Information technology applications and competitive advantage in ...

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Information technology applications and competitive advantage in hotel companies Anil Bilgihan, Fevzi Okumus, Khaldoon “Khal” Nusair and David Joon-Wuk Kwun Rosen College of Hospitality Management, The University of Central Florida, Orlando, Florida, USA

IT and competitive advantage 139 Received 22 January 2011 Revised 16 March 2011 Accepted 24 March 2011

Abstract Purpose – This paper aims to propose a conceptual framework that illustrates how information technology (IT) applications may lead to competitive advantage in hotel companies. Design/methodology/approach – The paper is written based on a synthesis of previous literature in this area. Findings – Multiple areas need to be carefully evaluated in developing and implementing IT projects so that they can lead to competitive advantage in hotel companies. There are four closely related areas when analyzing IT decisions in hotels, which include coherence between the business strategy and IT decision, types of IT applications, intended benefits of IT decisions, and decision-making style. Technology sophistication, management skills, and integration of resources are key issues when implementing IT decisions. Investments into IT applications in hotel companies can lead to superior IT competencies and IT capabilities, which can subsequently result in lower cost, agility, innovation, added value for customers, and better customer service. However, not all IT investments may result in positive outcomes or their sustainability may be short lived. In addition, there can be a lag time between making IT investment decisions and seeing their intended outcomes. Practical implications – There are multiple areas and issues that need to be considered in making and implementing IT investment decisions if they are to contribute to the company’s competitive advantage. Hotel companies need to be selective in their IT investment decisions and look at each IT investment from the strategic management perspective. Originality/value – This is one of the first articles in the hospitality field that offers a theoretical framework on how IT applications can lead to competitive advantage in hotels. It also offers numerous theoretical and practical implications. Therefore, this paper should help hotel executives and researchers in evaluating IT projects in hotel companies. Keywords Information technology, Competencies, Competitive advantage, Hotels, Lodging industry, Technology, Applications, Investments Paper type Literature review

1. Introduction Information technology (IT) investments play a critical role in managing hotels strategically. Efficient and timely deployment of new IT applications may offer opportunities for enhanced guest services to meet increasing customer expectations, improved cost control, more effective marketing strategies, and expanded opportunities for hotels (Law and Jogaratnam, 2005; Piccoli, 2008). It is evident that IT investments will increase hotels’ productivity, reduce their costs, and at the same time add value to the services and products offered to their customers. Therefore, investments into IT applications in hotels have increased over the past decades (Armijos et al., 2002; Ham et al., 2005; Piccoli, 2008). There is a need for extensive research studies that

Journal of Hospitality and Tourism Technology Vol. 2 No. 2, 2011 pp. 139-154 q Emerald Group Publishing Limited 1757-9880 DOI 10.1108/17579881111154245

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thoroughly examine how investments in IT applications can lead to creating sustainable competitive advantage for hotel companies. The existing literature on this topic in the hospitality field is not yet conclusive and there have been limited conceptual and empirical studies into this area. Having identified the gap, this study aims to discuss how IT investments can lead to competitive advantage in hotel companies; and to propose a theoretical framework that illustrates the links between IT applications and competitive advantage. 2. IT applications and competitive advantage As shown in Figure 1, there are multiple areas that need to be identified and evaluated when looking at whether and how IT applications can lead to competitive advantage in hotels. The first area is analyzing the investment of IT decisions, which is discussed below. 2.1 Analysis of IT decisions in hotels There are five closely related areas when analyzing IT decisions in hotels, which are: (1) coherence between the business strategy and IT decision; (2) types of IT applications; (3) intended benefits of IT decisions; (4) financial standing of the company and available financial resources; and (5) decision-making style. It is expected that there should be coherence between the business strategy and functional strategies of a hotel company (Okumus, 2003; Okumus et al., 2010). Managers should therefore justify and illustrate how their IT investments will support the hotel company’s overall business strategy or the hotel units’ competitive strategies. Otherwise, such IT proposals/projects may not be fully supported by the hotel’s owners and the management team. Siguaw et al. (2000) indicate that hotels are likely to focus on a select set of technology initiatives that are tied to a specific strategy. Within low value-added lodging segments (i.e. budget, economy, and midscale), hotels are likely to pursue ITs that increase operating efficiency; whereas within high value-added lodging

