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Centralized information systems in the lodging industry: Implications for

knowledge management

Article  in  Information Technology in Hospitality · January 2006

DOI: 10.3727/154595306778001621

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CENTRALIZED INFORMATION SYSTEMS IN THE LODGING INDUSTRY:

IMPLICATIONS FOR KNOWLEDGE MANAGEMENT

SRIKANTH BELDONA,* PEARL BREWER,† and SHERYL F. KLINE‡

*Department of Hotel, Restaurant and Institutional Management, University of Delaware, USA

†Department of Hotel Administration, University of Nevada, Las Vegas, USA
‡Department of Hospitality and Tourism Management, Purdue University, USA

The open standards of the Internet have brought about a centralized shift in the way franchisors
interact with franchisees. Using centralized systems such as those enabled by Application Service
Providers, lodging franchisors can greatly leverage the benefits of centralization that goes beyond
the domains of rich transactional processing. The purpose of this study was to examine the forces
that will shape the development of centralized information architectures, while simultaneously
shedding light on the new knowledge that lodging franchisors can harness and diffuse across the
network. The study develops a lodging-based organizational creation framework. Implications for
IT managers are discussed.

Key words: Centralized information systems; Application service provisioning;

Knowledge management; Organizational learning; Lodging

Introduction phenomenon like most others: by making forays

into the areas of distribution and procurement so
Across a technological landscape weighed down as to realign business models to the changed envi-
by a plethora of vendors and the absence of uni- ronment.
form standards, the lodging industry has long strug- The growth in the technologies and systems
gled with the issues that surround technology (Con- that use the Internet as their network has grown
nolly, 1999; Lysne, Goetze, & Collins, 1999). Core exponentially because of the open technology
issues for technology managers continue to be the standards that encourage development. Using In-
high costs associated with customization, building ternet-based technologies, the intranet and the ex-
interfaces between disparate systems, maintenance, tranet now link people and resources within an or-
and scarce labor (David, Grabski, & Kasavana, ganization as well as enable the organization to
1996). The combination of these challenges frames link with suppliers, channel partners, and custom-
the workload for hospitality technology managers. ers more effectively. These technologies have now
As for the Internet, the industry initially faced the become key within an organization’s IT infrastruc-
Address correspondence to Srikanth Beldona, Ph.D., Assistant Professor, Hospitality E-Commerce and Marketing, Department of
Hotel, Restaurant and Institutional Management, University of Delaware, 202 Raub Hall, 14 West Main Street, Newark, DE 19716,
USA> Tel: 1-302-831-6192; Fax: 1-302-831-6395; E-mail: beldona@udel.edu

