An evaluation methodology for hotel electronic channels

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Hospitality Management 23 (2004) 179–199
An evaluation methodology for hotel electronic
channels of distribution
Peter O’Connora,*, Andrew J. Frewb
a
b
IMHI, ESSEC Business School, Ave Bernard Hirsch, BP 105, Cergy Pontoise 95021, France
Faculty of Business and Arts, Queen Margaret University College, Edinburgh, EH8 12TS, UK
Abstract
Electronic channels play an increasingly important role in hotel distribution, with most
companies utilising a portfolio of channels to reach the customer in an effective manner.
However channels cannot simply be added ad infinitum as they emerge; system complexity,
technical factors and the management overhead associated with using multiple channels mean
that choices must be made between alternative solutions. However, little is understood about
how an electronic channel of distribution might be best evaluated. This study, combining both
qualitative and quantitative approaches through a Delphi study, explored expert opinion on
the key factors involved. Factors generated in the initial round of the study were subsequently
refined, rated and ranked by the expert group to identify the key factors for consideration in
both the channel adoption and continued use decision making process. In contrast to existing
literature on channel evaluation, this revealed that operational and performance factors,
rather than financial or strategic issues, should be of prime consideration in the adoption
process.
r 2003 Elsevier Ltd. All rights reserved.
Keywords: Electronic Distribution; Tourism; Hotels; Electronic commerce
1. Introduction
Despite a well-recognised conservatism in the adoption of new technologies,
electronic distribution systems have quickly gained widespread acceptance in today’s
hotel sector. Effective distribution is especially important as the key (accommodation) product is highly perishable and sold in a market characterised by high capital
*Corresponding author. Tel.: +33-1-3443-3177; fax: +33-1-3443-1701.
E-mail addresses: oconnor@essec.fr (P. O’Connor), afrew@qmuc.ac.uk (A.J. Frew).
0278-4319/$ - see front matter r 2003 Elsevier Ltd. All rights reserved.
doi:10.1016/j.ijhm.2003.10.002
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costs, increasing competition and shrinking margins (Vialle, 1995). The sale of each
room, each night at the optimum price is critical to the overall profitability of a hotel
(WTO, 1991). Although demand is increasing, achieving this objective has become
increasingly difficult as the supply of hotel rooms is increasing at an even faster rate.
Distribution systems play a key role in overcoming this challenge.
Hotel distribution channels have two (main) separate yet interrelated functions; to
provide consumers with information to help them in their purchase decision; and to
facilitate the purchase itself (Middleton and Clarke, 2001). Effective information
distribution is important since consumers are dependent on accurate, timely, high
quality information to help differentiate among competing properties (Poon, 1994).
Convenience, both in terms of finding appropriate information and facilitating
reservations and payment processes is also critical (Castleberry and Hempell, 1998).
Intermediaries especially have an interest in handling the most easily sold products
and may well use competing suppliers if their product is more easily accessible
(Bennett, 1993). One of the key enablers in distributing information and making the
reservations process more convenient is information technology. However, hotel
electronic distribution systems are currently in a state of transition as a result of
technological advancements, new and emerging players and a shift in the balance of
power among suppliers, buyers and intermediaries (O’Connor, 1999). Distribution
costs are rising due both to the increasing number of intermediaries involved in the
hotel distribution process, and the complex technological infrastructure needed to
support distribution to a growing spectrum of potential channels (Connolly, 1999).
The decision as to which channel(s) to use has become increasingly complex, and
hotel managers currently have little guidance to help them determine which best
match their needs (Weill, 1991). To investigate ways of addressing this, a (Delphi)
study was undertaken to identify factors that should be taken into consideration
when evaluating hotel electronic channels of distribution and a prioritised portfolio
of factors was generated for consideration in both the channel-adoption and
continued use decision making processes.
2. Distributing the Hotel product
According to Connolly (1999) ‘‘merchants have wrestled with determining the best
approaches to delivering their products to the marketplace since the early days of
farmers’ markets’’. This challenge still exists today and has become more difficult in
our ever-changing, increasingly competitive and global marketplace. Hotel channels
of distribution provide ‘‘sufficient information to the right people at the right time
and in the right place to allow a purchase decision to be made, and provide a
mechanism where the consumer can make a reservation and pay for the required
product’’ (Go and Pine, 1995). While extensive use is made of both direct selling and
intermediaries, developments in information and communications technologies have
presented powerful new possibilities for hotel distribution. Digital convergence,
supported by miniaturisation, portability, declining costs and more powerful
applications, are part of the trend driving computers to ubiquity in everyday life
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(Negroponte, 1995). This has given rise to a digital economy where speed, agility,
connectivity and the ability to amass and subsequently employ knowledge are key
competitive ingredients (Tapscott, 1996). In the hotel sector, distribution channels
represent the quintessential example of this convergence of technology, communications and content.
