Introduction of Cloud Computing
Cloud computing is a model for enabling
ubiquitous, convenient, on-demand network access to a shared pool of
configurable computing resources (e.g., networks, servers, storage,
applications, and services) that can be rapidly provisioned and released with
minimal management effort or service provider interaction (Mell & Grance, 2011). With cloud computing, an individual or business pays only for the
services they need, when they need and where they need, much as we use and pay
for electricity and water. Unlike to past, companies needed to invest huge
amount on hardware, software and networking system. They needed to employ IT
technical people to maintain and develop according to their needs. They may
have a system with excess capacities to cater future business expansion and
they needed to save capital to roll out outdated system. However, for cloud
computing, it is a concept that “Anything as a service”. Rather than acquiring
a full set of system, companies can subscribe service from cloud with software
service, storage, database, server functions or even computing power etc. So
that companies can enjoy cost benefit by “Investment is Small, Benefits are
huge” from cloud computing.
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The status of Hotel Industry
Hotel industry
composes of different business: hotel, restaurants, event management and even entertainment. Hotel has different organization structure from other commercial
sectors, as its main deliverable is service which is intangible. For instance, it has department
of front office, housekeeping, security and back office including HR, Finance
and IT support. The vision is to ensure
sustainable growth, quality of service and customer loyalty. Therefore,
it is important to provide customized services for guests while they experience a comfortable and safe environment
at the same time and exceed customer expectations.
Hotel Industry with Cloud Computing
Hotel industry has been majorly affected by the economic turmoil. Re-prioritizing
the strategies and looking out for cost-effective and on-promise solutions should
be helpful to capture the market opportunities (Cybage 2010). It is very common for the consumers to
reserve hotel rooms, facilities, (e.g. spa, restaurant, limousine) via
on-line system. Therefore, Cloud
computing as a perfect tool for handling the large numbers of reservation all over the world. In the meantime, connection
or alliance with airlines, travel agency to be business partnership, cloud
computing is very helpful to develop their business, for example, Cathy Pacific
offering air ticket with hotel rooms for travel package in its web-site. Customers relationship management (e.g.
customers record as staying history across the chain, hobby), marketing, management in Front
offices, reception, concierge, with cloud computing will be more efficiently.
How cloud computing has impacted hotel industry
At the most recent Hospitality Industry
Technology Exposition & Conference (HITEC), the theme upon cloud services
and how they can revolution the hospitality industry demonstrated a shift
towards accepting cloud computing as the norm which may shape the whole
industry. Many real M&A cases in hotel industry also verify the popularity
of offering cloud solutions for hotels, such as Priceline that acquired direct-booking marketer Buuteeq in addition to OpenTable and added cloud-based hotel property management system Hotel Ninjas to their roster (Coleman, 2014). The hotel industry has reached a turning point to realize benefits of upgrading from in-house enterprise software to cloud based system through cloud computing technology.
Cloud Computing Technology is no longer in
its emerging phase, though the technology itself is still being innovated, and
will further evolve in the future. It has changed the dynamics of many hotels
not only by offering new approach for fast, on-demand and highly available
applications in cost-effective manner, but also by providing support to
functions ranging from business intelligence, customer relationship management,
collaboration solutions to back office operations. More importantly, it endorses hotel
industry with new competitive advantage.
Cost Saving
No Heavy Upfront Investment
Most of companies consider “cost” one of
the most important factors for adopting cloud computing, which is especially
true for small sized companies like hostels and motels. This cost advantage includes both upfront
investment and operational cost. As it would be a huge investment on acquiring hardware with servers and all related software for a standalone system for the company, cloud computing platforms are based on
subscription pricing, it can be viewed as pay-as-you-go service based on the usage instead of maintaining whole set of hardware and software. Therefore, companies can be free from the heavy
infrastructure investment, in other words, it will be easier for start-ups to
enter hotel industry. It lowered new entries barrier and excess investment costs on hardware and software as well as future cost of maintenance. It is so called “Investment is Small, Benefits are huge”.