Low cost

Speed

IT capabilities Analysis of IT decisions

Figure 1. IT and competitive advantage

• Coherence between the business strategy and IT decision • Types of IT applications • Intended benefits of IT decisions • Financial standing/available resources • Decision making style

Implementaion of IT applications IT • Technology sophistication competencies • Management skills • Resource integration • Integration of IT with other systems

Value added Competitive advantage Creating dynamic capabilities

Agility

Innovation

Customer service

sectors (i.e. upscale and luxury), hotels are likely to initiate technological improvements that increase the quality of service delivery to the guest, the key is to defining business strategy and choose IT investments accordingly. The second area is determining the type of IT applications that the hotel company will invest in. Hotels may invest in IT applications purely for front of the house, back of the house or both. Some IT applications may be used by customers, managers, and employees whereas some IT applications may be for special functional areas such as human resources management, finance and accounting, and sales and marketing. For example, customers not only want IT applications faster, but they also want better value and higher quality. Customers are well informed, empowered, and capable of using self-service IT capabilities. Thus, hotel companies are now forced to use IT to reinvent their operations and maximize customer value; self-check-in kiosks are examples of such matter. The shifting business paradigm needs hotels to be more customer oriented, responsive, flexible, quick, innovative, and collaborative. For instance, in 2008, Sheraton Hotels & Resorts and Microsoft introduced a new hotel guest experience with Microsoft Surface, which was Microsoft’s first commercial surface computer. Surface units are placed in the lobbies of select Sheraton hotels aiming to offer an experience that would bring interaction, connectivity, and a social setting to the lobby, providing guests with an entirely new way to explore local highlights and enhance their hotel stay (Microsoft, 2008). Customers may also have different IT needs and expectations. For instance, business travelers may expect hotels and airlines to provide online check-in. On the other hand, leisure travelers may request more in-room entertainment amenities. Meeting and incentive travelers may require specific IT applications for their meetings and conventions. Put it simply, each customer segment may need and request different types of IT applications (Victorino et al., 2005). According to a recent AHLA (2008) survey, hoteliers’ perceptions indicate that the most important technologies to customers are Wi-Fi hotspots, in-room entertainment systems, and kiosks for airline check-in/boarding passes, respectively. Berezina and Cobanoglu (2010) reveal that the most important in-room technologies for male travelers are express check-in/check-out, high-speed internet access, and easily accessible electrical outlets, whereas easily accessible electrical outlets, guest control panel, and high-speed internet access were identified as the most important in-room technologies for female travelers, respectively. Hospitality-linked ITs can be broadly categorized under back-office operations and front-office requirements. Back-office technologies include software solutions for inventory management, financial reporting, menu management, security management, green technologies, labor management, data management, etc. Front-office technologies mainly revolve around the point of sale and property management system (PMS). Ham et al. (2005) divide IT applications of the lodging operations into four categories: front-office applications, back-office applications, restaurant and banquet management systems, and guest-related interface applications. Figure 2 shows the examples of different types of IT applications in hotels. Figure 3 shows the hotel technologies in chronicle order. The third and equally important area is identifying the cost of the IT project and its intended outcomes from it. Certainly, cost of each IT project and its projected return on investment are carefully assessed. The major factors driving technological implementations in hotels are increased transaction volumes through consolidations,

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Front office applications • Reservation system • Check-in/check out • Room status and housekeeping management • In-house guest information functions • Guest accounting modules

Restaurant and banquet management systems • Menu management system • Sales analysis • Beverage control system

• • • • • •

Back office applications Personnel Purchasing module Accounting modules Inventory module Sales and catering Generating financial reports and updating statistics

