The aim of this chapter is to present literature relevant to this research and to provide a theoretical framework. The chapter begins firstly brief summery about tourism industry and the relationship between the innovation and the tourism industry. Secondly about independent variable of innovation, type of innovation, and Innovative technological amenities in hotels and performance. Thirdly about dependent variable of hotels’ organization performance. Fourthly conceptual frame work and operationalization has been presented in this chapter. Operationalization chart provide brief idea about what are the independent variable, dependent variable, and how measurement that variables. Finally this chapter provide summery about second chapter.
2.2. Tourism ; hospitality industry
Since the past years, services industry has achieved a rapid growth in the global context. It Service industry has been contributed the international and the global economy in term of economy of scale. It play critical role in economically and industrially. In Sri Lanka service sector contributed more than 61% to GDP (central bank report, 2017). According to the UNWTO word Tourism Barometer sown 7% remarkable grew rate in tourism arrivals and 4%- 5% rate expect in 2018. To achieve that target hotel industry contribution is most important. In Sri Lanka also face more challengers: world economic dip activities, terrorism attack as well as natural disaster in the last decades. Those led to decline tourism and hospitality industry and the industry profitability. In Sri Lankan context tourism industrials offer unique characterized services through innovation for their customers. For that industrial’s use innovative technology, information technology (IT), the multyskill employees and optimum resource utilization.
2.2.1. Hospitality industry and Innovation
In modern world tourisms industry achieved their goals through innovation, information technology applications, multyskill employees and optimum resource utilization. Information technology industry is dynamically change combined with the innovation. K. Tajeddini’s study of “effect of customer orientation and entrepreneurial orientation on innovativeness: evidence from the hotel industry in Switzerland” emphasize innovation have a positive impact on hotel service performance, and also innovativeness will have positive effect on profit goal achievement, sales goal achievement, and return on investment (ROI) achievement. This research reveals the owners and manager of hotel who are investing innovative technologies, service or product are able to achieve their profit sales and ROT goals. And this study suggests to improve performance , customer orientation, entrepreneurial and innovations should be encouraged by top managers and owners in hotel sector and if their perceive innovative technologies as an integral part of corporate strategy (Liu, 2002) According to Anil Bilgihan, Fevzi Okumus and David Joon (2011) information technology application may lead to competitive advantage in hotel companies. This study mention investing in IT applications in hotelier can lead to superior competencies and IT capabilities. And also it can subsequently result in lower cost, agility, innovation, added value for service. This research study mention four key areas in implementing IT applications: technology sophistication, management skill, integration of resources, integration of IT systems.
In tourism and hospitality industry frequently use information technology for their operational activities. It is newly available factors of production were the new information and communication technologies, specifically designed for the tourism industry such as computer reservation systems and destination information systems, tourism web-sites on the internet or computer assisted backup systems for complex vacation or business travel packages (Birgit Pikkemaat and Mike peters, 2014). Not only it aid to reduce stationary and maintain cost, enhance operational efficiency, and most importantly to improve service quality (provide quick service) and customer experience (Rob Law, Rosanna Leung, and Dimitrios Buhalis, 2009). Hotels have in general more professional training structures and also invest more money in training. Hotels have realized that employee training is important when developing innovations in order to enhance front-line expertise. Enz and Siguaw (2000) argue that employee training has become an increasingly critical aspect in the hotel sector, in order to increase service quality, reduce labor costs and increase productivity (Ottenbacher, Shaw, and Lockwood2014).
Chain and independent hotels are continuously forced to improving quality and reputation, cutting costs, and increasing sales ; profits in their organization. One of the way hospitality organizations to achieve their objectives through innovation. (Brentani and Cooper; 1992, Michael Ottenbacher and Vivienne Shaw; 2014). Hence innovation has become the strategy for success of the hotel industry. According to the Ottenbacher, Shaw and Lackwood (2014) innovation impact on the service firm’s performance. It supports effective marketing communication in the industry and significantly improve their level of maturity. And this study suggested innovation activities have been affected for the success of the independent hotels and chain hotels. Especially small and medium businesses (SME) in rural regions, the tourism industry displays special disadvantages in terms of product development (Peters and Weiermair; 2002). Basically, small businesses lack economies of scale and are not able to raise profit margins which allow small units to reinvest in research & development, market research, product development, skill or creativity enhancement (Bieger, 2001; Weiermair, 2004). This situation totally change in the present world through the government and non-government organizations’ support (financially and ideally) and innovation technologies. It value added to the value chain of services. Gomez and Probst’s (1995) model categorizes innovation levels in tourism using core competencies as the unit of analysis. This differentiation seems to be appropriate, as innovation in tourism is often based on core competencies. It may comprise internal or external factors. Internal resources of the company are most important determinants regarding positioning and competitive advantages of a company which are difficult to imitate.
