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Chpater 10 The future of hospitality and tourism E-commerce and information technology.

LEARNING OBJECTIVES

After you complete your study of this chapter, you should be able to:

* Describe new technology trends.

* Understand new e-commerce paradigms.

* Grasp new e-commerce strategies.

* Understand the issues, problems, and barriers in hospitality and tourism e-commerce and information technology.

* Understand the implications of all those changes.

10.1 NEW TECHNOLOGIES, NEW PARADIGMS, AND NEW STRATEGIES

While much dot-com e-commerce has either disappeared or merged and the market is experiencing a major shake-up in adopting the new reality, there are plenty of indications that consumer interest in e-commerce is actually picking up. The hospitality and tourism industry has not only survived the downturn in e-commerce and related technologies but also flourished when other industries are having a difficult time.

New technologies are being introduced into the market almost on a daily basis, which in turn opens up new territories and new possibilities in hospitality and tourism e-commerce. With new technologies, new paradigms are being created, and therefore new strategies are being formed to compete in this ever changing but profitable world of e-commerce in the hospitality and tourism industry.

10.2 NEW TECHNOLOGY TRENDS

In considering development trends in technology, you need to understand the needs of humankind for communication, information distribution, and business transactions. Just as the Internet is the result of our relentless quest for instant, real-time, and 24/7 communication, future developments in technology will need to solve the remaining issues for communication and business.

BROADBAND AND SPEED

The dial-up modem connection to the Internet has become a bottleneck for the complicated needs of human communication. Large chunks of data transmission, such as video, graphics, and other multimedia, require a lot of bandwidth, which the traditional dial-up telephone line was not designed to handle. Broadband will be key in solving this problem. The diffusion of broadband technology among Internet users will greatly increase the appeal of hospitality and tourism e-commerce since the intangible nature of hospitality and tourism services requires much more visual information and interaction over the Internet than any other industry.

Broadband technologies such as DSL, ISDN, cable, fiber optics, satellite, and radio wireless will become the norm in the future. At that time, the question will change from 'What can you put onto the Web that consumers can view without difficulty?' to "What can you do to make your presentation and communication more effective?" As competition heats up in providing these services and prices drop as a result of this competition, consumer adoption of broadband technologies will rise quickly.

At the same time, hospitality and tourism businesses will continue to look on broadband technologies as their major offering for consumers demanding broadband services. Today, most major hotel chains have installed broadband high-speed Internet connection in their hotel rooms and business centers. Increasingly, travelers are expecting every hotel to have such a connection, just like they expect cable television in every room.

MOBILITY AND ACCESSIBILITY

Travelers need to access information not only 24/7 but also wherever they have a need to do so. Mobility and accessibility are key in meeting the needs of the consumers. Wireless and satellite communication provides such a solution to solve the problem. Handheld devices, such as PDAs (personal digital assistants) and cell phones will take the market lead in the years to come.

A more advanced wireless technology that seems to be made just for the travelers has evolved: location-based technology. With this technology, travelers who either know their location or where they are headed input their address or the destination address. The service provider that uses this technology can then find restaurants, stores, theaters, and so on for the traveler. This technology can also provide interactive functions that permit people in different locations to communicate via IM, play tic-tac-toe together, or view restaurant listings together to decide where to meet (Gutzman 2001).

INSTANT MESSAGING (IM)

IM is a live chat and e-mail service that enables you to find your friends when they are online and send messages or talk via a private chat room. With IM, each user has a private list of instant messaging addresses, and the instant messaging system can be set to alert you when someone on your list is online. You can leave an e-mail message for a user who is not available online. Hospitality and tourism e-commerce can use this technology to send customized information ranging from travel conditions to flight cancellation.

CONVERGENCE OF TECHNOLOGIES

Another development will be the convergence of all communications media through the Web. This does not necessarily mean that all communications will take place on the Web; rather, the Web will serve as a central communication platform where means of communications merge with each other to create the most powerful and convenient information distribution, communication, and e-commerce channels.