• • • •

Guest-related interface applications Call accounting system Electronic locking system Energy management systems Guest-operated devices (e.g., in-room entertainment) Auxiliary guest services (e.g., voice mail)

•

Figure 2. Examples of different IT applications in hotels

Source: Developed by the authors based on their literature review Hotel technologoies

19

64

0's

te 7

La

47 19

19 65

19

06

80's

90's 77

Allowed for hotels to connect to each other Off-site application, internet acccess Greater exposure (web sites) The microcomputer was introduced Interface between TV and PMS Remote check-in/check-out Allowed for the development of hotel application Properly management systems (PMS)

0's 200

72

19

Teletype machines enable 1965 holiday inn introduces "Holidex" instantaneous confirmations the world's first computerized reservation system of reservations

Figure 3. Hotel technology chronicle

APEX standards for meeting planners XML data maps EDI

20

1947

Hotel system interfaces allow other hospitality related systems to "talk" to the property management system (PMS), Westin hotels 1964 Pan American airline developed PANAMAC, Airlines expanded their systems Call accountiong introduces "Hoteltype" POS the industries first reservation system to allow travel agents Coded key cards to book hotel rooms. Voice mail systems Color TV in guestrooms

More amenities in guestroom Hotel technologies

The first models of telephone systems

complex-reporting requirement, and international communication needs. IT investments can assist hotel companies to initiate new products and services proficiently. They may provide benefits such as improved operational efficiency, cost reduction, decision support in the areas of planning and business strategies, and enhancement of brand image, product quality, and customer loyalty (Cash and Konsynski, 1985; Cash et al., 1988; Ives and Learmonth, 1984; Keen, 1991; McFarlan, 1984; Porter and Millar, 1985). Literature on IT investment has addressed market measures (Guilding and Pike, 1990), lead and lag (Hu and Plant, 2001), stock market reaction, and market valuation of the firm. IT investments using accounting measures, such as return on assets, return on investment, and return on sales, have been examined, demonstrating mixed results relative to positive correlations with IT investment (Sircar et al., 1998; Strassman, 1997). Sriram and Krishman (2003) support the view that the stock market considers

investments in IT as a significant and value-increasing activity for the average firm. This is also consistent with Brynjolfsson and Yang’s (1998) findings. Likewise, Farrell et al. (2003) focus on IT expenditures and the many factors that firms struggle with when determining proper spending levels and strategies. They concluded that companies tend to spend on IT inefficiently. Firms are susceptible to under-invest in some areas, particularly in weak-financial periods, missing opportunities to increase productivity, reduce costs, offer greater customer service, or achieve competitive advantage. Conversely, firms usually overspend in financially strong periods; frequently buying into hype that promised huge returns on investments in trendy hardware/software solutions, sometimes just copying their competitors often resulting in disappointment and disillusionment. It is not the IT itself that can lead to the competitive advantage, but rather, how that IT project is selected, implemented and used, what it provides to the company, and what IT can present in the future that makes a difference in competitive advantage. For example, Farrell et al. (2003) state that, with the intention of leveraging IT effectively, firms cannot easily limit IT spending and spur management to cut down the technology budgets at any cost. The fourth area is the financial standing of the company and availability of resources for IT projects. For example, deployment of an IT project may be highly needed and many executives and managers would fully agree with it. However, if the hotel company’s financial standing is not strong enough and the company does not have financial resources due to internal or external reasons, the IT project may not be feasible (Anckar and Walden, 2001; Khemthong and Roberts, 2006). Accordingly, it can be stated that the hotel company’s current financial situation is crucial in determining the type and the scale of IT decisions. Finally, when making IT decisions, it is suggested that participation and input from different management levels and functional areas should be sought. This is because such participation may provide constructive feedback and input into this process does not only lead to gaining support from different management levels and functional areas but also secure resources for IT projects. Lack of participation and input from other functional areas can lead to resistance to the project from different management levels and functional areas (Barson et al., 2000; Okumus, 2003). 2.2 Implementation of IT applications There are four key areas in implementing IT projects, which are: (1) technology sophistication (Bu´rca et al., 2006; Sigala et al., 2004); (2) management skills (Teece and Pisano, 1994; Yuan et al., 2003); (3) integration of resources (Sigala et al., 2004); and (4) integration of IT projects with other systems (Dong et al., 2009). The link between IT sophistication and company performance has received some attention in the literature over the years. Bu´rca et al. (2005) advocate that in order to call a firm technologically sophisticated, a company should possess a robust scientific-technical base; new technology should quickly make existing technologies obsolete and new IT applications should create new demand or revolutionize markets and demands. Bu´rca et al. (2006) investigate the relationship between service practices, service performance, business performance, and IT sophistication. Their study pointed


