The History of Ecommerce in the Hotel Industry, Research Paper Example

Abstract

Purpose– The purpose of this article is to comprehend the history of e-commerce in the hotel industry.  It seeks to explore the competitive advantage a Hotel industry can gain by adopting e-commerce in their operations. It will also look at how e-commerce is importantto the economy.

Approach– Thiswill be done by defining what e-commerce is and how it has affected hotel industry operations, the clients and all the affected parties. This will be the customers’ satisfaction, the quality of services provided, the attitude of the customer and the hotel staff. The foundations of e-commerce in the hotel industry will include the different types of e-commence.

Findings– The paper will identify and analyze the different e-commerce for the hotel industry, will discuss in-depth the B2B e-commerce, and the visible advantages of B2B in the Hotel industry. In addition, it will also outline the opportunities and challenges associated with B2B e-commerce. Another aspect to be analyzed is B2C e-commerce:what it is and the competitive advantages of applying B2C in the Hotel industry. Furthermore, it will also demonstrate the opportunities and challenges associated with B2C.

Originality– This paper will study the effect of e-commerce in the hotel industry, using facts and actual data. This will be useful for a researcher to make a decision in future improvement, in the Hotel industry.

Keywords Electronic Commerce (e-commerce), Internet, B2B,B2C

Paper TypeResearch Paper

Introduction: The history of e-commerce in the hotel industry

The term e-commerce, originally envisaged to portray the process of conducting business transaction using electronic systems, for example, Internet and network. E-commerce use was to be done through various technologies like the Electronic Funds Transfer (EFT), Electronic Data Interchange (EDI), and Supply Chain Management. Modern e-commerce uses the World Wide Web (WWW) in conducting the various transactions.

There has been an impact of e-commerce in the hotel industry that has greatly been felt through the various studies and research papers. These includes; enhancing customer relationship capital in the global hotel industry; managing customer behavior dynamics in the multichannel e-business environment (Louvieris, Driver & Powell-Perry, 2003), and exploring developments in web based connection advertising in the hotel business (Gilbert & Powell-Perry, 2001). The benefits brought by e-commerce were analyzed on the importance of hotel website dimensions and attributes: perceptions of online browsers and online purchasers (Law & Hsu, 2006) and e-commerce and hotel performance: three-stage DEA analysis (Shang et al., 2008).

For e-commerce to operate well in the hotel industry, there will be a need for the Hotels to interact, with their customers, to see how well they can make the services available to them at a click of a button. This will establish long-term relationships, which is beneficial to the Hotel management. Moreover, the hotel will also benefit when most of the clients who will be involved in the initialization of e-commerce in a particular hotel will have a close relationship and will always prefer the services of that particular Hotel. They will have cultivated a strong consumer trust that is difficult to destroy.

Different Types of E-Commerce

There are different types of e-commerce that can be used by the Hotel industry. The top hoteliers need to shape focus from the traditional way of customers finding information to readily availing information at the customers ‘desk’, which will lead to a maximum Return on Investment (RIO).  According to Hilton, e-commerce hotels’ Hotels have achieved up to 55% paid search revenue growth over previous years with a Global e-commerce team (Hilton Management Services).

There are five different types of E-commerce namely:-

1. a) Business-to-Business (B2B)
2. b) Business-to-Consumer (B2C)
3. c) Business-to-Government (B2G)
4. d) Consumer-to-Consumer (C2C)
5. e) Mobile commerce (M-Commerce).

Business-to-Business (B2B)

Business-to-Business is a type of e-commerce that is between companies, which consists of bigger forms of e-commerce. Buying and selling here is of two different entities. A manufacturer can be a buyer, and also a seller. Therefore, B2B e-commerce has enhanced benefits associated to the supply chain for most hotels. For example, companies with CIT as their main segment in marketing have been able to generate e-commerce. Island Hotels Group (IHG) uses the on-line facility to invoice their beverage supply. Their main supplier being Sigmonds Farsons Cisk’s has managed to emerge the only ones in the supply chain with the infrastructure (CIT) and processes to conduct e-procurement. In Hotel industry, B2B will aid in managing the business and ensuring that services required by the Hotels are easily accessed. This will interconnect the Hotel to all its relevant companies regardless of the location or the supply chain position (Pavlou & El Sawy, 2002).

The Hotel will require to link with other suppliers who will provide them with the required services. For example, they will need to have a close relationship with suppliers of foodstuff and beverages, this will ensure that the goods required will be available on time and when required. The ties that will exist with the supplier will ensure that they are given quality products without the hotel management visiting the supplier in person. This will be reciprocated by the Hotel ensuring that the payments are done online and that they need not travel to pick their payments.

Competitive Advantage B2B

Competitive advantage in this industry is gained by building on required principles proven effective in strategy implementation. This is achieved through effective operation, doing the same as competitors, but making improvements, and by strategic positioning, approaching things from a different angle from competitors to be able to deliver unique value types to customers.