1
2 BELDONA, BREWER, AND KLINE
ture, more so in the case of franchising. But per-
haps the most significant phenomenon that exploits
the capabilities of the Internet is the Application Ser-
vice Provider (ASP) model, a unique model of
software distribution that enables the delivery of
application functionality via the Internet.
Figure 1 describes how the ASP model operates
in its contemporary form, depicting the typical
ASP system for a multiproperty hospitality organi-
zation. Additionally, Figure 1 illustrates how an
ASP interacts with a multiproperty chain, and in
turn how the chain uses Internet tools and technol-
ogies to interact with its internal customers such
as employees, franchisees, and suppliers, etc.
While one database caters to individual properties,
the other serves as the corporate database that
feeds off the individual database. Already, many
hospitality technology vendors such as Micros
Figure 1. Typical ASP model for a multiproperty lodging firm.
Fidelio with Opera, AremisSoft, Central Point
Technologies, CSS Hotel Systems, and MSI Sys-
tems have ASP versions of lodging system sys-
tems (Squires, 2001). Also, vendors of related
lodging information systems such as Central Res-
ervations Systems (CRS), Point of Sales (POS)
systems, Procurement and Sales & Catering are
already either in the process of adopting the ASP
model or have already done so (Adams, 2001a) As
for usability, a recent study projects that the ASP
model would have a 60% market penetration in
the lodging industry over the next 2 years (Hospi-
tality Technology, 2002).
The purpose of this study is to evaluate the op-
portunities and impediments of centralized infor-
mation architectures (such as that enabled by the
ASP model) for lodging franchisors. Drawing
from literature across hospitality, information sys-
 CENTRALIZED INFORMATION SYSTEMS
tems, and interorganizational relationship litera-
ture, this article provides an analysis of the central-
ized model and the organizational/environmental
conditions that impact its adoption. In this article,
the authors use the franchise organizational struc-
ture as a reference model for analysis. Also, ASP
is a business model under the umbrella of central-
ized architectures, and is therefore used widely as
a reference. ASP in this article implies a central-
ized chain-based system catering to multiple fran-
chisees as illustrated in Figure 1. The authors also
do not attempt to make a business case for ASP
viability. The article’s focus is largely on IT distri-
bution enabled by centralized information archi-
tecture in a homogenous environment where tech-
nology and infrastructure standards are fairly uniform,
such as in the US and Canada. Issues pertaining
to heterogeneous environmental contexts in other
countries are outside the scope of this article.
How ASP Works
The Overall Model
Typically, an organization will outsource its ap-
plication services from an ASP vendor and will
access these applications via the Internet. This
means that a multiproperty hotel chain or manage-
ment company can lease or buy software and out-
source the hosting service to an ASP vendor. The
vendor will in turn be responsible for the manage-
ment and service of the application(s) to the client.
Put differently, each hotel property in the chain
rents applications (PMS, Back Office, POS, etc.)
rather than going through the life cycle of ongoing
support, maintenance, and the technology manage-
ment issues associated with it.
Interface
In almost all cases, an ASP solution involves
the use of a PC with a simple browser at the prop-
erty level to access a system such as the PMS that
resides on a remote server via an Internet connec-
tion (Wilkins, quoted in Adams, 2001b). Web
browsers such as Internet Explorer and Netscape
Navigator run on many types of machines, operate
the same way regardless of which web application
is running, and the business application can be
constantly updated and improved at the server,
3
without ever having to upgrade or reconfigure the
software on the client device (Bennett, 1999).
Management and Service
The ASP vendor owns, operates, and maintains
the servers that run the application. In some cases
they tie-up with a data center, or may run their
own. As mentioned earlier, client data are typi-
cally off site in an outsourced center. The ASP
vendor is also responsible for employing and
training the people needed to maintain the applica-
tions. The property’s data (reservations, availabil-
ity, guest history, etc.) also reside off site, at an
outsourced service provider center.
Network Technology
Depending on bandwidth and performance re-
quirements, different network options may be cho-
sen and can either be ISDN, T1, T3, etc. These
lines may be open or operated within a Virtual
Private Network (VPN) that provides greater secu-
rity. A VPN uses encryption and tunneling to con-
nect users or sites over a public network such as
the Internet. It is different from a private network
that uses dedicated lines between each point, and
is usually a more expensive solution.
Pricing
The ASP vendor bills application usage either
on a per use or on a monthly/annual fee basis.
Hospitality industry pricing models are still evolv-
ing, with options such as charging on a per room