Convergence refers to the integration of voice, data, and video into a single, IP-based network. We have already seen the process of convergence happen before our eyes. The wide spread use of Intranet and Extranet by hospitality and tourism businesses has speeded up this convergence process. Destination marketing organizations (DMOs) begin to use the Internet as a central platform for streamlining functions of marketing, travel information distribution and customer service. Hotels' property management systems (PMS) are not only transformed by the use of Intranet, but also become accessible to customers by way of extranet, providing 24/7 customer service.

As a whole, twenty-six percent of the Global 2000 are already migrating towards a converged network, and 42 percent plan to do so within the next two years (Blacharski, 2002). There is a good reason for this trend. Companies not doing so could be in a serious competitive disadvantage. It's true that infrastructure investments can cost a lot of money, but they can save revenue by reducing the total cost of ownership. In addition, there are other benefits in terms of business empowerment, which includes increasing organizational speed and efficiency, flexibility, and better support for a mobile workforce. Furthermore, with the same IP network, companies can run video over the network for teleconferencing, a feature that can potentially accrue tremendous savings in travel.

INTEGRATION OF BUSINESS AND E-COMMERCE TECHNOLOGIES

Related to the trend of the converging of different technologies is the trend to integrate e-commerce technologies into the daily operations of hospitality and tourism businesses. The motivation behind this trend is twofold. First, the development of new technologies has made it possible for businesses to use Internet technologies to transform their old business technology solutions into an integrated system. Second, and more important, is the drive to cut costs in the adoption of new technologies.

The need to reduce costs is urgent. As technology plays an increasingly important role in maintaining competitive advantage by increasing efficiency and effectiveness in business operations and customer service, the need to adopt new technologies is no longer a luxury but a life-and-death issue for most businesses. The question is how to strike a balance between spending and adopting new technologies.

The answer is not an easy one, but a general rule can be applied. Only when the adopted new technologies become integrated into a business operation can it save money and increase productivity. Failure to do so will result in costly expenses and inefficient and ineffective use of technology.

VOICE RECOGNITION

Another technology that has been around for a while but is receiving new interest is voice recognition, part of the artificial intelligence quest of humankind since the introduction of the computer. With voice recognition, travelers can free up their hands while driving or doing fun things by speaking to voice recognition devices, such as handheld computers, instead of typing on a keypad. For instance, through a voice command service, a traveler can use a wireless device (either a handheld computer or a PDA), get e-mail and have it read or receive a response, and get headlines and make reservations.

TRACKING TECHNOLOGIES

Yet another technological development will be tracking technologies. These technologies are needed by e-commerce companies to get users to visit their sites, allow shoppers to easily find and buy the products they need and enable electronic customer relationship management (e-CRM) by customization and personalization.

With these technologies, new paradigms and strategies arise that will determine whether an e-commerce business will survive and profit from the great potential that the Internet has to offer. In the next two sections, we discuss some of these new paradigms and strategies.

WIRELESS COMMUNICATIONS

The Internet has speeded up the process of globalization and technological innovation. As a result, wireless technology is growing at great speed worldwide. As pointed out elsewhere in this book, the United States lags behind other nations in terms of the popularity of wireless usage. However, this is changing. It is estimated that 137 million Americans are now equipped with some type of wireless service (Hospitality Sales and Marketing Association International 2002), and the possibilities that this presents for the hospitality and tourism industry are far reaching and endless.

Key wireless technology applications are emerging quickly to meet the needs of the travelers. Already in use or being improved are applications such as location based services (the ability to locate cell phones to send information), voice command service (basic voice recognition technology), multimedia (viewing short videos, like trailers for movies and videos taken on vacation), speed (faster wireless networking-an Ethernet connection at 11 megabytes per second that can match the speed of broadband), and interoperability (improving the ability to talk to one another).

The hospitality and tourism industry will continue to look for ways to increase productivity through wireless extensions of e-commerce. With wireless technology becoming more mature and shifting from voice to data and from limited personal usage to mobile e-commerce and personalization, it is foreseeable that more companies will be taking advantage of wireless technology.

In the future, as convergence trends continue, the wireless device might become point of access for all sorts of information, such as news, sports, maps, entertainment (e.g., music), graphics and games, communications (e.g., e-mail), instant messaging and SMS (short messaging service), and transactions such as banking, shopping, and reservations.