The companies using B2B e-commerce need to have Inter-organizational Information Systems (IOIS). This software will enable multiple firms to interact online by identifying and selecting partners, negotiate and execute a business transaction. They also have the B2B exchange; this is an inter-firm mediator, which is available in the digital space, which enables different organizations to interact online (Pavlou & El Sawy, 2002). B2B will benefit the hotel industry because they can be able to outsource the unprofitable part of their business. In most cases, the Hotel industry will outsource cleaning services, by ensuring that cleaning is done well in all aspects of the Hotel, and that includes the rooms, bedding, compound, and the pool areas. This will be cheaper as compared to hiring your own personnel and putting them in payroll to carry out those duties.

The other advantage over other firms is speeding up of activities by reducing the market time. The Hotel’s activities will be done faster than others will. For example, acquiring a person to repair a phone will be faster, because the list of recommended suppliers will be available online and one needs only send a request. Reduction of market time increases efficiency and deliver of service to their target market.

The hotel will have improved business and market intelligence. This will give it an advantage over others because one will understand the market better as compared to the competitors. The hotel will also benefit in retaining its customers, most of the customers who have established  close relationships will find it difficult to change. This is due to the smooth operations that exist between them and the consumer trust that has developed over years (Pavlou & El Sawy, 2002).

This also enables cloning of one business in the market. This will help in representing the Hotels to its clients and the public. This will aid in marketing the hotel by ensuring all the services provided are indicated, it will serve like a virtual Hotel. The other advantage that will put such hotel on top of others is improving the speed of communication with clients. The Hotel will be able to respond to the request placed by the clients faster; this is because of the use of the Internet and e-mail in communication. The clients can also access the services from the website directly and respond as the need arises (Shang, et al., 2008).

Challenges and Opportunities associated to B2B

Challenges

E-commerce may be beneficial to the Hotel, but it also has its challenges, which the Hotel must handle with care. This will determine the success of B2B to the Hotel. One of this challenges according to Merrill Warkentin is  selecting the B2B exchange because of the alternatives available in the market, a B2B swap can be measured as an arrangement that is structural for the governance of fiscal activity other than an IOIS (2003, p. 4).

The other challenge is ensuring that the Hotel gives the right information. Most of the leads in the website will give a client to connect directly to the sales representative of a company. The best company in e-commerce is the one that uses the leads to develop a relationship with qualified prospects. This will give a dialog with the clients, thus enable the company to analyze the information and get to know the clients’ intentions and interest, and integrate the system to track sales follow up (Neslin et al., 2006).

Being available when needed is another challenge facing companies using the B2B type of e-commerce. The company should always stand out when one is searching for a Hotel to book. This can be achieved by carrying out regular campaigns spread throughout the year. This is to ensure that customers are aware every time something is available regarding your Hotel. Another means is by setting focus on other means like search engine marketing campaigns especially using Google. Most people visit Google, and this search engine is appropriate and available always. In addition, the senior management needs to give support to the team in order enable them access all areas that measure to their success. However, obtaining that support is a big problem that has added to the failure of B2B (Li et al., 2009).

B2B is challenging to the Hotel industry because they should ensure that they use the right content at the right time by allocating resources across the channels. For example, in Hotel industry, they should ensure that if they were offering a package like if one is to have a 1-week full board in the Hotel, then one would have a chance to win a trip for two to the Bahamas. For most Hotels, software installation is a big challenge that has increased issues for the web site, organizations and people. This should be available at the right time, and when time elapses, the team should remove it to avoid confusion by other customers. This might lead to loss of reputable clients if contradiction occurs (Neslin et al., 2006).

Opportunities

The opportunities offered by B2B supersede the challenges thus, making every company in the hotel industry want to be in the e-commerce. The hotel, which has established e-commerce, has many opportunities making it the leading market worldwide. Hospitality, has gained from using e-commerce since profits have been increased through reaching out to customers at greater distances, which has subsequently improved the service quality accorded to customers by faster and timely responses.

One of the most distinctive opportunities is getting market the world over, and this can be attributed to the use of Internet. Internet has made the world into a global market, where one can acquire service from any Hotel in the world.  Currently, majority of clients have embraced the exploit of technology into their everyday operations, and people trust that they will get reliable information in the Internet. Most people book for Hotel services through the Internet even when one is new in the particular place (Moksony & Giuliano, 2008).

B2B will enable the company to increase their sales and profits because it is easy to process transactions like billing over the Internet. According to Perogianni, “B2B e-marketplaces were seen as a tool for achieving cost savings, efficiency enhancements and additional sales. Thus, an increasing share of B2B e-commerce was expected to move to B2B e-marketplaces, providing buyers and sellers with efficient price-finding mechanisms like auctions or exchanges, settling the ordering, billing and payment and even providing additional services like trust functions or logistics support (2003, p. 7).