or per month basis, based on a transactional vol-
ume (Adams, 2001a). Alternative pricing models
based only on revenue-producing transactions are
also viable.
Organizational Knowledge
in the Lodging Franchise Chain
Understanding the relationships in data leads us
to information, while discovering patterns in infor-
mation leads us to knowledge (Bellinger, 2002).
Organizational knowledge in a franchise chain is
the collective resource that resides across the busi-
ness units, individual properties, departments, and
even the individual. Most organizations have vast
pools of knowledge, which when exploited effec-
4 BELDONA, BREWER, AND KLINE
tively can significantly enrich the firm’s ability to
compete (Day & Wendler, 1998). But knowledge
and the processes behind its creation, transfer, and
management in a firm largely depend on its orga-
nizational properties and structure.
Franchising has been extensively researched as
a hybrid organizational form. In fact, it has been
described as one of the most successful organiza-
tional forms over the past two decades. This is
also best explained by the phenomenal growth of
franchise chains in major service industry sectors,
especially the lodging industry. Typically, chains
are collections of service organizations, doing es-
sentially the same thing, linked together into larger
super-organizations (Ingram & Baum, 1997). This
is because chains grow by bringing together and
standardizing operations of organizations and re-
producing successful routines across components,
which is key and vital to organizational growth.
This has led to franchise organizations being termed
as “learning communities” (Ingram & Baum, 1997).
Exploitation and exploration are the two dis-
tinctive approaches to organizational learning in
franchise organizations (March, 1991). Exploita-
tion is through improved reflection of known pa-
rameters of business performance. This approach
helps the chain realize efficiencies through the im-
plementation of standardized practices. Explora-
tion is about the development of new routines and
enables the franchise chain to adapt to varied mar-
kets. Both types of learning are essential to the
development of a franchise organization and a
franchisor should enable an information strategy
along these lines.
Figure 2 illustrates the organizational knowl-
edge creation framework (Scott, 1998) for a lodg-
ing franchise chain that uses the paradigm model
(Strauss & Corbin, 1990) as a guideline to trace
and complement two congruent phenomena: one
that highlights evolving technologies and the other
that funnels emerging organizational needs rele-
vant to organizational knowledge creation. Both
these phenomena converge and complement one
another to facilitate organizational knowledge cre-
ation.
Causal Conditions
To understand the wide applicability and prom-
ise of ASP, it is imperative to view the growth
and development of the Internet from a technology
standpoint. Also, prevailing organizational condi-
tions enable the growth and development of a phe-
nomenon and should be taken into context as well.
Technological Drivers. The ubiquitous nature
of the Internet is largely because it functions using
open standards and technologies such as HTTP,
TCP/IP, and the browser. Open standards of tech-
nologies here imply that applications can now
function on multiple types of computer operating
systems such as Windows and Macintosh systems.
These open standards enable the transition to open
systems that are operable across multiple hardware
and software from yesteryear proprietary systems.
Also, the wide reach of the Internet ensures acces-
sibility of these applications from multiple proper-
ties dispersed geographically. As discussed above,
the browser has largely been the accepted interface
for these applications. Developments of secure
technologies such as Secure Socket Layer (SSL)
and Virtual Private Networks (VPN) have also
driven the growth of ASP by making them more
acceptable to conduct secure transactions on the
web. SSL is a protocol (agreed-upon format) for
transmitting private documents using encryption
technology. Lastly, the growth of data transfer
technologies, such as T1, has significantly boosted
the viability of ASP from a performance stand-
point.
Organizational Drivers. On the organizational
front, there has been a growing need for greater
quality of information flow between franchisors
and franchisees. Communication is the most obvi-
ous area in which technology impacts the franchi-
sor–franchisee relationship (Stanworth, 1995). In
fact, in a study by Hospitality Technology maga-
zine, franchisees found greatest satisfaction from
email because of their ability to communicate with
franchisors (Hospitality Technology, 2002). The
study indicated that providing data to franchisees
was the biggest challenge faced by franchisors.
Processing vast amounts of information across
units spread in multiple markets enables the chain
to learn from experiences and disseminate rich in-
formation back to individual units. According to
Scott Heintzeman, CIO of Carlson Hotels World-
wide, “We have great customer information at a
hotel level, but the collection of that data at a
 CENTRALIZED INFORMATION SYSTEMS 5