Within tourism, the potential of electronic distribution was first demonstrated by
the airline sector. Systems originally developed to help manage seat inventory were
forwardly integrated into travel agencies (Knowles and Garland, 1994), giving agents
direct access to information about flights, availability and pricing, and also
facilitating direct bookings. The product portfolio of these systems was subsequently
broadened, with hotel rooms being one of the first complementary products added to
the developing Global Distribution Systems (GDS). However, as the database
structure was originally designed for use with the airline product, it proved
unsuitable for use with the more diverse hotel product. As a result, large chains
developed their own systems with more appropriate data architectures, and
subsequently interfacing them with the GDS. Independent hotels and smaller chains
used alternative strategies, including outsourcing, joining a marketing consortium or
making use of public funded Destination Management Systems (O’Connor, 2002).
This effectively was the state of play at the beginning of the 1990s, with each
system co-operating in a mutually beneficial relationship. However, the development
of electronic commerce on the Web had a profound effect on hotel distribution. In
addition to cooperation, systems started to compete by offering information and
reservation services directly to the consumer (Coyne, 1995). Channels became
increasingly interconnected as intermediaries formed strategic alliances in an attempt
to develop multiple routes to the customer. New intermediaries and business models
have appeared, and while the original electronic channels were linear, closed and
dedicated, the emerging distribution model is multi-dimensional, open and flexible,
with the majority of participants able to distribute to customers using a variety of
different routes. Both the number of channels and the complexity of the network
continues to increase, and the distinction between channels has become less clear as
the systems become interconnected at multiple levels (Anderson Consulting, 1998).
Since no one distribution channel is likely to dominate in the near future, hotels
need to use a portfolio of channels to reach the marketplace (Middleton and Clarke,
2001). However, not all channels are equal and thus companies must carefully weigh
their decisions in light of their organisational goals and performance standards
(Crichton and Edgar, 1995). Some authors claim that selecting ‘‘an appropriate
distribution channel is paramount to success and important if hotel firms are to grow
top line revenues and control overhead, yet the number of choices facing hospitality
executives is overwhelming’’ (Connolly and Olsen, 2000). Which channel (or
combination of channels) should a hotel be using? Both the ever-increasing
complexity of the distribution network and the rapid pace of change make this a
difficult question to answer. Yet increased competition, scarcity of capital and rising
distribution costs make management of electronic distribution channels essential.
The question arises, therefore, of how to evaluate a hotel electronic channel of
distribution. In the past, many companies did not perform such evaluations,
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preferring instead to adopt a ‘‘shelf space’’ approach, including their inventory on
multiple simultaneous channels on the premise that more is better as it increases
product visibility and thus the chance of selection by the customer. However, as the
number of channels used increases, system complexity also increases, raising the
management overhead and technological infrastructure required (Connolly, 1999). A
more discriminating approach, balancing the merits and costs associated with each
alternative, is needed. Budget airlines have long recognised the value of this strategy
(Dev and Olsen, 1998), e.g. EasyJet has chosen not to participate in the GDS even
though they [GDS] distribute the majority of airline seats worldwide and service the
powerful travel agent market. Instead customers are encouraged to book directly,
either over a toll-free number or over the company’s Website, thus saving on GDS
fees and travel agent commissions. However, such a decision such as this can only be
taken after a thorough evaluation of each option (Olsen and Zhoa 1997). Others
(Lewis and Chambers, 1995) claim that such channel management is the backbone of
distribution. Similarly, Andersen Consulting (Anderson Consulting, 1998) maintain
that hotel companies urgently ‘‘need to get better at managing their channels,
understanding the profitability of each and developing levers to divert traffic through
one channel or another’’.
3. Evaluating electronic channels of distribution—a theoretical perspective
As investment in IT-related projects tends to be substantial and suffers from a
high failure rate, a considerable literature base exists on IT evaluation techniques
(Remenyi and Sherwood-Smith, 1999). Perhaps the best starting point is an
understanding of what is meant by evaluation. According to Ballantine and Stray
(1999), evaluation is the process of establishing, by quantitative and/or qualitative
means, the worth of an investment. Similarly Symons (1991) defines evaluation as ‘‘a
process incorporating understanding, assessment and sometimes measurement of
some sort against a set of criteria’’, while Remenyi and Sherwood-Smith (1999)
define evaluation as ‘‘a conscious or an intuitive process whereby one weighs up the
value added by a particular act/situation’’. Although the process can be intuitive,
more formal evaluation techniques are prevalent in the case of large scale capital
investments such as those involving distribution (Ballantine and Stray, 1999). In the
following section, the techniques identified are grouped into economic and noneconomic approaches to facilitate discussion. While there is overlap, in this case, it is
unimportant as the objectives are firstly to highlight the complexity of the evaluation
process as it relates to information technology related projects, and secondly to bring
some clarity to the range of techniques available.