10.3 NEW PARADIGMS

For hospitality and tourism, information has been the king. The Internet has made it even more so. From the traveler's point of view, the ability to access information anytime, anywhere, is always something to dream about. However, the most important thing for consumers is probably the ability to make intelligent choices, that is, the freedom of choice based on an informed decision. For business, the ability to gather information from travelers so as to understand their needs and wants is key in providing satisfactory customer service. In addition, the ability to market directly to consumers has been a goal for hospitality and tourism marketers, and that goal was made possible with the introduction of the Internet.

INFORMATION AS ASSETS

With the advent of the Internet, a new information paradigm has arisen: Customer information has become part of a business' assets. When customers trust a business with their personal information, they expect the business to take good care of it, just as they trust a bank with their money. In this regard, they also expect to get something valuable in return for their trust and to be able to withdraw that trust any time they desire.

The idea that customer information is part of a business' assets means that the business will have to find ways to invest these assets. One simple way to do so is to make sense of those assets and customize the information so as to be able to provide valuable services to customers. In e-commerce, this is called e-CRM, one of the hottest trends in hospitality and tourism management.

Once we use the terms assets and investment to refer to customer information, we are accepting the idea that a long-term relationship with customers is more important than any temporary gain. Any time you abuse your customers' trust and handle their information against them, you will be penalized by losing their trust and thus their loyalty.

PERSONALIZATION AND CUSTOMIZATION IS KING

In the Internet age, mass marketing and commercialization are out, and personalization, customization, and target marketing are in. Long before the Internet, market segmentation played an important role in marketing and information distribution. The difference now is that Internet technology has made it much easier to do target marketing in a faster, more accurate way. Hospitality and tourism businesses have realized that while it is important to deliver targeted and personalized information to existing and potential customers, they also know that not everyone needs the same information, nor will they use it and receive it in the same way. A more difficult challenge is to customize the information for the end user, delivering high touch in a high-tech world.

For years, the hospitality and tourism industry has realized the importance of customization and personalization in delivering marketing information as well as service, and there was no easy, economical way to do it. The Internet has changed all that. With Internet research and communication tools, delivering personalized and customized information is no longer a time-consuming, costly proposition. In fact, it is cheaper and faster to deliver such information today than it was with a mass mailing in the past.

The tracking technology discussed in Chapter 9 is an important tool in helping a business achieve the goal of personalization and customization. For instance, many e-commerce sites install shopping wizards that can help visitors find what they want quickly and easily. More important, when these visitors return to the site, the site will have remembered their interests and preferences to provide a personalized experience for the customers. Personalization and customization make up the future of e-commerce.

THE WEB SITE AS A 24/7 OFFICE

In the fierce competition for Web dominance in e-commerce, the site that not only can attract visitors but also convert them into loyal customers will be the winner. Since online visitors can come to a Web site at any time of the day from every corner of the world, a business Web site must serve as a 24/7 office or an extension branch of the business. Only when visitors can find what they need quickly and easily and when their visiting experience is satisfactory will they become repeat visitors and therefore possible customers.

The concept that the Web site is a 24/7 office is critical to e-commerce. It means that you have to be present at the site all the time to respond to customer needs and questions. This can be done by several means. One way is to try to understand these visitors as soon as they come to your site and give them what they want, which requires a high degree of personalization and customization, discussed in the previous section. A second way is through the design of the Web site, that is, anticipating the needs and wants and providing the needed information in an easy-to-find and easy-to-understand manner. Another way is to create as many interactive communication channels as possible so that visitor questions can be responded to and answered instantly and satisfactorily. Throughout this book, we have discussed many communication tools that can accomplish this goal.

PERMISSION MARKETING IS EVERYTHING

Related to the personalization and customization is permission marketing and selling. As the Internet makes communicating with and reaching customers more easy and less expensive, the sensitivity of customers to privacy and consumer rights also increases. Hospitality and tourism e-commerce businesses must make sure that they get consumers' explicit permission to send marketing or any type of information. Furthermore, they will need to provide an option for consumers to opt out in case they decide not to continue the relationship.