Schumpeter (1947) was one of the first to develop a theory about innovation. He defines innovations as “new ways of doing things”. Innovation word cover new and creativity ideas as well as implication of discoveries. Service innovation is “introducing something new into the way of life, organization, timing and placement of what can generally be described as the individual and collective process that relate to consumers” (Tan and Decelle; 2004). “innovations are the outcome of the innovation process, which can be defined as the combined activities leading to new, marketable products and services or new production and delivery systems” (Burgelman and Maidique; 1996). According to Weiermair (2003) innovation recognized most firms to product development and competition in markets, and he mention large tourism firms use information technology and e-tourism are seen as a major change although nobody sees it as an innovation because it comes from outside the industry. Sorescu (2011) expressing different definition for innovation, cannot define extract definition for innovation. But it is derived from originally the Latin verb “innovare” and the Latin noun “innovatus”, standing for transforming an idea or a process into a marketable product or service thus adding value to it. (Peters & Pikkemaat: 2006; Banger: 2007; Vatan: 2010). Not only Peters and Pikkemaat (2011) define it may be concluded that, innovation in tourism industry may be attained by new services, new target groups and consumers, new channels of distribution, new promotion tools and strategies, new marketing applications or new infrastructures. According to these literatures innovation can define create new products and innovations to meet someone needs & wants and find new solution for the problems in present and near future. In this study measure existing innovation technologies in Sri Lankan context.
2.3.1. Type of innovative
According to the Weiermair (2003) two basic innovation in the tourism and hospitality industry. Product innovations are new products in catering, trendy comfortable hardware in the hotel room, new wellness hardware and applications, new architecture & design, customer loyalty programmers and price innovations. Process innovations are Internet, B2B information, reservation systems, controlling systems, restructuring of the company, new distribution channels and marketing systems, collaboration in various departments and fields, further training of the staff members, and service optimization. According to this study half of the process innovation are affect to the hotel operational performance. As an example wireless internet access, IT base reservation system, robots for cleaning services, guest communication system (Nordin S, 2003; Blichfeldti, 2011). Brentani (2001) the critical dimensions influence service innovation performance that have been separated into four, there are service or product- related, market-related, process- related, and organizational- related. Product- related determinants the relative advantage of a product or service has been recognized as important source of success in new product and service development literatures (Cooper, 1994; Cooper and Kleinschmidt, 1987). And also have been found to improve the performance of service innovations. The market determinants of service innovation success, market synergy (Cooper and De Brentani, 1991; De Brentani and Ragot, 1996) and market attractiveness are particularly important influences. In process-related determinants, the implementation of a proficient and market-oriented new product development process including pre-launch activities (Atuahene-Gima, 1996), employee involvement in the process (De Brentani, 1991), supporting the new project with excellent communication (Edgett, 1994) and effective process management during the process (De Brentani and Ragot, 1996) have been shown to be important. Finally, organizational-related determinants include synergies between the new service and the marketing, managerial and financial resources (De Brentani, 1991). This type of innovation emphasize more researchers (OECD & Eurostat 2005).
Hjalager (2002) distinguishes four types of innovation dealing with competencies: regular innovations, niche innovations, architectural innovations, and revolutionary innovations. While niche innovations emphasize the new cooperation and untouched existing competencies, architectural innovations introduce new structures and redefine relationships to stakeholders. And also this study mention another five innovation types, product innovation, process innovation, market innovation, logistics innovation and institutional innovation. Production innovation mean launch new product or services or increase the production mix, process innovation is new way of producing products or providing the services including new roles for delivery process, market innovation is new modes of communicating with among with the others in external and internal environment, logistics innovation mean new constellation of services and organization of flows, finally institutional innovation is emergence of new organization and new way of providing organization performance. Cihan, Kateina, Michael and Mehmet (2011) measure impact of innovative technology amenities on guest satisfaction. It measure guest satisfaction by used four type of innovation: in room technology innovation, comfort technology innovation, business essential innovation and internal assess innovation. This type of innovative technologies are impact guest satisfaction not also those are affect to the hotel operation. Because operational or organization performance can measure through customer satisfaction. There is literature about the relationships among innovation with service quality, customer satisfaction and the consumer loyalty, the gap in studies relationship among the performance and the innovations.
Birgit Pikkemaat and Mike Peters discuss innovation as competitive advantage in the tourism and in particular, in the small and medium sized hotel industry (Michael Attenbacher, Vivienne Shaw, and Andrew Lockwood; 2014). However Less research has been carried out on innovation in the tourism industry (Hjalager, 2002; Weiermair and Peters, 2002; Keller, 2004; Pikkemaat, 2005; Pikkemaat and Weiermair, 2004, Inanovic 2010; OECD & Eurostat 2005). From the authors’ point of the view recently two studies combined both empirical measurement of innovation with guest satisfaction and the performance (Cihan Cobanoglu, Kateina Berezina, Michael L. Kasavana and Mehmet Erdem, 2011; Weiermair, 2003). This research dimension categories according to Birgit Pikkemaat and Mike Peters study: reservation technology innovation, in room technology innovation, comfort technology innovation, business essential innovation and internal assess innovation.