4. Economic approaches
As with any other asset, investment in the use of a distribution channel must be
justified from a financial perspective (Griffin, 1997). For that reason financial
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analysis techniques (include cost benefit analysis, value added approaches,
productivity based approaches and capital appraisal) are the most commonly
suggested (Avison and Horton, 1988). However, difficulties in assessing the
monetary contribution of IT based systems limit the utility of such approaches
(Lefley, 1996). With financial techniques, both costs and benefits are assumed to be
well defined, direct and short-term (Hopwood, 1983), however, in reality there are a
large number of unknowns, uncertainties and assumptions. Nearly 75% of all IT
investments have no easily calculated business value (O’Brien, 1997) because instead
of hard dollar costs benefits, they generate indirect, qualitative and contingent
impacts that are difficult to quantify (Banker and Kauffman, 1993). Yet, despite
being based on subjective judgement, typically in financial calculations every cost or
benefit is shown as a single, precise number. And, because the evaluation must be
done a priori, such numbers are based on forecasted cash flows and thus are to a
large extent fictional (Weill, 1991). In any case, identifying the economic
contribution may be difficult as IT projects frequently cross organisational
boundaries and are often part of a string of interrelated investment decisions (some
prior and some future) with the result that their effect is difficult to isolate from
external factors (Applegate and McFarlan, 1996). Furthermore, evaluating electronic channels is made even more difficult by the speed at which this arena is current
developing (Middleton and Clarke, 2001). And lastly, even if appropriate data could
be obtained, today’s financial models are acknowledged to be insufficiently
sophisticated to evaluate such investments (Applegate, 1999). Current techniques
originated in the manufacturing economy, where the test of an investment’s worth is
based on ‘‘effectiveness and productivity gains, as realised in terms of labour savings,
increased output and lower unit costs’’ (Connolly, 1999). As such, they tend to focus
on cost displacement, omit strategic implications, be biased towards short term
returns, set unjustly high hurdle rates in situations involving high perceived risk and
do not place enough emphasis on drivers of value such as customer satisfaction,
innovation and quality (Ittner and Larcker, 2000). Thus while economic approaches
are objective, theoretically well grounded, and undoubtedly the most commonly
used, their effectiveness in evaluating information technology related projects is
clearly limited.
5. Non-economic approaches
As economic approaches are increasingly seen as insufficient, a range of other
methodologies have been proposed (Leonard and Mercer, 2000). Supporters of these
alternative approaches argue that the drivers of success in many industries are
‘‘intangible assets’’ such as intellectual capital and customer loyalty, rather than the
hard assets shown on the balance sheet. Thus while economic techniques focus on
performance against accounting yardsticks, non-economic measures encompass a
wider range of factors that may be important in achieving profitability, competitive
strength and longer-term strategic goals (Ittner and Larcker, 2000). Consider, for
example, investments in research and development. Under normal accounting rules,
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these must be charged for in the period incurred, so reducing profits. However,
successful R&D improves future profits if brought to market—a fact ignored by
most economic evaluation methodologies (Ittner and Larcker, 2000).
While IT projects must obviously be evaluated in terms of their technical
feasibility and effect on existing systems as well as their performance, usability and
reliability, many observers now stress the importance of assessing the contribution of
the system to the organisation’s strategic position (McFarlan, 1984). Traditional
models of competitive advantage are based on Porter’s five forces model, with
strategic advantage resulting from when technology helps to achieve economies of
scale, reduce costs, create barriers to entry, build switching costs, change the basis of
competition, add customer value, alter the balance of power with suppliers, provide
first mover effects, or generate new products (Applegate and McFarlan, 1996).
Competitive advantage and strategic necessity confound traditional financial
analyses as investment yield results over time rather than in the short run (Clemons
and Weber, 1990). Taking a more strategic viewpoint balances the short- and longterm benefits against the initial capital expenditure, ongoing costs and other factors
(Smith David and Grabski, 1996). However, as technology becomes a strategic issue,
measurement difficulties are enhanced (Brady and Saren, 1999). In addition to the
difficulty in quantifying results, ‘‘IT is a multidimensional object, its value can be
looked at differently depending on the vantage point chosen’’, making it difficult to
calculate the tangible benefits of technology used for strategic purposes (Hitt and
Brynjolfsson, 1996). There are no commonly accepted concepts to measure its proper
value and no agreement as to which variables to measure (Ittner and Larcker, 2000).
Furthermore, unlike financial measures, there is no common denominator and
evaluating performance is difficult when some measures are denominated in time,
some in quantities and others in arbitrary ways (Ittner and Larcker, 2000). Thus,
while many authors stress the need to evaluate IT projects from a strategic
perspective, few offer concrete suggestions as to how perform such evaluations, with
the exception of using subjective judgement.