DISINTERMEDIATION AND RE-INTERMEDIATION

The Internet has been blamed for much of the death of middlemen. It is true that the Internet provides an excellent alternative for direct marketing and selling, thus putting most of the traditional middlemen out of business. This process of cutting off the middlemen is what has been referred to as disinter-mediation. In the meantime, the Internet creates a new platform for introducing new e-commerce businesses to fill the void left by traditional middlemen. The emergence of online-only travel Web sites such as expedia.com illustrates this process of re-intermediation. The fact is that it is not that travelers do not need travel agents, the middlemen; it is that consumers need a more efficient and effective way of accessing travel information and reservation.

10.4 NEW STRATEGIES

New technologies and new paradigms require that hospitality and tourism e-commerce businesses adopt new strategies. Some of the fundamentals of doing business will not change, but the way in which business is conducted will have to change to adapt to the Internet environment.

SERVICE ORIENTATION

The first e-commerce strategy for hospitality and tourism enterprises is to focus on customers and customer service rather than on products. A customer-and-service-oriented company tries to understand the customer needs and find solutions to meet their needs. A product-oriented company tries to sell features of its products and lets customers decide what they want. A customer-and-service-oriented travel agency, for instance, understands customer needs and preferences, personalizes solutions to meet those needs and preferences, and builds a long-term relationship with the customer.

A product-oriented travel agency, on the other hand, simply tells the customer what the customer can get from the agency, such as airline tickets, hotel reservations, or cruise-line bookings. It leaves the customer to decide where to go and what to buy. In this case, the travel agency becomes a ticket retail store. When people can get tickets quickly and easily from the Internet, they bypass the travel agent. This spells the decline of the popularity of the travel agent if the role of the travel agent is just to sell tickets.

BUILDING VIRTUAL COMMUNITIES

Another strategy is to build virtual customer communities. The Internet has provided every imaginable tool for businesses to offer opportunities for their customers to communicate and share information about their products and services. Tools such as mailing lists, Usenet, discussion forums, chatrooms, and Web site portals are great communication vehicles for people with the same interests to gather in cyberspace to communicate and share information.

One of the most exciting and promising marketing techniques in Internet marketing is based on this idea of virtual consumer communities. It is called viral marketing, which refers to a process in which consumers voluntarily spread a message about a company, a product, or a service based on their own experience. It is the Internet version of word-of-mouth marketing.

When your satisfied customers recommend your Web site or service to their friends in virtual communities, the impact of that recommendation will be much more powerful than if it comes directly from your business. If that customer passes his or her recommendation to his or her friends and so on, you get a viral marketing effect. All this is made possible because passing information on the Internet is much easier and more convenient than through any traditional means.

PARTNERSHIP

We all know that partnership is one of the important elements in traditional hospitality and tourism marketing in addition to the classic four Ps of marketing: price, product, place, and promotion. Partnerships are important because of the nature of the hospitality and tourism industry, which is an interrelated group of businesses that serve the needs of travelers. Hotels benefit from partnering with airlines, and small businesses benefit from partnering with large, reputable corporations.

There are many benefits derived from partnership in hospitality and tourism, particularly in marketing. These benefits include a large pool of resources for marketing, expansion of customer base, utilization of the partner's unique products and services to increase product and service value to customers, and the customer's conception of convenience and value.

In e-commerce, partnership is assuming its old role and in the meantime taking a new name. The role of partnership assumes a more important role than ever. The shake-up of the hospitality and tourism industry due to both technological changes and the terrorist attacks of September 11 intensifies competition by placing a priority on cutting costs and increasing revenue. Consolidation is happening in every sector of the hospitality and tourism industry, especially in the travel information distribution sector. For small businesses to compete in this market, partnership is an alternative to being consolidated by large corporations.

Another new dimension of partnership is being made possible by Internet technologies: The affiliate loyalty program, or affiliate marketing, discussed in Chapter 6. This e-commerce strategy is based on the fact that the Internet is basically a Web of information: Everything is linked to everything else. By identifying Web sites or Web pages that attract potential customers for your product or service, you can exchange links or pay to be linked to or advertised in another Web site.

MULTICHANNEL COMMUNICATIONS

This strategy uses multichannel communications for marketing and customer service. By multichannel communications, we mean the utilization of a combination of traditional media and Internet technologies in marketing and customer service. You need to realize that not all your customers have the same technological skills and may not prefer to use the same communication vehicle. In addition, technology does break down, but today's consumers are notoriously impatient. If they cannot find what they want or cannot ask the question they need an answer for before buying a product, they can click away and vanish in cyberspace.