There are opportunities that will benefit the companies’ staff, for example, the staff will get corporate training by experts. In the era of Internet, acquiring services from prospective clients with the needed expertise has been made easier because of the information available online. Travelling cost has also been reduced because one needs not to travel around to find the best training centre, but can be served at a click of a button.

In the hotel industry, catering services can be acquired by having a website with the list of services provided, companies in which you have served before and their testimonials. A contact address will be given for interested parties to contact.The collaboration and interconnection within firms also gives the firm an opportunity to streamline their supply chain to have smooth running of transaction. This will shorten the business processes by ensuring that the end-product is best for both firms, and that no company will be coerced to do what is unethical (Subramani & Walden, 2001). According to Merrill Warkentin, B2B redefines how organizations interact with each other, it is imperative to comprehend how firms can profit from B2B e-commerce through their participation in these exchanges (2003, p. 3).

Business-to-Consumer (B2C)

Business–to-Consumer (B2C) is the transaction that occurs over the Internet between a given business and a consumer when selling and buying of goods and services. Consumers have increased the level of transaction over the Internet.

The Hotel industry through e-commerce reduces their levels of dependence on the commercial partners for their sales. They are in a better position offering their client base lower rates due to commission cut-down. As a result, attracts direct business from the market segment. The operation in B2B is similar to B2C except that, in B2B, the parties are dealing with a trusted and known person, but in the B2C the retailing will be selling to an untrusted and unknown party. As a result, more security measures must be placed to acquire the customer payment information, and a further clarification must be acquired before an order is sanction. In B2C, the interconnection of systems will not be necessary because most of the needed information will be available in order. Stringent measures must be put in place for B2C to run smoothly (Carlton Collins, CPA 2003).

In the Hotel industry, this is the most used type of e-commerce. This is because the hotel will be dealing with clients, who are mainly unknown, and from unknown location unless they provide to you the information. The information will still need verification since it is hard to discern if the client wrote the right information. On the other hand, it is very useful for the hotel as it advertises itself to prospective clients in who might require their services in the future. According to Werthner and Ricci, due to its SME structure (especially when taking a destination point of view) it has great importance for regional development. For example, the E.U. hotel and restaurant sector accounts for more than 1.3 million enterprises, or 8.5% of all European endeavors. The majority of these ventures are small, with 1 to 9 employees (2004).

Advantages of B2C

There many advantages associated with B2C, this is the direct gain by the Company because of relationship established between the Hotel and the Clients. B2C reduces the competition gap by a big margin. This is because there will be reduced advertising by the Hotels because all the information is available on the Internet. All Hotels despite the size will have the same advantage of being available online. The competition will only be resolute by the goods and services quality, prices and packages provided by the Hotels. This will also benefit the clients because they will get quality services (Mokhtarian, 2004).

The hotel will have unlimited market place, this is because the internet gives customers that the ability to shop at their own pleasure: because they can access the Internet everywhere. Transactions can be received any time of the day or night. It also allows Hotels to offer their services globally. A global market for the Hotel industry is an advantage because it gives them a lead against competitors with only regional and national markets (Hawk, 2004).

Hotels using B2C e-commerce have an advantage over others because they eliminate the existence of intermediaries in their business and deal directly with customers. Most intermediaries take advantage of the company for their own personal benefit. Most of them would increase the price of a given service so as to obtain something out of the transaction. For example, if a Hotel charges $5,000 for bed and breakfast, the charges may be higher by $100; this might cause the Hotel to lose the client due to high prices. B2C has improved customer satisfaction.  The customer will also have control of the sale process, and the decisions made. B2C also builds loyalty of customers through regular transactions (Doney & Cannon, 1997).

Recently, the advancement in technology has given Hotels a competitive edge over the non-compliant Hotels. The technology has made it possible for payments to be done online with a secure payment system that allows encryption of the data. This can only be read by the concerned Company and be able to use the data (Subramani & Walden, 2001).

Another advantage of B2C is the reduction of workforce because the customers will be served directly by the Company and this will enable the company to operate with minimum employees. There will be no need to have many employees in the marketing sector except a few who will be monitoring the advertisement online (Singh, 2002).

Easier way of administrating business, B2C will avail software that will administer the entire task automatically and give real time results, which can be accessed when need arises. The software will reduce the errors made by the personnel in the daily operations (Egger, 2000).The customers will also have lower prices than purchasing at the stores,   this is because the cost of traveling will be reduced, and the cost of searching for the buyer will be reduced.  The customer will also be exempted from paying the sale tax by buying goods or services online. The buyers will also access all the information he/she required online (Mokhtarian, 2004).