Figure 2. Lodging organizational knowledge creation framework (adapted from Scott, 1998).

chain level is typically a big missed opportunity”
(Berkman, 2001). This way, improved information
flow between the franchisor and the franchisees
can be value additions in terms of improved mar-
ket and operational knowledge.
Another causal condition for the hotel industry
has been the dire need for systems integration.
Plagued by disparate systems, many studies have
indicated the need for a unified platform to con-
nect multiple systems within a property as well as
across the chain. The industry has been in search
of a viable solution to enable disparate systems to
integrate. Among the initiatives were the Hospital-
ity Information Technology Integration Standards
(HITIS) project and the Open Travel Alliance
(OTA). These projects brought together major
players in the tourism–travel industry. The OTA
aims to create and implement industry-wide, open
e-business specifications for central reservation
and global distribution technologies. These speci-
fications, which are to be built around XML
(eXtensible Markup Language), form a common
e-business language that will encourage develop-
ment of systems to create new collections of ser-
vices to better meet the demands and expectations
of travelers and the travel industry (Open Travel
Alliance, 2002). As of October 2000, the OTA and
HITIS have agreed to cooperate and work on this
integration project together (HITIS, 2002).
The Phenomenon
Driven by change brought about by the In-
ternet, ASP as a phenomenon is gradually reach-
6 BELDONA, BREWER, AND KLINE
ing a state of maturity. In fact, experts believe that
Application Service Provisioning as a model of
software distribution will pave the way for funda-
mental change in organizations wherein comput-
ing could be viewed like a utility such as gas,
water, and electricity. This is part of a larger phe-
nomenon called the “Information Utility” that will
provide bits over a network, similar to that of wa-
ter through pipes or electricity through power lines
(Lindquist, 2001).
Context
Context pertains to the larger environment
within which the evolving phenomenon is devel-
oping.
Environmental Context. Driven by intense
competition, the lodging product is becoming in-
creasingly commoditized, which in turn has driven
the need for greater customer retention. The use
of sophisticated tools such as data mining and
warehousing that provide the backbone of Cus-
tomer Relationship Management (CRM) is now
deemed imperative for lodging firms (Adams,
2001a). If supported by data mining and related
technologies, ASP can help individual properties
tailor services for individual customers. By pro-
viding real-time access to centralized guest history
databases, each property can customize services
and requirements for guests with an attempt to
gain competitive advantage. While the ASP model
has not introduced any new CRM practices to the
industry as yet, it has made guest information
much easier to obtain, store, and use either at the
property or centrally (personal interview with
Robert S. Bennett, Senior Vice President, Hotel
Management Transaction Services, Pegasus Solu-
tions, and 2000 HFTP Hall Of Fame Inductee,
February 27, 2002). This simultaneously allows
many more properties to make use of these CRM
concepts.
Organizational Context. Chains need standard-
ized operations and the efficiencies accruing
thereof can generate their competitive advantage
over stand-alone rivals (Bradach, 1998). The cen-
tralization of information brought about by ASP
will lead to standardization across the franchise
network. This is enabled by a uniform system that
can feed into multiple systems, thereby enabling
the same standards of service across multiple
properties in the chain. From a franchise gover-
nance viewpoint, support for standardization should
be viewed through the use of an information sys-
tem that feeds into standardized procedures.
Centralized services are not new to the lodging
industry. The concept of shared services and the
pooling of resources in the areas of IT, Financial,
Sales & Marketing, Laundry, and Procurement
services have long been the norm. Sharing IT is
also called “complexing,” and is the practice of
running several properties on a single main proc-
essor, usually located in one property, with dedi-
cated communications lines running to the other
sites (Inge, 1999). This strategy has been success-
fully implemented by multiunit firms operating
two or three hotels on a single system (personal
interview with Robert S. Bennett, Senior Vice
President, Hotel Management Transaction Ser-
vices, Pegasus Solutions, and 2000 HFTP Hall Of
Fame Inductee, February 27, 2002), and has
helped to reduce costs while improving productiv-
ity. Also, shared application processing has led to
economies of scale, lowering the cost of powerful
technologies and allowing for easier access to ex-
pensive solutions (Eng, 2001). ASP can be offered
to chains based on both centralized and decentral-
ized architectures. In a centralized system, data
and applications are held for all units. In the cen-
tralized case, there is centralized control of data
such as credit, allocations, contracts, specially ne-
gotiated rates, and guest history. This architecture
allows for total integration from the head office
down to the property, thereby enabling real-time
availability of rates, reservations, and related oper-
ational data. In a relatively less centralized system,
individual units access a remote site for applica-