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out that IT sophistication moderates the services practice-service performance relationship. Supporting this, Okumus (2001) illustrates how two large hotel companies had to rely on external IT companies in developing and implementing their specific projects since both hotel groups lacked IT sophistication. Possessing management skills are the second key area when developing and implementing IT decisions. Literature supports that managerial capabilities influence the way technology is developed, deployed, and used in organizations (Teece and Pisano, 1994; Yuan et al., 2003). According to Mata et al. (1995), managerial skills include management’s ability to conceive of, develop, and exploit IT applications to support and enhance other business functions. IT management skills include: . The ability of IT managers to understand and appreciate the business’ needs of other functional managers, suppliers, and customers. . The ability to work with these functional managers, suppliers, and customers to develop appropriate IT applications. . The ability to coordinate IT activities in ways that support other functional managers, suppliers, and customers. . The ability to anticipate the future IT needs of functional managers, suppliers, and customers (Mata et al., 1995). Without management skills, the full potential of IT for a firm cannot be realized. Compared to technical skills, managerial IT skills require a longer time to develop. Arguably, managerial skills are innate skills and simply not teachable (Bruhn et al., 2010). For example, it was noted that management’s understanding of IT projects and their potential contribution to the company’s performance was important for American Airline’s ability to develop the SABRE system (Copeland and McKenney, 1988). Integrating resources is another important area to consider in developing and implementing IT projects. The foundation of resource integration points out the maximization of competitive advantage of a firm through combining and utilizing valuable resources. That is, firms are viewed as attempting to find the optimal resource boundary through which the value of their resources is better realized than through other resource combinations (Das and Teng, 2000). The resource-based “strategic necessity hypothesis” claims that IT creates advantage by leveraging or exploiting existing human and business resources (Clemons and Row, 1991). Literature also supports that sophisticated IT users do not outperform less sophisticated users, however, the ones that combined IT with critical complementary human and business resources did gain performance advantages (Powell and Dent-Micallef, 1997). Sigala et al. (2004) reveal that hotels that had more sophisticated technologies and combined these technologies with their other resources achieved higher productivity scores than those using technologies for automation only. Additionally, IT projects need to be integrated with other projects and systems to ensure that they are user friendly, reliable, secure, responsive, flexible, easy to maintain, accurate, and measurable. Information systems integration is a critical issue for hotels since the industry is data driven. Owing to the significance of sharing customer information from across departments and properties, integrated IT systems are required to enable employees to exchange and share knowledge. IT integration is all about interoperability, which refers to the ability of diverse software and hardware systems to manage and communicate