Thus, evaluation in the context of information technology based systems is both
complex and multi-faceted. There is little agreement as to how such evaluations
should be carried out, and no commonly accepted range of techniques available to
help hoteliers with their channel evaluation and assessment decisions. Furthermore,
as has been discussed, there are deficiencies in the existing appraisal techniques. As a
result, new business measures that ‘‘effectively represent digital commerce,
determining the health and profitability of each channel available are needed’’
(Castleberry and Hempell, 1998). Collective wisdom now recommends a multidimensional methodology involving both qualitative and quantitative components,
as if a broad range of factors—not just the technical costs and monetary benefits—
are taken into account, the evaluation process is more likely to be valid (Avison and
Horton, 1988). In any case the hotel sector has been poor at using formal techniques
for information technology related investment appraisal (Cline, 1999). For example,
the 1987 study by Whitaker (1987) revealed that less than half of hotel computer
system installations were preceded by a formal systems analysis. In most cases, the
decision process ‘‘consisted of a series of ad hoc and uncoordinated decisions based
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on vague intentions’’. Murphy et al. (1996) found that ‘‘few businesses have based
their Internet investment on anything more than a back-of-the-envelope calculation—18% have done no analysis at all, while only 12% have justified their
investment under the scrutiny typically required within an organisation’’. Pringle
(1995) makes the pointed observation that use of electronic channels by hotels may
not, in many case be due to a carefully thought out strategy, but to external
pressure—a case of everyone else is doing it so why don’t we? There is, however,
some evidence that the major chains have started to evaluate their existing channels.
Respondents to a limited survey (Smith David and Grabski, 1996) considered the
impact of technology on productivity prior to investment. However, such
consideration was unstructured as a result of the measurement difficulties discussed
earlier and in any case investments often went ahead with any evidence that they
would generate any improvements or productivity increase.
6. Research objectives and methodology
As can be seen from the above discussion, literature regarding evaluation of
electronic distribution channels of distribution is still sparse without any robust or
accepted knowledge as to the process that should be followed and the criteria that
should be used. However, with the increasing capital, organisational and technical
requirements to successfully use an electronic channel, such assessments have
become of critical concern to industry practitioners. Not all channels can be adopted
and thus both those channels currently being used and any potential additions need
to be evaluated to identify those that best match the needs of the organisation. Thus,
the primary aims of this study were to establish and prioritise a portfolio of factors
for use in the hotel electronic channel of distribution evaluation decision, both at the
time of initial consideration and when ongoing use is being considered. As existing
literature on hotel electronic distribution was mainly descriptive there was little a
priori research available to help frame the research study. This, coupled with the
unstructured nature of the research problem, prompted the use of qualitative
research—specifically a grounded theory approach and the Delphi Technique, as a
foundation for an informed quantitative investigation. A three-round Delphi study
using experts in the field of hotel electronic distribution was thus used to develop,
validate and prioritise a baseline list of potential evaluation criteria.
The Delphi process itself has been well documented; a panel of participants is
chosen to give their opinions on the subject under investigation. Each is guaranteed
anonymity in terms of their responses; neither meets nor corresponds with other
panel members; answers questions provided by the facilitator; and are normally
given at least one opportunity to re-evaluate their answers based upon examination
of the group response. In this study, the expert panel was selected by identifying
speakers on technology related topics at major hospitality industry conferences in 30
months prior to the study. Based on the events calendars of two major academic
journals, the programmes of 105 conferences were analysed, giving a potential pool
of over 600 speakers. Those who had three or more presentations at separate
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conferences were invited to participate in the study. Potential respondents were
asked to evaluate their own level of expertise (Loveridge and Georghiou, 1999). Of
those invited, a total of 42 ‘‘experts’’ were willing and qualified to participate in the
study. These were classified into five categories: Academic, Consultant, Hotelier,
Researcher and System Supplier for comparison purposes, although subsequent
analysis revealed no significant differences between the opinions of each group.
Email was used as the communications medium throughout, and an overall response
rate of 65% was achieved.
7. Channel adoption factors
Initially the panel was asked to suggest the factors that should be taken into
account when evaluating the use of a hotel electronic channel of distribution for the
first time. A large number of factors were suggested in response, which were grouped
into six broad categories using content analysis techniques. Of these, financial factors
(focused on the cost or revenue aspects of using a channel) were the most commonly
cited. Specific criteria mention included the overall cost of using the channel,
transaction costs, set-up costs and the increased volume of transactions and revenue
that could potentially be generated. However, few respondents explicitly combined
these factors together by balancing costs against benefits or identifying the effect on
profitability. Marketing factors were also frequently cited. These included the
potential to service existing markets and the ability to address new customers in
terms of market segment and geographical spread. Issues that focused on the
strategic/tactical running of the firm were grouped into the management category.
These included the effect that using the channel would have on the ‘‘brand image’’ of
the hotel, competitive positioning and the effect on existing customer and
distribution channel relationships. Operational factors included technical easy of
use, integration with existing inventory databases, automation, control issues and
reporting issues. System provider issues were the next most frequently cited category,
and these included the reputation of the company providing the service, with their
level of independence and level of understanding of the hotel sector also mentioned.
Lastly, technical issues were the least frequently cited category. Both transaction
speed and update speed were mentioned, as were data quality and security.