tion functionality, but are not linked to a firm-
wide system in real time. Both centralized and de-
centralized options can add to the simplification
of technology management for individual franchi-
sees. But the centralized option allows for integra-
tion of information across the chain and brings the
added benefit in terms of the richness of informa-
tion contexts. Processing vast amounts of informa-
tion across units spread in multiple markets enables
the chain to learn from experience and disseminate
 CENTRALIZED INFORMATION SYSTEMS
rich actionable information back to individual
properties.
Technological Context. Most crucial of all
contexts is that the ASP model has the ability to
alleviate one key problem the industry has always
faced—that of technology management. Disparate
systems, huge system maintenance costs, and lack
of adequate supply of key IT skills compounded
by high manpower turnover have made technology
management a nightmare for lodging operators,
and this should all change with ASP.
Impediments
These largely comprise the situational factors
that are hindering the adoption of ASP among ho-
teliers.
Technological Impediments. Arguably, ASP,
as a phenomenon, is in a stage of growth and de-
velopment as a viable distribution model for enter-
prise applications. Perhaps as a result of too many
ASP vendors that emerged on the scene early on,
there is still a lot of skepticism. But, historically,
the lodging industry has been slow to adopt new
technologies (Namasivasyam, Sigaw, & Enz, 2000).
In a recent lodging industry study, an overwhelm-
ing 40% declared they would never adopt the ASP
model (Hospitality Technology, 2002).
Performance concerns abound (Squires, 2001)
because of the need for hospitality systems to per-
form optimally due to high employee–guest inter-
action. The last thing an organization would want
is a long line of guests waiting to check in while
employees try to do business with a slow perform-
ing system. Greater performance concerns have
highlighted the need for clear service level agree-
ments with ASP vendors. Aspects such as service
level measurements, escalation procedures, and re-
sponsibilities, as well as software and hardware
upgrades, are all performance-related issues that
need to be clearly identified in Service Level
Agreements (DeWitt & Landes, 2000).
Security concerns are typical of any IT-based
network environment such as the Internet, which
serves as the medium for mission-critical and sen-
sitive transactions. In fact, security is the single
greatest concern associated with the ASP delivery
model in the lodging industry (DeWitt & Landes,
7
2002). Hotel operators are apprehensive of data
theft, such as guest credit card numbers, that could
threaten them from a liability perspective.
Organizational Impediments. The lodging in-
dustry has a complex structure because of cross-
holding, where many property owners or manage-
ment companies own/manage multiple properties
of different brands (flags). This complex situation
has driven the need for a single uniform solution
for a multiple set of brands within a single owner-
ship company/management company. Bob Ben-
nett, Sr. Vice President at Pegasus Systems, feels
that the power for IT decisions in the mid-market
and economy segments is slowly shifting from the
franchise company headquarters to property own-
ers and operators (personal interview with Robert
S. Bennett, Senior Vice President, Hotel Manage-
ment Transaction Services, Pegasus Solutions, and
2000 HFTP Hall Of Fame Inductee, February 27,
2002). At a time when franchise companies are
trying to standardize systems across their proper-
ties, property owners and management companies
want a standard system and database across many
brands franchised from different organizations
(personal interview with Robert S. Bennett, Senior
Vice President, Hotel Management Transaction
Services, Pegasus Solutions, and 2000 HFTP Hall
Of Fame Inductee, February 27, 2002). It will be
especially interesting to see how this scenario will
evolve.
In fact, structural complexity in the industry
also raises a related issue of data ownership. This
is because the flag or brand centrally delivers the
application and those data would reside in a cen-
tral location offshore. Given that a franchisee re-
linquishes a flag or brand, will the franchisee or
franchisor assume ownership of the data? Much
has to be resolved in the area of guest data owner-
ship for a smooth transition to the ASP model
(Inge, 2001).
A greater emphasis on franchisee autonomy by
franchisees is another key organizational interven-
ing condition. Franchisor access to real-time infor-
mation, and the ability to review performance of
franchisees and monitor market developments in-
dicates potential for franchisors to exert greater
control over the relationship (Dant & Gundlach,
1998; Stanworth, 1995). In fact, Squires (2001)
8 BELDONA, BREWER, AND KLINE
says that, “ASP technology cuts both ways; if the
flag takes on the burden of running your PMS for
a unit, it also knows exactly what your property
did last night and this old resistance is probably
still around and may be one of the last hurdles for
the ASP concept to clear.” This in spite of the fact
that much of a franchise-based organization’s suc-
cess has stood on the side of centralization because
of the efficiencies it provides (Norton, 1988). Hos-
pitality and leisure, as with any franchise-driven
industry, has faced its share of franchisor–fran-
chisee conflicts, with a growing awareness for im-
