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THE NEED FOR A COMPUTER-BASED CENTRAL RESERVATION SYSTEM FOR SMALLER HOTELS, GUESTHOUSES AND RESORTS A dissertation in partial fulfillment of the requirements for the MASTERS DEGREE IN BUSINESS MANAGEMENT in the FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES at THE RAND AFRIKAANS UNIVERSITY by P. PRETORIUS December 1997 STUDY LEADER: PROFESSOR J. A. BENNETT ABSTRACT South Africa has become an accepted tourist destination since the 1994 general elections and the successful presentation of the 1995 Rugby World Cup event. The increase in the number of overseas visitors is reflected in higher arrival figures at our airports. Overseas tourists initially booked into the higher star rated hotels, but this trend quickly changed when they indicated a preference for the smaller hotels and the more personalised guesthouses. The recent establishment of hotels of well known world brands such as Hilton, Hyatt and others saw an increase in supply. These hotels were established with their links to the global reservation networks through which their reservations are accepted. The South African lodging industry now has to cope with management of the changes in demand in the face of world-wide computerised distribution. The guesthouses, smaller hotels and resorts tend to still utilise the printed media, mail or telephone bookings to communicate with prospective tourists. Although information technology is improving and becoming more accessible, only a few of the bigger South African hotel groups have utilised it to improve productivity and efficiency and to manage demand. A number of central reservation systems are in operation elsewhere in the world which allow the participants to present their establishments through the global travel agent networks such as Galileo and Worldspan. Trends in distribution of the lodging industry make it imperative to participate in such a system or face isolation from the world of tourism. The aim of this study is to establish the need for an integrated computer-based central reservation system for the smaller lodging establishments in South Africa. Depth interviews were conducted with a selected number of experts in the industry and the most important results of this empirical research were: The South African government has effectively withdrawn from the development of the tourism industry. The South African banks should be approached to establish such a system since they have proven expertise and knowledge of the operations of similar systems and would be in a position to make adequate funds available to allow the system to succeed. The system should be established with the capacity to link into world-wide distribution systems such as Galileo. The travel agents should be the first group to have access to this system since they are accepted as the driving force when implementing new solutions in the industry. Access through the Internet could follow. The cost of making a reservation at a lodging establishment is for the account of the hotel or guesthouse. The cost of accepting reservations from overseas tourists must be negotiated to be within the affordable range of the smaller lodging establishments. The establishment of such a central reservation system is of vital importance if the South African tourism industry wants to compete internationally in this highly competitive, but very lucrative market. ACKNOWLEDGMENTS Special thanks to my wife who encouraged and supported me through the many months of working towards my lifelong goal. Also to my two daughters who had to accept and realise that their dad was busy with studies - again! To ABSA my employer, for access to the library and the opportunity of numerous discussions with various wonderful employees of the organization about study related matters and the leave I was allowed to pursue this goal. Leatitia van Staden patiently suggested alterations to my initial efforts. Thank you for a document that most people can now understand. To Professor Bennett for his guidance and unusual understanding of this topic. His direction served as the prime motivation to focus me and in being able to compile this material in a presentable format. CONTENTS Page CHAPTER 1 INTRODUCTION, AIM AND LIMITATION OF STUDY 1.1 Introduction 1 1.2 Problem definition 3 1.3 Objectives of this study 8 1.4 Method of study 9 1.5 Limitation of the study 9 1.6 Announcement of chapters 9 CHAPTER 2 MANAGING DEMAND FOR LODGING THROUGH CONTROL OF THE DISTRIBUTION ELEMENT 2.1 Introduction 11 2.2 Characteristics of services and the marketing management of service establishments 13 2.3 Marketing strategy and the 7P's in the marketing, mix for services 15 2.3.1 The target market 16 2.3.2 The marketing mix 18 2.4 Distribution in the tourism industry 