The range and variety of criteria suggested by the initial Delphi round
demonstrates the complexity of the adoption decision. However, the pattern of
suggestions implies that evaluating the adoption of a channel is similar to most
business decisions and should be based on cost and markets served. How the channel
operates, and the technology behind it, should not be of prime concern. Such a
viewpoint is supported by the content analysis, which revealed far more cohesion in
the responses to the financial and marketing categories. However, it is also clear that
evaluation should be multi-faceted, and should not be undertaken using financial
and marketing criteria alone. A broader model is needed—one that effectively
combines the more important factors from each category to help generate the most
appropriate decision.
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8. Relative importance of adoption factors
Although some conclusions could be drawn from frequency of citation, the list of
criteria developed in the initial Delphi round needed to be prioritised to identify the
most relevant evaluation factors. Thus they were fed back to the expert group, with
each respondent requested, in addition to identifying any errors, omissions and
duplications, to rate each factor using a five point continuous rating scale, from ‘‘1’’
meaning that the factor could be ignored to ‘‘5’’ meaning that consideration of the
factor was essential.
While the initial round had suggested that channels should primarily be evaluated
on financial and marketing grounds, with (in descending order) strategic,
operational, system provider and technical issues also being taken into account, as
can be seen from Table 1, the importance rating identified a different set of priorities.
Technical factors in particular were rated as being the most essential to take into
consideration in the adoption decision. Similarly, the majority of the operational and
system provider issues also rated highly. In contrast, financial factors (with the
exception, unsurprisingly, of ‘‘initial capital cost’’) were rated as being least
important. The converse pattern continued in relation to both marketing and
strategic issues, both of which were frequently cited in the initial round but received
relatively low importance scores.
Such findings contrast with the priorities identified in contemporary evaluation
literature, where, as has been discussed, most authors focus on financial techniques
or strategic analysis criteria as evaluation methods. The findings suggest that a much
broader range of factors, and in particular, a large number of operational issues,
need to be considered. A possible explanation may be that while a wide range of
issues should potentially be taken into consideration when evaluating an electronic
channel (reflected in the large number of suggestions for possible factors received in
the initial round), it is how the system will perform in practice that should be the key
deciding factor in its adoption—hence the emphasis on technical and operational
factors when asked to rate their importance. However, it should also be pointed out
that the majority of the issues were rated as being important. If the scale mid-point
was used as a cut-off point, only five factors would be eliminated—four of which
would be financial! The overall score level, coupled with the lack of suggestions for
factors that should be added or removed, indicates that the correct set of evaluation
factors for the adoption of hotel electronic distribution systems has been identified.
However, the relatively consistent scores make it difficult to distinguish the more
important decision factors. Thus an alternative ranking method was used in the final
round to validate and prioritise the factors.
9. Validating the adoption factors
As the second round results were substantially different to what had been
anticipated, a revalidation of the findings was necessary. Panel members were
presented with a summary of the second round findings, along with a questionnaire
188
Factor
Delphi round one importance rating
(1=ignore to 5=essential)
Delphi round two
importance ranking
Technical System Manage- Opera- Market- Finan- N
Provider ment
tional ing
cial
Mean
Standard
deviation
23
4.22
0.80
0.427
41
4
23
4.17
0.78
0.324
26
9
23
4.09
0.79
0.162
33
7
24
23
23
4.08
4.04
4.00
1.02
1.02
1.09
0.718
0.654
1.162
38
27
38
5
8
5
24
4.00
1.06
1.184
25
10
23
4.00
0.90
0.807
46
1
23
3.96
0.98
1.192
46
1
24
3.92
0.97
0.437
25
10
24
3.75
1.15
0.210
24
12
23
3.74
0.96
0.089
21
13
Skew
Votes
Adoption
ranking
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Speed at which transaction
can be completed
Speed at which information and
rates can be updated
Reputation of the provider
of the channel
Initial capital cost
Security of the channel
Traffic levels (number of
visitors, lookers, hits)
Integration with existing
electronic channels from a data
maintenance perspective
Operational ease of use from
the hotel’s perspective
Potential of channel to open
up new market segments
Effect on existing customer
relationships
Effect of using channel
on brand image
Transaction cost
Content analysis category
P. O’Connor, A.J. Frew / Hospitality Management 23 (2004) 179–199
Table 1
Channel evaluation–adoption factors
3.70
1.33
0.654
46
1
23
23
3.57
3.57
1.16
1.34
0.555
0.584
9
8
18
19
24
3.54
1.28
0.369
12
15
24
3.46
0.98
0.483
1
22
24
24
3.42
3.29
1.25
1.30
0.452
0.079
11
14
16
14
24
3.25
1.33
0.259
2
21
23
24
2.96
2.96
1.30
1.33
0.324
0.322
—
1
—
22
24
24
23
2.96
2.57
2.57
1.43
1.48
1.25
0.177
0.146
0.570
7
—
11
20
—
16
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Potential of channel to address
current market segments
Joining or introduction fee
Presence of competitors in the
channel under consideration
Capability to provide
management information
Effect on existing channel’s
of distribution
Effect on room rate
Ability to individually
recognize customers
Availability of alternative
electronic channels
Achieved volume of transactions
Independence of the provider
of the channel
Forecast revenue from channel
Achieved revenue from channel
Forecast volume of transactions
189
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showing the mean importance score for each factor. Following the Delphi
methodology, instructions were included informing them that they could either
take the group’s mean importance score into account in their revised response, or
ignore it, depending on the strength of their own expert opinion. Panel members
were then asked to rank the factors they felt were most important using a voting
system that forced prioritisation. Each was given a limited number of votes to assign
to those factors thought most important. The results (see Table 1) reconfirm the
theory developed earlier—in the opinion of the expert panel; operation and technical
issues should be at the forefront of evaluation factors when adopting a hotel
electronic channel of distribution. As in prior rounds, a single factor from each of the
other categories also was felt to be of priority. In the financial category, ‘‘Initial
capital cost’’ received the highest number of votes, in marketing factors ‘‘Potential to
open up new market segments’’, and in the system provider group, ‘‘reputation of the
system provider’’ all received high relative rankings. Thus, the final round validated
earlier findings and identified the most important factors to take into account in the
adoption evaluation decision. While these include certain financial and marketing
concepts, it can be seen that, in contrast to established theory, a wider range of
factors, focusing mainly on the way in which the channel will perform in operation,
need to be considered.