BUILDING BRAND WITH TRUST

A final strategy is to build a brand with trust. Compared with brick-and-mortar businesses, e-commerce is relatively intangible and mysterious since a consumer cannot see who is behind the Web site and cannot see how the information he or she types into the computer gets transmitted through cyberspace. The Internet has made trust an overriding factor in the consumer's choice of services and products. A Yahoo survey has shown that 84% of consumers would be more likely to buy from a Web site that has been certified and is thus trustworthy (PITA 2001).

Established, well-known brands can play catch-up so quickly with Web entrepreneurs and in many cases outperform the latter because consumers feel safe in dealing with these brands, even in cyberspace. The old rule that if you build it, they will come, does not apply to e-commerce. Another old rule of e-commerce in the age of dot-com boom, "He who comes first will win", is no longer true with today's sophisticated online travelers. Earning the trust of consumers will become a vital strategy for successful e-commerce businesses.

10.5 ISSUES, PROBLEMS, AND BARRIERS

The Internet has given the hospitality and tourism industry great opportunities, but at the same time it has produced many challenges. For many small businesses, the cost of adopting new technologies becomes a big issue. Related to the cost issue is that of deciding on managing technologies in house or out of house, that is, outsourcing to technology companies.

There are many other issues for the hospitality and tourism industry to face, and one of these is the problem of standardization of technologies. Because the Internet is a decentralized structure and does not dictate what type of technologies can be used with it, various technology vendors have produced different technology standards, resulting in confusion at best and incompatability at worst. Without a system of standardization, the hospitality and tourism industry cannot reap the potential that various innovations in technology can bring to their businesses and e-commerce. The hospitality and tourism industry has other barriers to face. One of these is online payment methods. E-commerce requires a complete system for online financial transactions so that online travelers can pay for products and services instantly as they see fit. Only when business and online travelers feel that they can pay or accept payment easily, reliably, and securely can you convert more lookers into buyers.

10.6 CONCLUSION

The Internet has revolutionized the way we communicate, expanded the horizon of our thinking, and presented countless opportunities for various human activities that include e-commerce. More important, the Internet is here to stay. Just like electricity and the automobile have become part and parcel of our daily lives, the Internet is bound to permeate every facet of our activities.

The Internet is like water in the ocean, to use a Chinese metaphor. It can keep a boat afloat and carry the boat to the destination; it can also engulf the boat and sink it to the bottom of the ocean. For the hospitality and tourism industry, understanding and learning how to control and take advantage of the Internet (the ocean) may very well determine the course of business success in the years to come.

E-commerce is not an option that we can safely predict but rather a necessity of life for every business in the coming years. This might not seem obvious since e-commerce is not doing as well as it should. However, this is not the fault of the Internet. Indeed, it reinforces the point that we have tried to make throughout this book: We need to gain a better understanding of the potential of the Internet and learn how to take advantage of it. The fact is that the age of e-commerce is just beginning. The potential of the Internet has yet to reveal its greatness and capacity.

We will soon see e-commerce as commonplace as our neighborhood automobile repair shop. And the biggest beneficiaries will be the hospitality and tourism industry and travelers since the Internet and this industry, as we stated at the beginning of this book, is a marriage made in heaven.

KEY WORDS AND TERMS

Location-Based Technology

Central Communication Platform

Electronic Customer Relationship Management

Location-Based Services

Voice Command Service

Multimedia

Interoperability

Point of Access

Instant Messaging

SMS

Freedom of Choice

Information Paradigm

24/7 Office

Extension Branch

Viral Marketing

Partnership

Multichannel Communications

Outsourcing

Standardization

Corporate Travel Specialists

SUMMARY

Internet technology will undergo many changes, but these changes will most likely be in the direction of providing solutions for human communication needs. Just like the Internet is the result of humankind's relentless quest for instant, real-time, and 24/7 communications, future technology development will need to solve the remaining issues for communication and business.

New technologies will most likely focus on improving communications speed, increasing the accessibility of information, and making communications more mobile. Broadband, wireless communications technology will witness tremendous growth in the years to come. We will see a convergence of all technologies with the Internet as the major communications platform. In addition, tracking systems will become more sophisticated and highly valued.

