cooperating with business partners. Special technical standards for e-business facilitate the exchange of data between companies. E-business software solutions allow the integration of intra and inter firm business processes. E-business can be conducted using the Web, the Internet, intranets, extranets, or some combination of these.

Basically, electronic commerce (EC) is the process of buying, transferring, or exchanging products, services, and/or information via computer networks, including the internet. EC can also be beneficial from many perspectives including business process, service, learning, collaborative, community. EC is often confused with e-business.

E-BUSINESS APPLICATION IN HOSPITALITY INDUSTRY

The application of the Internet in the business world has become a major trend in practice and generated a hot stream of research in the recent literature. The Internet, as a collection of interconnected computer networks, provides free exchanging of information. Over 400 millions of computers on more than 400,000 networks worldwide today are communicating with each other (Napier, Judd, Rivers, and Wagner, 2001). As such, the Internet has been becoming a powerful channel for business marketing and communication (Palmer, 1999), and for new business opportunities - as it is often called as "e-business" or "e-commerce" today (Schneider & Perry, 2001). This new virtual marketplace allows small companies competing with business giants by just having a better web presentation of their products/services. Under the same wave, online customers can enjoy a wider choice of products or services, more competitive prices, and being able to buy their favorite items/services from the sellers located thousands miles away. It provides communication between consumers and companies and through electronic data interchange (EDI), buyers and sellers can exchange standard business transactions such as invoices or purchase orders with remarkably easy.

E-commerce has been defined as "the buying and selling of products and services by businesses and consumers over the Internet". The Internet and e-commerce give consumers an opportunity - through the easy on-line information gathering and convenient online shopping - to be better prepared to purchase the right product (or service) at the right time (Schulze, 1999). New entrepreneurs and traditional small to medium sized businesses are the pioneers exploring on the forefront of e-commerce. According to a published survey, more than 90% of new entrepreneurs and starting businesses are using the Internet - to either enhance their existing business operations or to explore new business opportunities (McKendric,1999). Numerous studies have been reported about the Internet applications in business – including the application in the service operations, such as: the health care industry (e.g., webMD), banks and financial institutions (e.g., e-banking), and the hospitality & tourism industry (e.g., e-booking of hotel/motel rooms, airline tickets, etc.). Those Internet applications have attracted a great amount of attention from industrial practitioners and academic researchers, due to the fact that the information exchanging and sharing is a key part of those business operations, where the use of Internet will provide an advantage in the related information flow. Given the competition from powerful traditional businesses, a successful e-business can only occur if this business can satisfy its consumers' needs better than those traditional business approaches and provide consumers with at least one of the following advantages:

(a) lower price,

(b) wider selection,

(c) better choices,

(d) superior services, and

(e) more convenient.

One key issue for the e-business application in service operations is about the possibility of online delivery of the services customers ordered - as not all types of services (or products) can be delivered online, such as haircut (or hot cooked meals). Specifically, the services requiring customer participation (or the items demanding immediate delivery) are difficult (if not impossible) to be purchased and delivered online. In this regard, the online booking of hotel/motel rooms, airline tickets, advanced car rental, or a total travel package has become one of a few good example services - which can be inquired, checked, and ordered easily while conveniently communicated and delivered online with the Internet. In fact, the use of internet information delivery and on-line document printing has provided the backbone for the current stream of e-commerce – as it can overcome many traditional business obstacles and operational barriers by delivering access to global market and providing new leverage with old large powerful suppliers (Westerlund, 2000). In the current performance criteria for service operations, fast service delivery and prompt and reliable service have been identified as two key competitive priorities for the future Web-based service delivery operations (Verma and Young, 1997), while time-based competition through better customer service has been re-emerging as a major tool of delivering high-quality services to customers through a total operation cycle – including planning, design, processing, marketing, and distribution (Sue Abdinnour-Helm, 2000).

The hospitality industry has followed the trend of Internet application in recent years, and sometimes even gaining its own name of Internet application - called "e-traveling" referring to all travel related business transactions now completing through Internet include: customer acceptance and satisfaction, services rendered, value added for both the travel businesses and consumers, privacy concerns, profitability, operational risks, and competition from traditionally non-traveling firms. Smaller traveling agencies, among others, are more interested in the application of Internet to gain certain competitive edges over their larger counterparts.

E-BOOKING RECENT TRENDS IN HOSPITALITY INDUSTRY

It has been reported that the online booking in the hospitality industry (including hotel/motel, airlines, travel packages, etc.) is increasing at a very rapid speed recently, especially at the lower rate end, (Deegan& Horan, 2003). Online hotel room bookings has been increased by six times just during last four years (from 1999 to 2002) from $1.1 billions in 1999 to $6.3 billions in 2002. As a result, its percentage as of total annual bookings is increased over 400% - from about 2% in 1999 to 9% in 2002. It has been projected a more rapid jump in the online hotel room bookings for the next few years – reaching $15.8 billions in 2005 and account for 20% of total annual bookings.