10. Developing a list of potential continuation factors
While the evaluation process might be similar, it is possible that a different set of
criteria might be important when evaluating the continued use of an electronic
distribution channel. An identical methodology was used to investigate this issue
with Delphi panellists initially asked to nominate the factors they felt should be
taken into account in such a scenario. The majority of respondents indicated that the
process was essentially the same, but most also chose to nominate additional factors,
which when analysed revealed that the continuation decision should be greatly
influenced by the actual performance of the system.
As with adoption factors, respondents were subsequently asked to rate the factors
identified in terms of their importance. An identical rating scale was used, and the
results are shown in Table 2. Once again, technical and operational issues are rated
highest, although the pattern in this case is less clear as a variety of other issues also
score highly. Financial issues once again score poorly, with initial capital cost and
joining fees understandably receive the lowest scores as they are in effect sunk costs
and thus less relevant to the decision as to whether to continue using a channel.
However in contrast to with the adoption scenario, revenue related factors achieve
relatively high mean scores, as did transaction cost, supporting the theory suggesting
by the first round—that it is day-to-day performance, rather than abstract financial
models or strategic issues, that should determine whether to continue using a
channel. As with adoption factors, such a viewpoint was in opposition to that
commonly recommended in published literature, and thus it was revalidated in the
final round of the study.
Table 2
Channel evaluation–continuation factors
Factor
Content analysis category
Mean
Standard
deviation
Votes
Speed at which information and rates can be
updated
Speed at which transaction
can be completed
Ability to individually
recognise customers
Potential of channel to
open up new market
segments
Transaction cost
Operational ease of use
from the hotel’s
perspective
Traffic levels (number of
visitors, lookers, hits)
Security of the channel
Potential of channel to
address current market
segments
Capability to provide
management
information
Achieved volume of
transactions
23
4.52
0.59
0.806 28
8
23
4.43
0.66
0.767 34
4
24
4.38
1.06
2.061 31
6
23
4.30
0.82
0.647 40
1
23
23
4.26
4.26
0.92
1.01
0.573 38
1.739 34
2
4
23
4.17
1.15
1.535 19
14
23
23
4.13
4.13
0.97
0.87
0.610 28
0.269 29
8
7
24
4.12
1.08
1.182 23
13
23
4.09
1.16
1.697 26
10
System Manage- Opera- MarketProvider ment
tional ing
Financial
Skew
Ongoing
ranking
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N
Technical
191
Delphi round two
importance
ranking
P. O’Connor, A.J. Frew / Hospitality Management 23 (2004) 179–199
Delphi round one importance rating
(1=ignore to 5=essential)
192
Table 2 (continued)
Factor
Content analysis category
Financial
N
Mean
Standard
deviation
Votes
24
4.08
1.10
1.246 25
11
24
4.08
1.14
1.139 24
12
24
4.04
1.37
1.419 38
2
24
3.87
1.12
0.349 12
15
23
3.78
0.95
0.218
8
18
24
23
3.63
3.61
1.10
1.12
0.456
0.191
8
8
18
18
23
3.57
1.24
0.321
9
16
24
3.54
1.02
0.011
3
21
24
3.54
1.28
0.503
9
16
24
3.17
1.34
0.094
2
23
24
3.08
1.28
0.102
3
21
24
23
2.92
2.87
1.47
1.55
0.245
0.157
2
1
23
25
Skew
Ongoing
ranking
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Integration with existing
channels from a data
maintenance perspective
Effect on existing customer
relationships
Achieved revenue from
channel
Effect of using channel on
brand image
Reputation of the provider
of the channel
Effect on room rate
Forecast volume of
transactions
Presence of competitors in
the channel under
consideration
Effect on existing channel’s
of distribution
Forecast revenue from
channel
Availability of alternative
electronic channels
Independence of the
provider of the channel
Initial capital cost
Joining or introduction fee
System Manage- Opera- MarketProvider ment
tional ing
Delphi round two
importance
ranking
P. O’Connor, A.J. Frew / Hospitality Management 23 (2004) 179–199
Technical
Delphi round one importance rating
(1=ignore to 5=essential)
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193
11. Revalidating the continuation factors
As was the case with adoption factors, panel members were given an explicit
number of votes and asked to prioritise the factors that should be taken into account
when evaluating the continued use of a channel. The validation process confirmed
earlier findings; although the highest scoring factor (‘‘potential to open up new
market segments’’) was marketing oriented, operational issues such as ‘‘transaction
speed’’ and ‘‘ease of use’’ ‘‘speed’’ and ‘‘security’’ followed close behind. Similarly,
financial factors were confirmed as being more important than in the adoption
evaluation decision, with both ‘‘transaction cost’’ and ‘‘achieved revenue from the
channel’’ receiving a high number of votes. However, unlike with the discussion of
the adoption factors, the pattern of what is important is not as clear, incorporating
financial, marketing, management, technical and operational issues. Overall, a wider
range of issues needs to be considered, but as can be seen from Table 2, the majority
of these focus on the actual performance of the channel.