New paradigms arise as a result of the development of new technologies. Customer information becomes part of a business' assets. Personalization, customization, and target marketing proclaim the death of mass marketing. By the same token, permission marketing will dominate Internet marketing.

New technologies and new paradigms require new strategies. The first strategy is to focus on customers and customer service rather than on products. The second strategy is to build virtual customer communities, which lays the foundation for viral marketing, or Internet word-of-mouth marketing. Partnership takes a new form and name in the age of the Internet; the affiliate loyalty program, or affiliate marketing. Trust is also an important strategy to win over consumers to a business brand.

To better serve the diverse needs of customers, you will need to develop a multichannel communications strategy.

As Internet technology matures and its potentials are better understood by both consumers and businesses, we will witness leaps and bounds in adopting this technology for all facets of our lives.

WEB RESOURCES

* www.broadband-guide.com

* www.everythingDSL.com

CASE STUDY: The Hotel Reservations Arena: An At-a-Glance View from Around the Globe

In today's technologically advanced environment, no hotelier can afford to ignore the explosive growth of electronic bookings from travel agents, third-party Web sites, and tour operators around the globe or avoid the rapidly growing consumer demand for direct electronic access to the hotel product. The reservations process has moved from faxes and phone calls made directly to the property to call centers and international representation services, connections to global distribution systems (GDSs) and access to the Internet via computers, wireless phones, and personal digital assistants (PDAs).

In this ever changing marketplace, the challenge to hoteliers around the world is to learn how to operate effectively, efficiently, and economically in this complex multichannel distribution environment. Tapping the proper technology services to manage the reservations process is the secret to achieving profitable results, leaving hoteliers to focus on their core competency-a superb guest experience.

A VISION FOR AN ELECTRONIC FUTURE

The idea of electronic hotel bookings most likely would not have become a reality if a group of 16 of the world's leading hotel and travel-related companies had not shared a collective vision for the future of the reservations process: automation.

In 1988, this forward-thinking group founded Pegasus Solutions to create a streamlined and automated hotel reservations process for the hotel industry. The company's pioneering technology provided a seamless electronic connection between a hotel's central reservations system (CRS) and the GDSs, such as Sabre and Galileo, which travel agents use to book airline reservations. Through this connection, travel agents could easily reserve hotel rooms from the same desktop computer terminal used to book flights.

This industry milestone dramatically improved the efficiency of the entire hotel reservations process and was the foundation needed to build additional technology platforms for today's global hotel reservations arena, including reservation systems, Internet reservations and hosting services, call center services, travel agent commission processing services, and marketing representation services.

THE IMPORTANCE OF THE INTERNET

In the mid-1990s, Pegasus recognized the importance of the Internet as a distribution channel for making hotel reservations and is credited with launching the first online travel agency site to provide real-time hotel bookings for a variety of hotels in 1994. To provide consumer-friendly hotel information and photos through the site, Pegasus created what is now one of the largest property information databases, containing detailed, descriptive property information for more than 44,000 hotels. The data are managed directly by the hotel chains, ensuring a high level of accuracy.

Today, the Online Distribution Database and Internet booking engine that Pegasus created in 1994 and has continually upgraded and enhanced are used worldwide, "powering" thousands of travel-related Web sites, including HotelHub, Ebookers.com, Lastminute.com, Hotwire, and Orbitz. As the Internet continues to gain wider acceptance as a means to both shop for and make hotel reservations, Pegasus' online distribution service is well positioned to take advantage of this escalating trend. Two reasons for the success of this expanding online segment are the ability to easily access the CRSs of more than 44,000 hotels and the high caliber of the property information.

Pegasus also identified that for non-English-speaking customers to maximize the opportunity from their Pegasus hotel booking solution, ideally the hotel content within the Pegasus database would need to be in various European languages. Since June 2002, Pegasus has provided the ability for its member hotels to start loading their hotel content in French, German, Spanish, and Italian.

With hotels looking to increase the proportion of their reservations that are made online, consistency of information across the brand is essential. For example, the Ritz-Meridien in Madrid would like to know that a corporate traveler in Barcelona would see the same information about its property regardless of whether the traveler is using Lastminute.com or Ebookers.com or any other travel booking site.