electronic product and project data smoothly. Furthermore, efficiency and effectiveness could be the end-results of IT integration. For instance, RFID minibars that are connected to the PMSs could provide instant reports, inform the room service when a room is out of a specific kind of beverage, and also it could post charges to guests’ folio. Another example is energy management systems that are connected to the PMS that front-desk agents could remotely set the temperatures once a guest checks-in or checks-out. IT-driven concepts, like supply chain management, enterprise application integration, knowledge management, customer relationship management (CRM), and enterprise resource planning, are having remarkable impacts on firms (Cachon and Fischer, 2000; Ghosh, 1998; Kim and Mauborgne, 1999; Lumpkin et al., 2002). For example, the study by Olsen and Connolly (2000) suggests that the premise of information age is that firms in the future will build their success on how much they know about their customer, how they will provide them with information about their products and services, and how they will profitably distribute those products and services in an information environment. CRM is a great example of getting to know customers better. 2.3 Developing IT capabilities and IT competencies to create competitive advantage Deployment of IT applications can help organizations create IT capabilities and IT competencies (Bhatt and Grover, 2005; Vogel, 2005). IT capabilities mainly focus on internal efficiency and reducing cost and they may lead to transforming key business processes and practices into IT capabilities that significantly streamline and integrate the value chain, eliminate or reduce redundant or non-valued processes. On the other hand, IT competencies have an external focus and represent the collective learning of an IT organization (Vogel, 2005). Key IT competencies include flexible internet infrastructure, business to customer (B2C), business to business (B2B), customer self-service, IT value added to products, IT value added to services, and IT innovation. Vogel (2005) conducts a study with IT executive respondents from 2002 to 2003 CIO 100 award winners of CIO magazine and reveals that IT competencies and IT capabilities significantly affect competitive advantage of a firm. One may question what competitive advantage is and how companies can create competitive advantage. There are three different views on creating competitive advantage, which are the positioning view, the resource-based view, and dynamic capabilities view. The positioning view relies on Porter’s (1985) views. According to Porter, companies should choose one of the three competitive positions in the market place if they want to achieve and maintain competitive advantage. The first position is cost leadership where a firm aims to achieve competitive advantage by achieving a cost leadership position in the market. The differentiation position implies that a company must offer something unique and rare. The focus strategy has two options: focus differentiation and focus cost leadership. The former one aims to achieve differentiation by offering a superior and unique product or service to a niche segment. The focus cost leadership strategy aims to achieve cost leadership position by targeting a niche segment in a specific geographical area. Porter suggests that only one of these three generic strategies should be followed rather than trying to follow all or two of them simultaneously. According to the resource-based view, it is essential to look at the company’s resources when evaluating competitive advantage of a company (Barney, 1991;


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Grant, 1996). In this view, if resources and capabilities to create competitive advantage, they should be “valuable”, “rare”, “inimitable”, and “unsubstitutable”. In terms of value, resources should contribute to the performance of an organization or a destination whereas being rare refers to being owned by very few companies or destinations. In addition, it is suggested that those resources and competencies should not be easily imitated and substituted by competitors. In order to create and maintain competitive advantage, possessing such resources and competencies is not sufficient alone. Sustainable competitive advantage is achieved by developing distinctive competencies and offering unique positive experiences. The dynamic capabilities view builds both on the positioning view and the resource-based views. This view suggests that companies should have the capacity to renew competencies to achieve congruence with the changing business environment, innovative, fast, and timely responses are required and critical (Teece et al., 1997). Dynamic capabilities are defined as a “firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments” (Teece et al., 1997, p. 516). Thus, the dynamic capabilities view suggests that companies have to develop dynamic capabilities to be able to offer superior products and services in the fastest and efficient way in response to the developments and changes in the market place. Each of the above three views competitive advantage provides specific propositions regarding the creation and maintenance of competitive advantage. However, there is one commonality among these views, which is that in order to create competitive advantage; companies should find a way to differentiate themselves from their competitors. This can be achieved either through positioning your company (the positioning view), offering unique products and services (resource-based view), or creating unique and complementary dynamic and timely capabilities to respond to fast changing market conditions (the dynamic capabilities view). Supporting the aforementioned discussions, the interdisciplinary literature reviews (Barney, 1991; Bharadwaj et al., 1993; Eisenhardt and Brown, 1998; Helfat and Peteraf, 2003; Rindova and Kotha, 2001; Sanchez, 1993; Stalk et al., 1992; Teece and Pisano, 1994; Teece et al., 1997; Vogel, 2005) suggest that IT investments can lead to developing IT capabilities and dynamic IT competencies, which can lead to achieving the following six closely interrelated outcomes: (1) low cost; (2) value added; (3) speed; (4) agility; (5) innovation; and (6) customer service. Low cost refers to providing products/services at the lowest costs (Huo, 1998; Siguaw et al., 2000). It can help a hotel company offering services at a lower cost ratio. For instance, Vintage Inns installed an enterprise system that would allow the hotel to sell benefits to guests and combine the separate guest histories from their four properties into one database in order to increase booking efficiency. The system allowed the hotel to manage the properties centrally and reservation staff had