Reduced Operational Costs
Moving hardware from hundreds or thousands
of individual hubs to cloud system not only means less upfront investment, but
also less labor to manage since you don’t need to retain too many IT guys, less
energy to cost since you don’t need to keep too many your own data center
running, even less telecommunication costs within company as communication is
done via cloud system. Real case such as La Quinta Inns & Suites, a limited
service hotel chain that adopted cloud computing in 2007, its operating costs have
been reduced by 50% and have saved 30% to 50% in telecommunications bills at
each company-owned property (Sanghi, 2013).
Overall, cost savings for hotel industry by
moving to cloud computing can potentially be very high. West has estimated that
a range between 25% to 50% cost savings is realistic (West, 2010).
While Tucker estimates that using the cloud service would potentially lower IT
labor costs by 10% to 15% (Tucker, 2009).
Cloud-Based Reservation
Cloud-based reservation system becomes increasingly popular in hotel industry because it has huge
potential to increase direct booking revenues. In recent years, more and more
customers began to book hotels online, or via mobile, and are even eager to use
mobiles or tablets to complete these transactions.
According to a report on
mobile bookings by L2 Think Tank, hotels are benefiting from the increasing booking
via mobile. As 70% of customers prefer to book via mobile site compared with
applications, which means that hotel brand name is considered importantly
credible to customers, and hotels should consider how this experience informs
the customer’s preference.
Better Customer Experience
Having a cloud-based reservation system
allows hotels to capitalize on this trend, appealing to a customer that is only
set to become more knowledgeable about online booking, which can be quite
attracting especially to tech-savvy guests. For example, Choice Hotels
International has rolled out its Web-based central reservation system, Choice Advantage,
to more than 4,500 hotels throughout the world (Mayock, 2011). Besides revenue increases, hotels also
rely on the capabilities of cloud-based reservation systems to provide them with competitive advantage over how they calculate rates and room availability.
Since cloud computing relies on sharing of
resources and hotels can benefit from this sharing, further cost savings with high utilization on investment could
be achieved from the creation of a shared, industrywide reservation system.
This idea brought many big hotel groups such as includes Starwood Hotels &
Resorts Worldwide, Marriott International, Hyatt and InterContinental Hotels
Group together to explore the possibilities, as industry believe it can help
share cost and enable all players in the shared system to use the system at the
same level of application capacity and stability in terms of infrastructure and features,
which otherwise won’t be possible without cloud computing technology.
Elimination of Downtime
One of the biggest unpleasant things that customers encounter in hotels, especially on busy weekends, is
waiting at front desk for check-ins and check-outs. Those downtimes affect customer experience at a large extent. However, through better
staff collaboration, cloud computing help hotels to provide more responsive
service in an efficient way. Cloud computing like public cloud can have more reliable server and network directly linked to data centers with power protection in order to keep the up time more than 99%. It would be more reliable than owning a own server system. With cloud-based IT support, you have engineers
and help desk service available around the clock, but not a fully staffed IT
department.
Engagement with other Services
Cloud computing enables hotel industry
engaging with various services: it help hotels to better integrate with cloud applications to provide
customers with better services. For example, Force.com cloud computing platform
provides built-in support to integrate with many other services such as Amazon,
Google and other major applications.
Cloud computing makes it faster and easier
to integrate and extend legacy environments as well as connecting to other
cloud services. And because of the cloud multitenant architecture, integrations
with these services will have no "break" during upgrades, which require
intricate technology dependencies, and finally lead to vendor lock-in (Hopkins, 2011)
Customization of Customer Experience
Customer experience plays a vital role in hotel
industry. A number of hotels have already begun apply cloud technology in order
to improve overall customer experience in all aspects of business and consumer touch
points.
With cloud shared information and large storage resources,
hotels can extract data and interpret it to help provide individual customer
personal service within small amount of budget and limited extra time. Hotels
can take advantage of social media and mobile data via cloud system to provide
customers with customized service. For example, if customers book online,
hotels can trace their individual preference and then prepare for their arrivals, even a cup of customized drink or small
gift will definitely give customers a memorable experience. Or if hotels know
customers’ general health condition, they can make customized food menu for
room service, such as amount of sugar, calorie or cholesterol.