21 2.4.1 Location 22 2.4.2 Distribution (accessibility) 22 2.5 Managing demand for lodging services 27 2.6 Summary 31 CHAPTER 3 RESERVATION SYSTEMS AS THE SUPPORT MECHANISM FOR DISTRIBUTION 3.1 Introduction 34 3.2 Central reservation systems to support the distribution element in the marketing mix 35 3.2.1 World-wide move to computer-based support for distribution 36 3.2.2 Support functions to be provided by a computer based system 40 3.2.3 Contribution by the vendor to participate in such a system 41 3.2.4 World-wide experience in establishing global reservation systems 43 3.3 Position of smaller vendors with regard to participation in central reservation systems 47 3.4 Some business functionality of other central reservation systems 50 3.5 Summary 54 CHAPTER 4 METHODOLOGY AND RESULTS OF THE EMPIRICAL RESEARCH 4.1 Introduction 57 4.2 Research methodology 57 4.2.1 Empirical research 57 4.2.2 Research objectives 58 4.2.3 Sample for research 59 4.2.4 Depth interviews for qualitative research 60 4.3 Demographic information on the organisations that participated in the depth interviews 63 4.3.1 SATOUR 63 4.3.2 FEDHASA 63 4.3.3 Galileo travel agent network 63 4.3.4 ASATA 64 4.3.5 Karos Hotels 65 4.3.6 The Don Apartments 66 4.3.7 Aramis and Utell central reservation systems for hotels 66 4.3.8 Pretoria guesthouses 67 4.3.9 Jacana - Fannstays & Countryroads 68 4.4 Results of the study 69 4.4.1 Integration of market segmentation into the marketing strategy of the guesthouses, smaller hotels and resorts 70 4.4.2 The means to access the identified target market for the owners/managers of the smaller establishments 73 4.4.3 The level of understanding of demand management and of the supporting role of a reservation system 76 4.4.4 The need for a computer-based system for the smaller vendors in the South African market 78 4.4.5 The option of any existing or possibly a new system operator to fulfill the need for a reservation system 81 4.4.6 A computer-based reservation system must be implemented to allow world-wide distribution 83 4.4.7 Functionality expected of such a system 84 CHAPTER 5 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 5.1 Summary 87 5.2 Conclusions 91 5.2.1 The industry faces a perceived oversupply of accommodation facilities 91 5.2.2 Vendors are yet to accept the position of intermediaries for reservations 92 5.2.3 Functionality of the system 93 5.2.4 The role of the travel agents 93 5.2.5 The need for strong central coordinating body 95 5.2.6 Lack of professionalism amongst the vendors and the labour force 96 5.2.7 The vendors to implement information technology solutions or face isolation from the global tourism market 96 5.2.8 Affordable distribution to bring South Africa in line with world standards 97 5.3 Recommendations 97 BIBLIOGRAPHY 100 APPENDIX A : INVITE TO THE DEPTH INTERVIEW 103 LIST OF TABLES Page 2.1 Options in addressing the demand issue 32 4.1 Organisations selected to be interviewed and the reason for their inclusion 61 CHAPTER 1: INTRODUCTION, AIM AND LIMITATION OF STUDY 1.1 INTRODUCTION The South African tourism industry has recently been receiving much positive attention. The country seems to be regarded as a more "acceptable" tourist destination after the April 1994 general elections and the successful hosting of the Rugby World Cup tournament in 1995. The South African tourism industry must position itself in the global tourism market where competition to attract tourists is fierce. The country's vendors' must use their new-found popularity to present themselves as an attractive destination to overseas and domestic tourists. Every possible means, including integrated reservations systems, should be utilised to attract business from this lucrative potential market. The increase in the number of international tourists is clearly demonstrated by the improved arrival figures of overseas visitors since the December 1994 season (Cloete, 20 January 1995:26). Already there seems to be a shortage of hotels and resorts to cater for the increase in visitors (Cloete, 11 November 1994:60). This trend was supported throughout 1995 and 1996. The annual report of SATOUR tabled in Parliament, indicated that 1,2 million tourists from overseas visited South Africa during 1996 (Swart, 23 April 1997:1). The number of tourists from other African states during the same period was 3,7 million. The focus seemed to have shifted from finding tourists to fill beds, to finding beds for the tourists. Durban, specifically, had to establish a hot line facility to assist tourists to find accommodation since they were experiencing crises at peak times (Kobokoane, 1995:4). For the purpose of this study a vendor is regarded as an owner or manager of a hotel, guesthouse or resort.

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