the ability to book rooms for any property from any of our hotels. Staff only needed to learn one product, one screen, and one process, moreover, they can see where guests have stayed in the past, track the experience they had with them. The system has increased the staff efficiency by 15 percent and improved data accuracy by at least 50 percent with the elimination of re-keying guest information between systems, furthermore, the system decreased the training time of the employees significantly. Another example is that Morrissey Hospitality installed yield management system at two of its luxury properties. Two months after installation RevPAR increased significantly and according to Smith Travel Research, their occupancy beat their competitors by 30 percent (Hotel Online, 2003). Lately, the new trend “green technologies” also yields to cost savings in hotels by cutting down on operating costs (Compton, 2010). Value added refers to offering products and services, which are highly desirable and have distinct features/functionalities. Creative and innovative use of technology that enhances the value of offered services will be the means by which hotels differentiate themselves from their competitors (Lee et al., 2003). IT could be a primary catalyst that helps hotels innovate their service offers and add value to what they offer their internal and external customers. For example, guest-room technologies, such as electronic, ordering system, TV check-out, and electronic and video entertainment services can be value-adding services. IT has not only improved in-room services, but has also increased choices in entertainment. City center hotels, whose clientele are primarily business travelers, are more likely to equip their rooms with advanced in-room technologies as opposed to hotels in more remote or resort locations. Speed refers to systems and processes that offer faster and superior services and products. For instance, hotels can increase the speed of housekeeping departments with guestroom status indicators. Once a guest asks for his/her room to be cleaned, he/she can choose within the room and a message will be delivered to the hotel staff. Guests can also use self-check-out through their television to facilitate and speed the check-out process. Back-office IT solutions provide numerous ways to speed up various departments; Hyatt Hotels & Resorts announced a migration to Microsoft’s cloud-based Business Productivity Online Suite to provide unique e-mail addresses for 17,000 tethered employees, and purchased licenses to provide e-mail to an additional 40,000 “deskless” associates. This cloud computing initiative provided significant functionality in HR systems such as providing employee schedules via e-mail (Lorden, 2010). RFID minibars that report inventory immediately are another example that could increase the speed of folio posting in hotels. Agility refers to the ability to manage change faster than competitors. IT-driven agility could be achieved via decision support systems (DSS) in hotels. Business intelligence (BI) is one of the latest developments of DSS. It offers imperative tools for analyzing and presenting data to hotel managers such as trend analysis so they can make more informed decisions. Hotels store massive amount of operational data, generated by daily transactions, in operational databases. These databases contain detailed information whereas managers need aggregate, summary information in decision the making process (Rus and Toader, 2009). By utilizing BI, the data from separate source systems are loaded into a data warehouse through a process of extraction, transformation, and loading. The data are then transformed in useful information and knowledge that enables agility in hotels.