Challenges and Opportunities associated to B2C

Challenges

The challenges facing B2C e-commerce type are mostly associated to the customer. This is because it is the transaction that exists between the business and customer. The customer will be trying to ensure that he reduces his/her budget and be able to acquire quality services while the business will need to get what it deserves for the quality services it provides (Schmitz & Sint, 2003).

One of the most devastating challenges is cyber crime. The “click and mortar” arena is expanding rapidly and associates with unregulated medium of cyberspace, which has prompted concerns of privacy and data security. Most Hotels are losing a lot from cyber crime where individuals are provided with services and do not pay. Another is when the company, invest billions of dollars to invest on a secure gateway, and infrastructure, which can be damaged and vandalized by others. These two issues are the most challenging because it is difficult to trace the culprits who hop from one hotel to another doing the same thing. This is a big challenge also to the government to put in place measures to curb the criminals, and have cyber laws in place. Government officials need to formulate policies that bear in mind the welfare of hoteliers. They should be able to follow through and administer justice (Furnell, 2005).

There is also the challenge of lack of telecommunication infrastructure to enable e-commerce to operate. The emergent of technological advancements in the communication sectors pulls back those companies and organizations that have not embraced the development of ICT. As a result, the government is expected to offer telecommunications services to its citizens. For Internet to operate there will be a need of fiber optic to be laid to set the foundation for ease of communication between suppliers and customers. This media are also fast and reliable at all times (Bajaj & Leonard, 2004).

For a Hotel to have B2B e-commerce, it needs qualified personnel. This will be a challenge for a company with unqualified personnel because they will not be able to develop the needed processes that can be automated to enable the company has workable procedures (Visser & Lanzendorf, 2004). The Company will also be required to develop a websiteto be used as a tool for marketing for the company. The website should have search engines, which can only be developed by qualified personnel. Maintenance of these websites is paramount for the success of this industry to be able to accommodate the needs of all their clients all the time (Hawk, 2004).

Another challenge is focusing on delivery of goods and services to customers and ensuring that they are delivered on time and that no damages have been experienced. Concerning hotel industry, delivery is crucial because it mostly deals with perishable goods, which can easily be damaged. The other factor is to make certain that they are delivered on time, as the customer needs it. If a customer places an order to have his/her lunch delivered at 12 o’clock, the target should be met and if there will be delay they should be informed immediately (Johnston & Warkentin, 2004).

B2C in e-commerce is a challenge to the company because of the various marketing methods and channels. It is a challenge choosing the best method to ensure that one gets the best tools. Selecting the right method also need the services of a skilled staff to aid in selecting. This is important because security and ethical issues are compounding with the use of e-commerce in hospitality industries (Schmitz & Sint, 2003).

Opportunities

The opportunities that are offered by B2C are substantially felt by the companies. This is because it improves their chances of being ahead of others and ensures that their sales are growing with a single step taken towards B2C e-commerce.

One of the intriguing opportunities is the change in consumer attitude towards Internet based e-commerce.  Most countries have developed a culture of shopping online which is good for e-commerce. It is important to appreciate the need of customer embracing e-commerce, as this will be the foundation of improved technology worldwide. According to Liao & Cheung, “Under these circumstances, it was important to discover whether consumers perceived at the outset that virtual shopping over the Internet would engender a comparable experience, and how significantly life content considerations tended to affect decisions to shop in this way (2001, p. 300)”.

B2C also give the customer an opportunity to select the best services he requires. This is because e-commerce enables clients to browse through the numerous available options. This will include prices and the total package. Depending on the available funds, the customer will choose what is best, and will not feel cheated because he was the one who selected (Zwass, 2003).

Another opportunity is the creation of the website, which has enabled companies to be able to have an attractive website, which attract customers to visit your site, and hence, carry out transactions. The company ensures that all service sectors are well advertised using the website to increase the number of customers.B2C will also improve the Gross Domestic Product (GDP) of a given country because its availability will not be affected by geographical location of a customer, and even in the very remote areas, and services can be acquired. This will help the government in improving the living standards andfighting poverty among the citizens (Fraumeni, 2001).

Conclusion

In conclusion, E-commerce is beneficial to the Hotels industry. There will be an expansion of the geographical reach.  All people who can access the Internet will be able to be given services by the Hotel. The customer base will also be expanded because the Hotel will have a virtual storage of all the information it has ever transacted with a customer.

Customers can also acquire useful information from the hotels website and can use that to make decisions. This can be done any time when the customer wishes, this is because the service will be available 24/7 throughout the year. There will be reducing cost of advertising and marketing by the Hotels. This is because all the information required by all parties, which includes the client, will be accessible on the website. A well-known Hotel like Hilton rarely does the advertisement over the radio or television; this is because of the well build a website that can provide more information than advertising on radio. There is high sense of loyalty created in e-commerce that is between businesses or business and customer.

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