12. Adoption factors versus continuation factors
Although the evaluation decision is similar, the Delphi panel clearly identified a
different set of factors as being more important when an electronic distribution
channel is initially being considered versus when its ongoing use is being assessed. A
paired sample t-test (see Table 3) highlights these differences. In four of these factors
(‘‘initial capital cost’’, ‘‘joining or introduction fee’’, ‘‘achieved revenue from
channel’’ and ‘‘achieved volume of transactions’’) differences were to be expected as
they relate primarily to just one scenario. Similarly, the difference in the scores for
‘‘transaction cost’’ was predictable, as, while this issue is important in the adoption
decision, it becomes more important when the system is in actual use and its effect is
actually being experienced. The results for four other factors were also found to be
statistically different. Mean scores for ‘‘Speed at which information and rates can be
updated’’, ‘‘Capability to provide management information’’ and ‘‘Ability to
individually recognise customers’’ were all significantly higher for the continued
use evaluation decision, adding to the evidence that actual performance becomes
more important in this scenario. Lastly, the scores for ‘‘Forecasted volume of
transactions’’ were also significantly lower in the adoption scenario, once again
confirming that it is how the system will operate, rather than its performance that
should be of prime consideration when evaluating a system’s adoption.
An alternative method of analysis is to use a matrix to demonstrate the factors
that should be taken into account in each (and both) scenarios. By plotting the
adoption importance scores against those for continuation it is possible to identify
the factors most important in each scenario, as well as to visualise their relative
importance (see Fig. 1). Those shown above the horizontal axis are important than
average in the channel adoption decision, while those to the right of the vertical axis
are more important than average when the continued use of a channel is being
evaluated. Factors listed in the top right-hand quadrant are important in both
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Table 3
Paired sample t-test comparing mean importance scores for adoption and continuation factors
Factor
Category
Ability to individually recognise
customers
Achieved revenue from channel
Achieved volume of transactions
Availability of alternative electronic
channels
Capability to provide management
information
Effect of using channel on brand image
Effect on existing channel’s of
distribution
Effect on existing customer relationships
Effect on room rate
Forecast revenue from channel
Forecast volume of transactions
Independence of the provider of the
channel
Initial capital cost
Integration with existing electronic
channels
Joining or introduction fee
Ease of use from the hotel’s perspective
Potential of channel to address current
market segments
Potential of channel to open up new
market segments
Presence of competitors in the channel
under consideration
Reputation of the provider of the
channel
Security of the channel
Speed at which information and rates
can be updated
Speed at which transaction can be
completed
Traffic levels (number of visitors,
lookers, hits)
Transaction cost
Management
*
t
df
Sig (2tailed)
4.511
23
0.000
Financial
Financial
Management
3.844
3.861
0.401
23
22
23
0.001
0.001
0.692
Operational
3.245
23
0.004
Marketing
Management
0.647
0.358
23
23
0.524
0.723
Marketing
Financial
Financial
Financial
System Provider
0.678
1.045
1.857
2.405
0.157
23
23
23
22
23
0.504
0.307
0.076
0.025
0.877
Financial
Operational
3.685
0.440
23
23
0.001
0.664
Financial
Operational
Marketing
2.113
1.298
2.011
22
22
22
0.046
0.208
0.057
Marketing
1.558
22
0.133
Marketing
0.000
22
1.000
System Provider
1.775
22
0.090
Technical
Technical
0.492
2.336
22
22
0.628
0.029
Technical
1.226
22
0.233
Technical
1.164
22
0.257
Financial
2.228
22
0.036
p-value o0.05.
