Hospitality industry sees the light in e-business

The hospitality industry is beginning to embrace e-business, including Internet-based functions such as electronic procurement, resulting in huge supply chain cost savings, says Andre Pretorius, divisional director of DataPro Pty. Ltd., an Internet Service Provider (ISP) and network integrator.

Pretorius says that "back in 2001" reports coming from the U.S. showed that the hospitality industry was already getting "Internet-wise". "During 2001 it was reported by the Aberdeen Group Inc. that the hospitality industry spent an estimated US$50-$60 billion per year on supplies and services. But this value," he says, "is steadily climbing."

Although we are not seeing such a large take-up in South Africa (SA) just yet, Pretorius is confident that e-business will be deployed more widely during the next few years, saying that his company expects to grow its number of hospitality clients substantially.

"For us, as an ISP that provides value-added services beyond just providing bandwidth, we see a lot of potential for ourselves as an Application Service Provider (ASP), where we will be looking at handling the ICT and e-business requirements of hospitality organizations, including hosting their central reservation systems or their supply chain requirements," he adds.

He says that because of the drop in the number of tourists visiting SA this year, some hoteliers to whom he had spoken are actively looking at ways to cut supply chain costs, especially in the food and beverage area. Whereas before the allocation for a breakfast "was done as a percentage of revenue", the revenue for the breakfast versus the actual cost meant that the food and beverage managers were "getting away with murder". Hoteliers are now concentrating on reducing actual food costs, and the only way to do this is to improve systems through the harnessing of e-commerce.

Commenting further, Pretorius says that, as a result of using the Internet for e-procurement, the increase in overall efficiencies is expected to save companies million of dollars each year. "We are already seeing purchasing managers gaining better control over their procurement -- and businesses are cutting back on off-contract, or ad hoc purchases, a big cost concern for any hospitality company.

"In fact, over the past few years a number of large hospitality electronic marketplaces have been established. These are already, according to research, handling at least $13 billion in revenue per year. This is also set to grow."

There are, for instance, a number of Global Distribution Systems (GDS) and Web-based closed user groups, or intranets -- and Web-based reservation portals -- already facilitating e-business delivery, bringing with them the possibility of making use of 'high touch' central reservation call centers.

Although the hospitality sector has definitely been lagging other market sectors when it comes to the adoption of e-business, there are certainly signs that this is changing -- especially as "market demands push for this". "When it came to e-procurement, for example, the manufacturing sector was far quicker into the fray. But I believe hotels are starting to realize the need to embrace e-business -- and they are starting to take advantage of the many benefits it offers, such as the Web-based applications that are available to effortlessly upgrade purchasing systems, resulting in immediate benefits, including increased levels of customer service, and cost-cutting."

Pretorius says that although the bubble has burst on high-flying dotcom companies, the Internet will continue to have a significant, and lasting, impact on how companies from all market sectors conduct business into the new millennium.

"Doomsayers said that the dotcom bust would cause a mortal wound for the widespread adoption of e-business. But, while it did create a serious hiccup, it did not relegate e-business to the bottom of boardroom agendas. People are just wiser and more careful when implementing e-business strategies," he concludes.

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