proved relational norms between franchisees and
franchisors (Dev, Brown, & Lee, 2000). Because
of an evolving environment of franchisee advisory
boards, licensee education, and the negotiating of
more equitable contracts, many franchisees are in-
creasingly interested in autonomy (Frabolta, 2001).
Opportunities
Hotel chains’ potential to extract the gains of
the centralized distribution model lies in their abil-
ity to harness organizational knowledge creation,
integrate knowledge from the knowledge sources,
and establish a knowledge management strategy
that percolates across various levels of the organi-
zation. This is possible only if the centralized in-
formation system is well integrated with the fran-
chise intranet and enables the development of a
knowledge platform accessible across the enter-
prise.
Organizational Knowledge Creation. The knowl-
edge creation process involves the conversion of
both tacit and explicit knowledge (Frabolta, 2001).
However, to truly enable a learning organization
requires an effective knowledge management sys-
tem to be in place (Davenport & Pursak, 1998).
But what is knowledge and how is it different
from information? Knowledge in a firm can be ei-
ther explicit or tacit (Nonaka, 1994). Explicit
knowledge is codified and can be easily conveyed
in documented form such as processes, templates,
and data. The ability to easily share explicit
knowledge in an organization is because it is
knowledge that is shareable in the form of data,
specifications, manuals, etc. For example, bench-
marking is concerned with enhancing organiza-
tional performance by establishing standards
against which processes, products, and perfor-
mance can be compared and consequently im-
proved (Pemberton, Stonehouse, & Yarrow,
2001). Tacit knowledge, on the other hand, is in-
formal knowledge gained through experience and
is largely influenced by beliefs, perspectives, and
values (Nonaka, 1991). Being highly personal,
tacit knowledge is not easy to visualize, not easy
to express, and difficult to formalize for sharing
across the organization. The challenge for hospi-
tality franchise firms is to establish mechanisms to
manage the transfer of tacit and explicit knowl-
edge across the organization utilizing the informa-
tion infrastructure enabled by the Internet.
Nonaka (1994) contends that socialization, ex-
ternalization, combination, and internalization are
the four processes that firms must undergo to en-
able the knowledge creation process. Figure 3 il-
lustrates the four processes and the nature of
knowledge transfer that they ascribe to. While so-
cialization is the sharing of tacit knowledge be-
tween individuals through interactive sessions
such as meetings, externalization involves the
transfer of tacit to explicit knowledge and can be
aided by technology such as groupware and chat
rooms. Both socialization and externalization can-
not be supported directly by the use of transac-
tional applications in the context of the ASP
model. However, intranet technologies such as
chat rooms and groupware may support these
types of knowledge transfer, though their effec-
tiveness in doing so has been much debated (Mar-
wick, 2001).
On the other hand, combination involves the
transfer of explicit to explicit knowledge. Under-
standably, this is the mode of transfer best sup-
ported by IT because of the organized structure of
knowledge being dealt with. In a lodging franchise
context, an ASP model enables the drawing of op-
erational data from franchisee information sys-
tems; performing chain-wide processing and redis-
tributing refined executive perspective-based reports
back to franchisees is an example of this form of
transfer. As mentioned earlier, ASP-based busi-
ness intelligence systems enable rich flow of infor-
mation and are good examples of this form of
knowledge transfer.
Finally, internalization is experimentation with
explicit knowledge that can result in organiza-
 CENTRALIZED INFORMATION SYSTEMS
Figure 3. Multiproperty hotel organizational information infrastructure.
tional learning and tacit knowledge creation (Non-
aka, 1994). This is done by providing scenario
simulations built around explicit knowledge bases.
This is crucial in the franchising context because
chains operate in heterogeneous markets and as-
similate experiences across these markets. Creat-
ing knowledge through multiple experiences can
significantly help the organizational creation pro-
cesses in franchise firms. Internalization in hotel
chains can be facilitated through online training
tools providing multiple perspectives/solutions to
situations or problems encountered. Here again, an
ASP model (due to its capability of centralized in-
formation processing and knowledge accumula-
tion) can feed into the explicit knowledge base and
significantly support this type of knowledge transfer.
Organizational Knowledge Integration. The
convergence of hitherto multiple disparate systems
into the intranet provides potential for organiza-
tional knowledge integration from multiple sources.
This is because the ASP model of IT distribution
paves the way for convergence of traditionally dis-
parate hospitality systems to one single platform.
9
The rich context of information generated from
multiple systems can support the intraorganiza-
tional interdependencies of the lodging operation
while simultaneously providing rich perspectives
at the chain level as well as the individual property
level.
With a browser as a ubiquitous interface to ac-
cess system functionality, it has become possible