situations, and thus can be regarded as being of key importance. From the matrix, it
is immediately noticeable that the majority of the factors in this quadrant are
operational or technical, together with a small number of marketing factors. ‘‘Ease
of use’’, ‘‘Integration with existing inventory databases’’, ‘‘Transaction speed’’,
‘‘Update speed’’ and ‘‘Security’’ all score highly in both scenarios. A marketing
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195
Fig. 1. Matrix analysis of evaluation factors.
factor—‘‘the potential of a channel to open up new market segments’’—scores
highest overall, perhaps indicating that respondents perceive one of the key roles of
electronic distribution channels as being the generation of incremental business. That
being said, this sector also contains two other marketing factors—‘‘the potential of a
channel to address current market segments’’ and ‘‘effect on existing customer
relationships’’—indicating that in addition to generating new business, a channel
should also be able to service existing customers effectively. The only financial factor
in this segment is transaction cost, which, while high on the continued use axis, is low
on the adoption axis, suggesting that the level of cost associated with each
transaction is more relevant while the channel is being used rather than when its
adoption is being assessed. The bottom left hand quadrant (less important in both
scenarios) include the majority of the financial factors, including ‘‘Joining fee’’,
‘‘Forecasted Transaction Volume’’, ‘‘Forecasted Revenue’’ and ‘‘Effect on Room
Rate’’. Furthermore, two of the more strategic issues—‘‘Availability of alternative
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electronic channels’’ and ‘‘Effect on existing channels of distribution’’ are here also
and are among the lowest on both scales, indicating that in contrast to the theories
cited in the literature, respondents feel that economic and strategic issues are not the
ones that should be at the forefront of the decision factors when evaluating the use of
an electronic channel of distribution.
In addition to the common factors discussed above, the matrix also helps to
identify those issues most important in each of the alternative scenarios. Not
surprisingly, ‘‘Initial Capital Cost’’ is regarded as being important when evaluating
the adoption of a channel, but less so in terms of evaluating its continued use.
Instead, factors such as achieved volumes of transaction and achieved revenues come
to the forefront. Thus, the analysis shows that the panel perceives the key issues to be
different when evaluation hotel electronic channels of distribution for adoption and
for continued use. While there is some overlap—i.e. those thought to be important in
both situations—a different set of additional factors becomes important in the two
scenarios. In terms of adopting a channel, the matrix shows that factors such as
‘‘initial capital cost’’, ‘‘traffic levels’’ and ‘‘reputation of the system provider’’ are the
ones that need to be considered. In contrast, once the channel has been adopted,
factors focusing on the revenue side of the profitability equation should be taken into
account. While there is some common ground, the evaluation process in the two
situations is clearly very different.
13. Conclusions
This paper has presented the results of a three-round Delphi study focused on
identifying and prioritising a portfolio of evaluation factors for use in evaluating
hotel electronic channels of distribution. Although the findings must be regarded as
indicative (Babbie, 1995), they do provide a useful set of criteria for consideration in
the channel evaluation process.
It is clear that a different set of factors is considered more relevant depending on
whether the initial adoption of a channel or its continuation is being evaluated. For
adoption, operational and technical issues such as ease of use, transaction speed,
update speed, traffic levels, integration and security were found to be the primary
factors that should be taken into consideration. Initial capital cost also needs to be
considered, as does the channel’s ability to service both existing and additional
market segments. However, it is clear that it is the system methods of operation—
rather than how it will perform financially or contribute strategically—that are
thought to be of prime consideration in the channel adoption decision. In contrast,
the continuation decision appears to be more complex. Not only were more criteria
suggested in this scenario, but also the pattern of importance scores is less clear. The
decision seems to be multifaceted, incorporating financial, marketing, strategic,
operational and technical elements. Technical and operational issues remain
important, but financial aspects (particularly those on the revenue side of the
equation) were found to be more important than in the adoption evaluation decision,
suggesting that it is the channel’s actual performance in practice that should be the
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Table 4
Summary ranking of key evaluation factors
Factor
Category
Importance ranking
Adoption Continuation
Potential of the channel to open up new market segments
Ease of use from the hotel’s perspective
Potential of the channel to address current market segments
Speed at which transaction can be completed
Security
Speed at which information/rates can be updated
Achieved revenue from channel
Transaction cost
Traffic levels
Initial capital cost
Ability to recognise individual customers
Reputation of the system provider
Integration from a data maintenance perspective
Achieved volume of transactions
Marketing
1
Operational
1
Marketing
1
Technical
4
Technical
8
Technical
9
Financial
Financial
Technical
5
Financial
5
Management
System Provider 7
Operational
10
Financial
1
4
7
4
8
8
2
2
6
10
key determinant as to whether to continue to use it. A summary of the key factors is
shown in Table 4, where those issues important to both adoption and continuation
are presented first, followed by those that are important in one or the other situation,
ordered in terms of their relative importance.
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