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Innovation refers to the continuous flow of new products and services, which are valued by the customer. Managers are seeking to incorporate IT innovations as a mean of attaining competitive advantage, specifically through improved guest services, increased employee productivity, and enhanced revenue generation (Siguaw et al., 2000). For instance, technological innovations designed to improve employee productivity included voicemail, and interactive guides that allow automation of the service delivery system, thus reducing the guest-communications workload of the front office and concierge staff and allowing time for a greater focus on other guest services. In order to achieve innovation through an IT project, hotel managers should continually seek new technologies. X-Room, short for “Experimental Guestroom”, is located in a Marriott hotel and includes innovative technologies that are valued by the guest such as a Nintendo Wii gaming console (Coleman, 2008). Hotels could also generate revenues with such innovative technologies by charging the guest for the used amenities or services. GUESTROOM 20X is another example that demonstrates innovative technologies for hoteliers. The room represents HFTP’s vision as the information source for the lodging industry by exhibiting how future guestrooms can mix high-tech touches with a soft-touch delivery to make a guest’s stay the ultimate experience. The room includes innovations from high-definition artwork that changes to match a guest’s mood to the more practical self-cleaning shower (HITEC, 2010). Customer service refers to a superior responsiveness to customer needs. For example, Marriott’s reservation system manages the booking of more than 355,000 hotel rooms globally. This system delivers Marriott a priceless opportunity to gather information about the characteristics, habits, and preferences of their guests. As a matter of fact, the 12 million customer profiles stored in Marriott’s frequent-lodger program establish the largest such database in the lodging industry (Lee et al., 2003). This information allows Marriott to cross-reference the personal profiles of customers with product preferences. By doing this, Marriott is able to target incentives and promotions with unprecedented precision and offers distinctive customer service. Trump SoHo implemented Cisco solutions for the hotel network, pervasive wireless access, and unified communications in order to provide highly personalized guest experience (Business Technology Partners, 2010). Hotel employees wear a wireless IP voice badge that operates over the same Cisco Unified Communications system used for typical voice calls. When the bellhop asks the guest’s name at the door, the check-in staff hears so that a moment later they can greet the guest by name. When guests arrive in their room, the color display on the IP phone shows a personalized welcome message. Furthermore, guests can use the IP phone’s touchscreen for voicemail, weather by zip code, airport information, and e-mail. Employees can also use the in-room phones in order to confirm that a room is ready for the next guest. The room attendant enters a code on the phone, which updates the PMS. Finding out right away that a room is ready helps the hotel to accommodate guests who would like to check-in early thus improving customer service. The above six areas are closely related as one positive outcome in one area may positively impact others. In fact, IT can increase staff efficiency by providing the ability to communicate and collaborate from anywhere on the property and empower staff members to create personalized guest experiences. For instance, an employee who directs a guest to the spa can alert the spa that the guest is on their way and greet them by name, thus improving the guest’s overall experience.

BI solutions are beneficial time management tools and allow managers to make necessary adjustments at any time as information becomes more readily available. BI tools will help hotel managers access instant reports instead of waiting until the end of the period. They can optimize usage and schedule resources, adjust labor schedules and supply orders, maximize the hotel’s profitability, increase customer profitability, and RevPAR. Managers can also pinpoint and give priority to the most profitable guests by knowing and predicting guest trends, profitability, and preferences. 2.4 Lag time Response lag time is defined as the time it takes competitors to respond in a way that erodes a firm’s competitive advantage, and represents the delay in competitive response (Piccoli, 2008). Technology investments pay dividends over time, and the lag time between technology expenditures and payback can be lengthy (David et al., 1996). It may take some time for employees to be efficient with and become accustomed to the new technology. Response lag perspective suggests that competitive imitation occurs in stages (MacMillan, 1998, 1989). As previously stated, following the dynamic competences view, ability to develop timely dynamic competences fast leads to competitive advantage. Therefore, shorting this lag time is crucial in developing and implementing IT projects. 3. Conclusions and recommendations This paper has proposed a framework to illustrate how IT applications may lead to competitive advantage in hotel companies. Based on the above discussions, a number of conclusions and recommendations can be proposed. As shown in Figure 1, there are multiple phases and areas to be identified and evaluated when looking at how IT applications can lead to competitive advantage in hotels. The first area is analyzing investment of IT decisions. There are five closely related issues when analyzing IT decisions in hotels, which are coherence between the business strategy and IT decision, types of IT applications, cost and intended benefits of IT projects, financial standing of the company, and decision-making style. In order to achieve IT-induced competitive advantage, it is advised that hospitality managers consider the above issues very closely. The second area/stage is the deployment of IT projects in which hotel companies need to consider technology sophistication, management skills, integration of resources, and integration of IT projects with other systems. IT investments can help hotel companies develop IT capabilities and IT competencies which lead to achieving the following closely interrelated outcomes: low cost, added value, speed, agility, and customer service. The final issue to be considered in deployment of IT projects is that they pay dividends over time, and the lag time between IT investments and payback can be lengthy. To conclude, this paper review suggests that IT capabilities and IT competencies can help hotel companies achieve competitive advantage. However, it is worth noting that it is not the IT applications that offer the competitive advantage to a hotel company, but rather, how IT applications are developed, implemented, integrated with other areas and systems help hotel companies to develop dynamic capabilities to achieve competitive advantage. This article contributes to the hospitality field by offering a theoretical framework on how IT applications can lead to competitive advantage in hotels. It should assist hotel executives and researchers in evaluating IT projects in hotel companies.