Cloud computing has major impact on the ways of how information and resource are dealt
by hotel industry. Hotels that establish strategic partnership with technology
providers and implementing a variety of solutions unique to your needs, hotels can avoid excess expenses and increase efficiency.
Strategic choices for hotel industry
In order
to simulate different strategic approaches for hotel industry, we would like to
adopt The Competing Values Framework (CVF) in our analysis. The framework is
about understanding how to appreciate conflicting values and integrate them successfully
so that an organization is open to collaboration and growth (Klein, 2015). Also, according to Jeff
DeGraff, the developer of the frame work, "Sometimes the most effective
leadership decisions that enable innovation are more about stopping current
practices than starting new ones” (Klein, 2015).
For create
Difficulty for create
in hotel industry
In fact hotel
industry is an industry with rules and traditions while the main deliverable
were intangible products such as service. Good service can be positive aspect
in the guest's perception of the hotel and its service (Saleh, F., & Ryan, C., 1991) which is not easy to
manage as it is a kind of perception from customers. Therefore, it is limited
on create side. It is not preferred to have creativity in this industry. So,
the strategy would be more likely to be focus on improving current process by
new innovation which gives differentiation from competitors on image and service. By using cloud
technology, it can have a more efficient and user friendly system on
maintaining booking details, customer information even handling customer
special behavior over the world across the chain which can exceed customer
expectation.
Strategy for create
For
create, the system should be customer orientated and it cannot violate current
service delivery as customer loyalty is the core value. The ideal system such
as a cloud system can add value to current system which helps to save cost, improve efficiency
and help to deliver more than customer expectation under current system.
For Collaborate
People
To have
cloud technology in hotel industry, people would be an important factor to deal
with. As the system will totally change after using cloud technology, there is
resistance of change on employees as they need to be familiar with the new
system. Also, not all staffs were educated enough to adapt cloud system in this
industry. Some jobs such as cleaning and housekeeping may use no computer for
their records but just pen and paper. It may costly to educate them to change
their record system to computer. For IT department, as using cloud system may
outsource the maintenance to external hosting company, they may lose their job in implementing new
cloud system. Also, the external vendor may not be as reliable as recruiting owns IT staff who
are readily available.
Besides, to customer side, it may not easy to educate customers too. As some
brand new hotel may put an all in one PC connected to cloud providing a
comprehensive platform of TV, Internet, booking of service and hotel
information. It would lead to service failure if the customer failed to turn on
the TV inside the room.
Environment
For
customer side, even cloud system with extensive media service is provided to
them, the current system is still needed to be functioned since not every
customers like to use those facilities. Not everyone preferred to use the cloud
system to set morning calls, booking facilities and ordering meals. Some of
them still expected all services can be delivered by just a phone call or
delivered by so called “hotel service”. So there is not system can one size fit
all.
For
employee side, proper communication is needed for service delivery. Cloud
technology can provide efficiency on maintaining information through the hotel
or the chain. However, traditional communication among staff and direct
communication is also needed to maintain well. It cannot rely on cloud
computing too much.
For Control
The
purposes for implementing cloud computing technology in hotel are to add value to customer
service quality, scalability in terms of data usage and globalize business and
enhancing corporate reputation and its social responsibility by green
computing. To achieve these goals, it is
essential to control the resources and procedures throughout the process.
Cost
Cloud
computing can be categorized into private cloud and public cloud (Schneider, 2012),
while the set up cost and investment capital will be varied base on the
choice. Also, the infrastructure and the
level of technical support such as required IT staffs are different.
Hence, it is needed to develop a comprehensive financial plan with
considering these factors.
Security and Legal
issue
Since
the data are centralized at cloud server, it may eventually locate somewhere
offshore (Jaeger, 2011). If hotels use a public cloud service, data may be stored at external service provider which may led to security concern. As the data owner, it is important to ensure
sufficient security measurement for protecting such important intangible property. On the other hand, legal issue will be more complicated if
public cloud server is used. Privacy
is another point to beware when using the data to design the “customer behavior
fit service”. Otherwise, customers may
feel offensive more than caring.