to provide a range of hospitality applications through
ASP. Put differently, a form of application conver-
gence is taking place in the lodging industry, and
it will soon become possible to provide an enter-
prise suite of hospitality applications for the multi-
property lodging firm. For example, a Chain Man-
agement System will typically combine the PMS,
CRS, and CRM into one enterprise system that is
distributed through the ASP model. Eventually all
the computing that is accomplished today at a
property using client–server systems will be avail-
able through a single hospitality portal on the In-
ternet wherein all applications will be integrated
and available on a transaction fee basis (personal
interview with Robert S. Bennett, Senior Vice
President, Hotel Management Transaction Ser-
10 BELDONA, BREWER, AND KLINE
vices, Pegasus Solutions, and 2000 HFTP Hall Of
Fame Inductee, February 27, 2002).
As other transactional systems get bundled into
the hospitality suite, they will augment existing
communications applications such as email, thereby
allowing franchisor–franchisee interaction and in-
formation sharing. In addition, the extranet will
allow a franchisor to provide a single interface for
franchisees to interact with suppliers and other
channel partners. Centralized procurement sys-
tems offered by chains through the ASP model
allow franchisees to interact with a wide range of
suppliers. For example, Hilton Hotels offers In-
ternet-based procurement services to its franchise
network from its corporate website. Similarly,
Choice Hotels provides Choicebuys.com, an In-
ternet-based electronic procurement system for the
exclusive use of Choice franchisees.
Figure 3 illustrates the evolving information in-
frastructure in lodging chains that is differentiated
across three layers, namely the intranet, extranet,
and the Internet. Each layer has a specific focus
and has a typical set of applications that support
it. At the intranet level, the applications enable in-
formation flows between franchisor and franchi-
sees, or headquarters and hotels, such as the Cen-
tral Information System that comprises the PMS,
CRS, POS, BackOffice, and Yield Management
applications. Added to this are the online training,
knowledge management, and business intelligence
systems, which help scrutinize individual property
expenses and compare them with similar functions
in other locations within a brand or with other ho-
tels on a company’s roster (Selwitz, 2001). Scala
systems offer business intelligence systems through
secure, internal intranet system on the ASP plat-
form.
The extranet layer facilitates information flows
between the franchise network and other business
partners such as suppliers and travel intermediar-
ies. Lastly, the Internet layer facilitates business-
to-consumer information flows guided by CRM.
At its optimum, related applications across all
three layers could be linked with one another in
real time to achieve rich and actionable informa-
tion contexts.
Organizational Knowledge Management. Sub-
sequent to knowledge creation and integration,
franchisors can redirect richly processed informa-
tion back to franchisees in the form of knowledge.
This should be deployed in a structured way such
that it adds value across the chain and more im-
portantly to knowledge sources in the network.
One way to view knowledge distribution in a fran-
chise network is to segregate the franchise enter-
prise system along three layers of applications,
namely, data, information, and knowledge (Chen,
Chong, & Justi, 2000). This would involve the es-
tablishment of an intranet-based knowledge repos-
itory to leverage working knowledge from the
franchise enterprise system. The goal of such a re-
pository would be the accumulation of knowledge
and reduction of barriers to knowledge acquisition
through access for franchisees and employees alike.
Many would argue that access levels for franchi-
sees would largely depend on the franchise gover-
nance style in question. The key question arising
here being the degree of control that the franchisor
is willing to exercise in monitoring knowledge
flows. This is a strong area for future research,
especially from a lodging chain perspective where
the franchisor–franchisee relationship has come
under the lens.
Nonetheless, to enhance knowledge acquisition in
the chain, one needs to develop a strong understand-
ing of the dynamics of learning in multiproperty or-
ganizations. Towards exploitation, franchisors should
establish clear guidelines and performance parame-
ters in their information systems. As for explora-
tion, much of franchise learning comes here in
terms of ways to handle issues such as new prod-
uct promotions, etc. For example, how one fran-
chisee’s experience at battling the odds of compe-
tition and making success of a new campaign may
be worthwhile information to other franchisees.
An intranet-based knowledge repository should
support the simultaneous processes of exploration
and exploitation across the chain to be effective.
Discussion and Conclusion
Consequences resulting from the deployment of
ASP in multiproperty organizations should be
viewed from the benefits gained from a process-
oriented perspective (Scott, 1998). However, IT
value has to be realized at multiple levels (or loci),
especially in a context where value can be distrib-
 CENTRALIZED INFORMATION SYSTEMS
uted to multiple locations through the implementa-
tion of a single system (Davern & Kaufmann,
2000). But franchising is a hybrid organizational