Year

1999

2000

2001

2002

2003

2004

2005

Annual Bookings

(in Billions)

$1.1

$2.8

$4.2

$6.3

$9.9

$11.8

$15.8

As % of Total

Annual Bookings

2%

4%

6%

9%

13%

16%

20%

More significantly, the groups who are now going online bookings are those of business travelers and above-the-average vacationers – who are traveling more frequently than the average publics. Targeting great deals while still in control of their search process, those online bookers claim that more than often they are able to book a hotel room at much lower rate online comparing traditional phone reservation systems or old styled travel agents (e.g., to book a high end hotel room in New York city under $200/night).

The hotel industry is certainly full aware of this trend and fully willing to contribute its share in this effort. In fact, the industry has realized that during those early forays into cyberspace, the industry didn’t view e-booking strategically (many hotels simply considered online room bookings at the time as a way to pick up additional business by selling distressed inventory through those online travel agencies), and handed over too much control of inventory and pricing to those third party online travel agencies, and now the industry is in the unenviable position of trying to take back the reins after early shopping patterns have been established. While the pressure to sell their inventory rooms online will be continuing, the industry has developed its new online strategy striving to get a better grip on this emerging marketing channel.

First, now every hotel/motel chain has developed its own website in which bargain hunters can book their hotel rooms online – other than though an Internet travel agency. By 2002, over 51% of the total annual online bookings of $6.3 billions were earned through hotels’ own websites (i.e., remaining 49% were through those specialized online travel agencies). Another attempt by the industry is to change its early agreements with those online travel agencies – from old "merchant model" where hotels making rooms available to online travel agencies at wholesale rates and the agencies marking up those rates by 15% to 30% before peddling them to the public at fixed prices for fixed periods of time to a new "sharing model" where the hotels will have more control of their rooms via online booking by providing a higher priority to their own websites over the websites of those third-party travel agencies. Thirdly, other than allowing those online travel agencies to profit for an average 20% from original wholesale prices, some hotel chains now offer a more competitive price on their own websites to directly compete with those online travel agencies. For example, Six Continents PLC chain (including: Holiday Inn and Inter-Continental) and Starwood Hotels & Resorts Worldwide Inc. (including: Sheraton and Westin) both started to promote their special online packages since May 2002 – which are guaranteeing the best price deal available on all online websites. The slogan of their programs is "If a customer is able to get a better rate for the same room on another website within 24-hour of booking, the company will not only match that price, but beat it by extra 10%." Both companies reported increased online bookings on their own online systems. Another effective strategic decision by the industry is to form an online allies with a single combined e-booking website. In this effort, for example, five major hotel chains (Hilton, Hyatt, Marriott, Six Continents, and Starwood) launched their allied online booking website - <Travelweb.com> in 2002 to serve as their rival directly to those online travel agencies (e.g., hotels.com or Travelocity.com). This combined discount room site provides negotiated cut-rate deals at more than 10,000 properties and nearly 100 hotel brands. The claimed advantages to online room hunters include: a better deal in room rates, a direct link to all airlines’ websites, reservations are made directly into hotels’ systems to eliminate any potential snafus, and a fast payments to hotels where rooms are booked online. And finally, the hotel/motel industry has realized the importance of flexibility and thus developed new programs to provide hotels with more flexible room offerings and pricing schedules on an available-as-needed-basis.

While the e-booking of airline tickets has reached about 26% of total annual sales in 2002, the online hotel room booking is just account for half of that proportion – 13% to total annual hotel room bookings. As every two out of three hotel rooms are currently booked through traditional telephone reservation systems, the industry has predicted more quick increase in online room bookings during next few years – as the Internet technology becomes more popular and the access to the Internet becomes more easy and convenient to the public. As a result, a clear trend is that the hotel room bookings through both traditional (in-house) travel agency and traditional hotel telephone reservation systems has been declining year after year. Both hotel chains and existing online travel agencies have seen those potentials and prepared for the coming competition.

Year

Online Travel Agency

Tradition Travel Agency

Hotel Chain

Own Website

Hotel Telephone Reservation

Individual

Walk-In

Customers

2001

3%

21%

3%

63%

10%

2002

5%

20%

5%

60%

10%

2005

9%

18%

11%

53%

9%

The competition among all online travel agencies has been intensified during the past years. As the end of 2002, current major players in the e-booking business include: Hotels.com, Expedia, WorldRes, Travelocity, Priceline, and Orbitz.com, and their market shares in 2002. As a pioneer, Hotels.com is the current market share leader (with 34%), followed by Expedia (30%), and Travelocity (15%). These market share percentages, however, are just snapshot of the time and will be more dynamic as the competition is expected to go deeper in a near future. It is noteworthy that the newcomer Travelocity has climbed into top three among all major Internet-based travel agencies in just a few years – through its effective business strategy and operations.

There certainly are some challenges and issues in the application of Internet technology in the hospitality industry (including e-booking). One major obstacle addressed most in the practice is the security concern. Customers are certainly concerned of giving their personal financial information (e.g., a credit card numbers) online, and many old-fashioned customers somehow afraid to pay an invoice through Internet. Another issue challenged to the online booking is the quality of delivered service - including both delivery speed (i.e., short advance time required in ordering) and delivery reliability (i.e., the rooms booked are available on check-in times). It has been predicted that in the travel industry to be successful in long-term, the operations of an online booking business must compete in a more creative way comparing to those traditional business counterparts. That is, the strategic positioning decision of an online booking business must establish its own unique competitive advantages over its traditional business competitors as well as its online business counterparts.