GLEANING THE GLOBAL ELECTRONIC DISTRIBUTION TRENDS

As a provider of hotel industry technology services, Pegasus Solutions is in a unique position that enables it to anticipate industry change and recognize market issues. Pegasus has identified several industry challenges and has developed solutions used by industry players such as travel agencies, hotel booking agencies, corporate travel specialists, middleware companies, and tour operators. Following are some examples:

* Both leisure and corporate travel agencies are reviewing their online hotel booking solutions in order to provide their customers with direct access to negotiated rates and real-time availability. By using Pegasus' online booking system, agents are not limited to the functionality provided by the GDSs. By connecting to Pegasus, they obtain better property data, can view pictures of the properties and an unlimited number of rates, and can access real-time availability.

* Large hotel booking agencies, such as Hotel Reservation Service (HRS) in Germany, no longer want to manually update their proprietary booking systems. These companies want an automatic interface to the hotels' CRSs and have enlisted the services of Pegasus to achieve this goal. For example, hotels that work with HRS do not have to manually update the HRS database but just ensure the HRS rates and room allocations are featured in the hotel's CRS.

* Like the rest of Europe, corporate travel specialists in Spain are thriving. Sercotel, Keytel, and Utell are among those that directly or indirectly service the corporate market. Many corporations are demanding that their travel agencies make their corporate rates available over their company's intranet. Some travel agencies use a GDS-based corporate travel offering, while many others are considering using alternative hotel distribution channels that are connected to Pegasus. For example, Finland-based Hotelzon International is tapping Pegasus to provide a booking solution that allows other companies using the unique Hotelzon booking system to view and book their negotiated corporate rates online in real time. Similarly, NetBook in Sweden and KDS in France are using Pegasus as their booking engine and to access to corporate-negotiated rates stored in the hotels' CRSs.

* Tour operators want to access real-time hotel room availability so that they can dynamically create tour packages and no longer need to store hotel inventory in their proprietary reservation systems. Even the tour operators who decide to continue to manage their contracted room inventory on their own proprietary system are looking for a way to automate the delivery of hotel reservations directly into the hotel's CRS, eliminating the need to manually fax the reservation information to the hotel.

* Tour operators are also seeking an automated solution to manage and process the payments due to the various travel suppliers with which they have contracted. Pegasus is working with several tour operators to help automate their exchange of reservations with the contracted hotel and recently launched PegsPay[TM], a payment processing solution that helps tour operators manage and pay their travel suppliers for the sales that the tour operators made on their behalf. Additionally, PegsPay will help facilitate tour operators' payment transactions to travel agents that secured guest bookings.

THE "WIRELESS" WAVE

The worldwide availability and affordability of wireless phones is certain. For the hotelier, the question is "what" is being accessed. Is a wireless phone a distribution channel in itself? This is not the case-the wireless phone is a communications tool giving access to a distribution channel. If so, who are the accommodation providers, and from where are they sourcing the availability?

To help answer these questions, Pegasus capitalized on its aggregated supplier direct connections to systematically enhance its connectivity to the lodging industry and expanded its services to enable hotels to take advantage of emerging distribution channels, such as the Internet, via wireless devices.

Pegasus has pinpointed that in Finland, the United Kingdom, and Germany, the corporate traveler wishing to book a negotiated rate is the first sector using the wireless phone to book a hotel online. Pegasus addressed this trend two years ago through its working relationship with Hotelzon International, an expert in the conversion of CRS data to "thin messaging" required for the mobile Internet. Therefore, hotels connected to Pegasus for electronic distribution are secure in knowing that as travelers may move toward the use of PDAs and other wireless devices, Pegasus has already developed the required interface and is processing bookings today via this medium.

TOOLS TO HELP MANAGE HOTEL INVENTORY AND BUSINESS GENERATOR RELATIONSHIPS

While Pegasus Solutions continues to remain active in enabling its hotel customers to access more and more distribution channels, the increasing challenge for the hotelier has been not only how to discover and evaluate emerging channels but also how to best manage the inventory across these various channels. It is commonly accepted that the hotel CRS is the repository for inventory for distribution channels, whether traditional GDS, GDS-sourced online offerings, overseas call centers, and non-GDS-reliant online solutions.