Human Resource
Management
After
implementing cloud computing into the hotel, the role of staffs is
changed. Employees shall act more like
problem solvers than operators, knowledge required and code of conduct should
also be changed with the new business model. Moreover, departmental headcounts
shall be adjusted with the business needs.
Time
To respond to the market change quickly, management
decision making should be fast. On the
other hand, it is important to allow sufficient time for the project itself and
modification in later phases. Also, the
improvement in data transfer speed, operating service efficiency should be
monitored.
For Compete
To
standout in the hotel industry, it is important to manage customer relationship
by providing excellent service quality with fastest pace. The short term goal is
to modify the business fast.
Service Differentiation
Intelligent
devices like smartphone, tablets are popular nowadays. By combining cloud computing into those
intelligent devices, it can extend into central reservation system, property
management and even in-house entertainment. By
increasing customer satisfactory and exceeding customer expectations,
it helps to retain loyal customers and therefore business sustainability.
Scalability
Cloud
technology enables greater data storage size.
Hotels can make good use of the big data to analyze customer behaviors,
so as to design corresponding marketing strategies and maintain customer
loyalty in the long run.
Corporate Social
Responsibility
Cloud
technology is a typical example of green computing. It can replace and reduce
the use of hardware by centralizing the content (Nidhi Jain Kansal, January 2012) and hence the energy
used. Once prestige reputation is
gained, it is considered as an alternative marketing promotion for the hotel.
Managing Cloud
technology in Hotel industry
In
summary, Managers need to understand the nature of the industry and the nature
of the new technologies.
Access the Change
To
summarize the management view, managers need to think on both employee side and
customer side to see if the new cloud technology workable or not. As service quality
is the core value of hotel industry, it would be more expensive to get a new
customers than retain the current customers. So, they should access the risk of
service failure due to the new cloud technology. The availability of technical
support from cloud service provider as well as the reliability of cloud service
would be critical. Beside, how to implement proper control is also important.
As cloud technology will use network system, the internal network system needed
to be stable and reliable to access cloud service. In addition, network system
of cloud computing will increase the concern on data and privacy protection
within hotel internal and external network. Lastly, choosing a right form of cloud computing service to suit the business needs and all concerned factors would be strategical for managers in order to achieve highest cost and benefit.
Suggestion
In order
to maintain the service quality and customer expectation, we suggest running the new cloud system with
existing computing systems in parallel before adapting the new technology. Also, as
it would be very costly for a service failure for this industry, in order to
avoid service failure, it would be favorable to set up contingent plan when the
cloud technology fails.
InterContinental’s strategic approach in adopting and building on Cloud Computing
InterContinental Hotels Group, short for IHG, is
the world’s largest hotel group by number of rooms that it owns and manages.
IHC has franchises over 4,400 hotels in over 100 countries and operates seven
hotel brands, including InterContinental, Hotel Indigo, Crowne Plaza, Holiday
Inn, Holiday Inn Express, Staybridge Suites and Candlewood Suites. What’s more,
it has the world’s largest hotel loyalty program which is Priority Club Rewards
with 48 million members worldwide. IHG is a very active hotelier in planning
the roll-out of cloud-based server solutions in recent years. According to IHG’s
worldwide Chief Enterprise Architect Bill Peer, Cloud computing provides the company with a tenable utility-type
computing model. Considering company’s specific business strategy, IHG
has its unique strategic approach built to identify major business issues when
applying cloud computing.
Develop “Hybrid” Cloud
Security is one of the major issues that
hamper the growth of cloud. However, in hotel industry, the benefits that
companies can gain from cloud overweight the risks that they may suffer from. It’s important for companies to define the boundary of how far it can go
with cloud technology. As cloud computing has three model, including
public cloud, private cloud and hybrid cloud. Ultimately, IHG chooses hybrid
cloud computing that blends an in-house cloud data center with public cloud
services from providers.