form where IT value is realized at the franchisor
and the franchisee level. This makes it imperative
to segregate the automational, informational, and
transformational effects (process-oriented benefits)
of an organizational intranet (Scott, 1998) across
the franchisor and franchisee levels.
When hitherto long drawn traditional processes
in an organization can be automated through the
deployment of an information system, automational
effects would have resulted. These effects can re-
sult in greater efficiency and reduced costs of op-
eration. Given that an ASP solution for a chain
integrates and automates many processes as a
whole because of its enterprise-wide reach, it can
be viewed as the single largest automational effect
in itself. Automational effects result because of a
centralized information system that extracts richer
system functionality, while simultaneously feed-
ing property-based information into it. For exam-
ple, automatic uploads of property-based informa-
tion, chain-wide information processing of multiple
properties, and the distribution of decision support
information back to franchisees in real time are
automation effects. Another automational example
is the potential provision of real-time CRM at
front-line desks across the franchise network.
Lastly, through its unique model of distribution,
an ASP model breaks the system deployment bar-
rier as new applications can be rolled out quickly.
Software upgrades or changes can be centrally
controlled chain wide because franchisees only
need to plug in to keep versions current.
An ASP-based system serves as a rich informa-
tion repository, not only for franchise guidelines
and related information, but also for analytical and
the enhancement of intellectual opportunities for
both franchisees and franchisors. Also, the central-
ized database can serve as a rich mining ground
for customer-, operational-, and market-related in-
formation. From a franchise governance view-
point, reduced time gaps in providing greater re-
flective information to franchisees could be a key
informational development. Prior governance mech-
anisms built around large information time gaps
typical of legacy applications will move to the en-
riched real-time context here. Such changes to re-
11
duced time gaps brought about by real-time sys-
tems sharpen the organization’s overall reflexes to
changes in the marketplace.
Transformational effects enable a firm to gener-
ate new products and services largely aided by IT
system deployment. Rich information processing
by mining data from multiple properties and un-
derstanding variations in customer behavior can
help lodging firms to generate unique marketing
mixes and variations to the services offered. Also,
through rich knowledge contexts, franchisees can
better adapt to changing market conditions by
adapting their services and staying competitive.
Key to the development and evolution of cen-
tralized systems is the complex cross-holdings be-
tween operators and owners that the industry is
witness to. Additionally, how franchisors push the
agenda for greater standardization of systems will
play a key role in the success of the centralized
solution. Most industry practitioners contend that
the centralized model is here to stay. However,
there is no mention of the scope to improve the
knowledge contexts of the organization.
This new context of information flows brought
about by centralized systems should be integrated
into contexts of the hospitality education curricu-
lum too. Managing units or chains across a cen-
tralized information architecture calls for greater
coordination skills, and a richer perspective of the
environment. Courses specific to organizational
behavior in hospitality organizations need to incor-
porate concepts of knowledge creation and learn-
ing at large. The implications for centralization
architectures also stem to hospitality marketing
courses. ASP-based CRS have enabled faster
changes in marketing operations across the organi-
zation. For example, a lodging franchisee can
change rates based on variable demand in real
time. Additionally, franchisees can draw customer
knowledge from centralized databases in real time,
making CRM more viable. Lastly, hospitality
technology courses need to incorporate the organi-
zational ramifications from centralized architec-
tures while also explaining strategic opportunities
that emerge from them.
But there is more to knowledge management
than just IT-enabled systems such as ASP and the
intranet. Despite the information-processing capa-
bilities of computers, only the central role of hu-
12 BELDONA, BREWER, AND KLINE
mans can facilitate knowledge creation in an orga-
nization (Nonaka, 1994). Greater research needs
to focus on the aspects of knowledge management
in the lodging sector by addressing both IT- and
non-IT-enabled dimensions of the field. For exam-
ple, the role of franchise managers in the franchise
structure can be better supported from a knowl-
edge management perspective. By dealing with
experiences of multiple franchisees or units, man-
agers develop unique knowledge bases that can be
better leveraged through a knowledge manage-
ment perspective. The demand for creativity and
innovation in an industry that is hampered by in-
creasing commoditization emphasizes the need for
knowledge management and its effective imple-
mentation. How lodging firms can leverage knowl-
edge in the marketplace will greatly determine
their success in the marketplace in the future.
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