Utell, a wholly owned subsidiary of Pegasus Solutions, established itself in the Spanish market over 25 years ago, being the first to market with a call center serving travel agencies that wished to make instant reservations for a growing portfolio of hotels worldwide. Equally, Utell gave hoteliers a cost-effective way of reaching independent corporate and leisure individual travelers in overseas markets by way of its expanding voice reservations network for travel agencies around the world.

Today, the Utell representation service has expanded far beyond a voice reservation service and can provide independent hotels and small chains with even more distribution opportunities via all four GDSs as well as access to all the distribution channels mentioned previously-access that the hotels would never be able to achieve on their own. Utell provides the tools and service staff to help its hotel members manage and maximize the presence of their room inventory on all the various distribution channels as well as sales and account management service to assist them with promoting their hotels to travel agencies around the world and the electronic marketing of their hotel rooms. Examples of agencies that frequently book Utell hotels are Viajes El Corte Ingles, GBTA, Barcelo, and Halcon. More than 250 hotels in Spain are members of Utell.

ON-PROPERTY SYSTEMS

Pegasus has expanded its offerings to include another industry first, PegasusCentral[TM], a new Web-based hospitality management solution. Hotels using the PegasusCentral property management system can manage daily on-site operations of all hotel departments, such as guest checkin and checkout, sales and financial tracking and forecasting, comprehensive guest profiles, and inventory management. A Spanish-language version of ASP-based PegasusCentral is expected to be available by the end of 2002. Interest in PegasusCentral is growing strong from a number of hotel groups operating across Europe with properties in Spain as well as from independent properties.

In addition, Pegasus Commission Processing, the hotel industry's largest travel agent commission processing service, continues to see growth in its European business and maintains a Member Travel Agency Support Center in Europe. With tens of thousands of travel agencies subscribers in more than 200 countries, Pegasus processes an average of $41 million in travel agent commissions per month for more than 180 hotel brands. Serving both travel agencies and hotels, Europe represents Pegasus' second-largest penetration of travel agency membership, reinforcing the value that Pegasus brings to hoteliers' worldwide business generators.

In summary, there are many positive changes taking place in the development of technologies that offer new distribution channels and inventory management solutions in regard to the reservations process. It is clear that hoteliers need to enlist the support of a robust technology services provider to help them navigate the ever changing landscape of the hotel reservations arena and to ensure that they leverage all the emerging distribution channels.

SOURCE: This case study was written by Peter Fitzgerald, vice president of International Sales Pegasus Solutions, Inc. Printed with permission.

QUESTIONS TO PONDER:

1. What is the biggest challenge to hoteliers?

2. What is the vision of an electronic future? Do you agree with the vision?

3. What are the industry challenges that Pegasus has identified?

4. What are the solutions developed by Pegasus to meet the challenges?

5. Describe the major functions of Utell.

6. What on-property solution does Pegasus provide to manage daily on-site operations of all hotel departments?

REVIEW QUESTIONS

1. What are the major new technology trends?

2. What are the new e-commerce paradigms?

3. Describe the new e-commerce strategies.

4. What is the difference between personalization and customization?

5. Do you agree with the author that wireless has a great future in the hospitality and tourism industry? Justify your answer.

6. Why is partnership so important in the new Internet environment?

7. Why does trust become a critical issue for e-commerce and brand building?

8. What are the major issues, problems, and barriers for using technology?

9. What do all these trends, paradigms, and strategies mean to the hospitality and tourism industry?

REFERENCES

Gutzman, Alexis D. (2001). "Location-Based Services for PDAs." http://e-commerce.internet.com.

PITA. (2001). www.pitaonline.com.

Blacharski, Dan. (2002). "Convergence Impacts the Entire Enterprise." www.itworld.com.

Hospitality Sales and Marketing Association International. (2002). www.hsmai.org.

Zongqing Zhou, PhD

Associate Professor

College of Hospitality and Tourism Management

Niagara University
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Author:Zhou, Zongqing
Publication:E-Commerce and Information Technology in Hospitality and Tourism
Date:Jan 1, 2004
Words:6749
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