According to Bill Peer, VP of Enterprise
Architecture of IHG, there is still risks existed that once a cloud is
compromised, other clouds will also be compromised. Since IHG don’t want to take
this kind of risk with its brands, and committed to put customer information as
one of its key business priority. IHG adopted cloud computing by allowing a
system to run in the cloud that provides rate information for hotels than
anything with our customers’ information. In this way, even there is a cloud
breach happens, the impact will not be that huge as there at least won’t be any
customer data. (Peer, 2010)
By applying hybrid cloud model, the
company’s strategy is to work both on “private” cloud and public cloud services.
IHG builds its private cloud environment to move its core customer relationship
management systems off its previous mainframes and onto industry-stand
equipment. In private cloud, there are scalable resources and virtual
applications that provided by cloud vendors can be put together and can be available
for cloud users to share and use. But it differs from public cloud in that all the
cloud resources and applications are managed by IHG itself. In this mode, utilization
of private cloud can be much more secure than that of public cloud because of
its specified internal exposure.
On the other hand, IHG still takes the best
advantage of pubic cloud to manage other types of information, such as rates
and resource availability which is sensitive to changing demand. The company
strategically leveraged cloud to manage its complicated in-house system, making
system information be updated within a very short time. Indeed, it is also one
the reasons that the company decided to move most of its UK properties to the
cloud, then it can update hotel prices in real time across all hotels within
the group with a simple click. Besides, IHG is using public cloud
infrastructure for application development and testing, trying to make web
content closer to customers worldwide (Babcock, 2011)
Since InterContinental Hotels Group is a
franchise-based business, the company works especially hard to operate its
business in the most cost effective way, and cloud computing technology can
practically help IHG meet this business objective.
Lastly, again quote Beer Peer’s words
“IHG’s need grows as more hotels fly the IHG flag and as more people stay
at our hotels, and will result in more revenue to the business
to accommodate the computing needs. Cloud computing is a wonderful
financial and computing model that, done correctly, can scale together without
bound.” (Peer, 2010)
Conclusion
For traditional industry like hotel industry, it is
service and people oriented. In order to manage emerging technology to this
industry, cloud computing proofed to be the one with high flexibility and high compatibility.
As cloud computing provide “Anything as a service”,
management of hotels can acquire specific service to suit their business need
but not invest excess hardware and software. However, as cloud computing was
provided by external service provider with specific service, they also needed
to access their business needs, accessibility, availability and risk on
choosing suitable service and service provider.
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With cloud computing,
the main benefit is users can access company service anywhere in the globe with
network connection. Companies in different industries can be benefit
from sharing information and company service by some self-developed internal
software instantly without time lag through cloud. Also, it allows them
to handle and resolve different requests from
different places
efficiently. For example, all industries can
manage global online purchase and global supply chain by setting up a private
cloud. The private cloud in headquarter can handle all request instantly
without time lag from anyplace. Even the company has many different business
location, cloud computing can reduce lag time in the business decision making
in order to avoid business risk and increase utilization of working capital.
Furthermore, globalization resolves the geographic limitation by increasing
the ways of communication and not limiting just face to face format. At the same time, cloud base server allows
users to access anywhere, even offshore.
Therefore, some of the back-office duties can be outsourced or moved to the
places with lower operation costs.
In the era of
globalization, knowledge is being considered as one of the key drivers that provides
company with business intelligence and competitive intelligence. Cloud
computing provides new models of knowledge management and knowledge sharing,
and enable people to develop set of practices to create, capture, share and use
knowledge in a new way. Service industries are always facing the problem of
growing need of IT and infrastructure to keep and manage customer information
so as to improve customer service level. With cloud computing, SMEs aiming for
service industry is also given the chance to have better ways of knowledge
management and quicker access of knowledge sharing. As cloud computing can provide
the right level of security for knowledge management, service-providing
companies can achieve protection of customer information at the same time
provide them with the most desirable experience. Hybrid cloud can help overcome
organizational culture challenges by developing company culture that embraces
learning, sharing, changing, and improving knowledge sharing.