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The framework developed in this study can be used as a guide or checklist to analyze and evaluate forthcoming and current IT initiatives by critically looking specific tasks and requirements to be undertaken and considered under each phase of the IT project and also whether the proposed IT projects will deliver those intended outcomes. The proposed framework can help practicing managers to map out how to prioritize IT spending and resource commitments and whether and how the project can support the company in achieving competitive advantage. In terms of future research, we further suggest that following the framework developed in this paper, a semi-structured interview schedule can be developed and data can be collected from hotel executives, hotel managers, and hotel chief IT officers. Furthermore, the framework can assist hospitality scholars in developing and testing a survey empirically by developing specific statements related to each area of the proposed framework. Empirical findings from such interviews and surveys can provide additional insights into how IT projects can lead to competitive advantage in hotel companies. References AHLA (2008), “Current and future technology use in the hospitality industry”, available at: www.ahla.com/pressrelease.aspx?id¼22574&terms¼wi-fi (accessed January 17, 2011). Anckar, B. and Walden, P. (2001), “Introducing web technology in a small peripheral hospitality organization”, International Journal of Contemporary Hospitality Management, Vol. 13 No. 5, pp. 241-50. Armijos, A., DeFranco, A., Hamilton, M. and Skorupa, J. (2002), “Technology trends in the lodging industry: a survey of multi-unit lodging operators”, International Journal of Hospitality Information Technology, Vol. 2 No. 2, pp. 1-18. Barney, J.B. (1991), “Firm resources and sustained competitive advantage”, Journal of Management, Vol. 17, pp. 99-120. Barson, R.J., Foster, G., Struck, T., Ratchev, S., Pawar, K. and Weber, F. (2000), “Inter-and intra-organisational barriers to sharing knowledge in the extended supply-chain”, paper presented at the eBusiness and eWork Conference and Exhibition, Madrid. Berezina, E. and Cobanoglu, C. (2010), “Importance-performance analysis of in-room technology amenities in hotels”, Information and Communication Technologies in Tourism 2010, Springer, Vienna, pp. 25-37. Bharadwaj, A.S., Varadarajan, P.R. and Fahey, J. (1993), “Sustainable competitive advantage in service industries: a conceptual model and research propositions”, Journal of Marketing, Vol. 57, pp. 83-100. Bhatt, G.D. and Grover, V. (2005), “Types of information technology capabilities and their role in competitive advantage: an empirical study”, Journal of Management Information Systems, Vol. 22 No. 2, pp. 253-77. Bruhn, M., Karlan, D. and Schoar, A. (2010), “What capital is missing in developing countries?”, American Economic Review, Vol. 100 No. 2, p. 629. Brynjolfsson, E. and Yang, S. (1998), “The intangible costs and benefits of computer investments: evidence from the financial markets”, unpublished manuscript, MIT Sloan School, Cambridge, MA. Bu´rca, S., Fynes, B. and Brannick, T. (2006), “The moderating effects of information technology sophistication on services practice and performance”, International Journal of Operations & Production Management, Vol. 26 No. 11, pp. 1240-54.

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Corresponding author Anil Bilgihan can be contacted at: [email protected]

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