2.3.2. Innovative technological amenities in hotels and performance
Cihan Cohaniglu, Kateina, Michael L. Kasava and Mehmet Erdem (2011) emphasis on there is positive relation between innovation and guest satisfaction. This research found comfort technologies impact guest’s overall satisfaction. In additionally this research emphasis comfortable technologies and business essential technologies impact to business travelers. And this research find the highest rated guest satisfaction amenities, there are in room voice mail/ messaging, in room fitness system, in room guest control panel, In room universal battery charger, Also least satisfaction amenities are check in and check out system in room PC, in room telephone, in room alarm clock and the easily accessible electronic outlets. Srikanth Beldona and Cihan Cihanoglu (2007) emphasis innovation have only a marginal impact on hotel performance. It also analysis best five innovative technological amenities, there are in room temperature control system, online reservation capabilities, easily accessible electronic outlets, wireless internet access in hotel and the business center amenities.
Ani Bilgihan, Fevzi Okumus, Khaldoon Nusair and David joon- Wuk Kwun (2011) emphasis on IT capabilities and IT competencies can help hotel companies achieve competitive advantage. This research categories IT base innovation amenities into four section, there are front office application, back office applications, restaurant and banquet, and guest-related interface application. Under this research reservation system, check in/ check out system, in house guest information function, guest accounting modules, purchase and inventory modules, beverage control system, menu management system, electronic locking system, and Guest operated devices amenities classify according to above four categories. Korczynski (2002) Modern Information application of systematic are involves human resource management careful selection of employees, employee training, empowerment, low formalization, behavior-based evaluation and a strategic approach to human resource management. In this research measure the innovative technological amenities and its impact on performance.
2.4. Organizational performance
High number of innovative technologies has in the hotel industry, those innovation directly impact to the hotel performance. According to the Louise James organization performance relates to successfully an organized group of people with a particular purpose perform a function. Organization performance measure different ways: financial, employee, marketing, and operational performance. The evaluation of new services and products is most frequently based on financial measures of performance (Montoya- Weiss and Calantone, 1994). Nevertheless, using only financial measures is too limited, because it neglects several aspects of benefit to the company. The findings of success studies in innovation have shown that success on one specific dimension of performance does not necessarily mean success on the other performance dimension (De Brentani; 1991).
Study of Ottenbacher (2014) mention four innovative factors that influence of chain hotels’ performance of new service development on organizational relationship: market attractiveness, new service development process management, market responsiveness and empowerment. And that study emphasize five key success factors for independent hotels innovations: training employee, effective marketing communication, evaluation behavior, marketing synergy and employee commitment. Innovation includes planned employee training programs to improve the performance of individuals and groups of employees. Innovation the changes employees’ knowledge, skills, attitudes and social behavior (Cascio, 1989). Training of operational level employees is critical in order to enhance front-line expertise (De Brentani and Cooper, 1992). Innovation are used for marketing aspect of the launch were better & right targeted customer and better & right communication. It should result in more effective advertising or promotion than competitors, and create a better brand image (Ottenbacher, Shaw, and Lockwood; 2014). New service development performance measure along 12 dimensions: total sales, improved loyalty, improved image, enhanced profitability, market share, profitability, and sales of hotel services, new markets opened up, new customers attracted, cost efficiencies, customer satisfaction, positive employee feedback and competencies of employees.
2.4.1. Operational performance
Brentani (1991) findings success studies in innovation have shown success on one specific dimension of performance does not necessarily mean success on the other performance dimension. This study measures operational performance along six dimensions: market share, new services innovation, cost efficiencies, customer satisfaction, positive employee feedback and service quality. And also According to Ige Pirnar and Cagri Bulut (2010) Operational performance measure by market share, new service introducing, service quality, marketing effectiveness, and customer satisfaction. And Michael Ottenbacher, Vivienne Shaw, Andrew Lockwood (2014) are investigation of the factors affecting innovation performance in chain and independent hotels. That research performance measure dimension are total sales, market share, profitability, improved loyalty, improved image, enhanced profitability and sales of other hotel services, new markets opened up, new customers attracted, cost efficiencies, customer satisfaction, positive employee feedback and competencies of employees. In this research measure hotels’ operational performance in Galle district. This research measuring dimension obtain according to evaluating past researches (Ige Pirnar and Cagri Bulut, 2010; Michael Ottenbacher, Vivienne Shaw, Andrew Lockwood; 2014).
22.214.171.124. New service introduction
This is illustrated by Hult (2004), who note that “Innovative technologies is likely to be useful for allowing the firm to pre-empt competitors with improved new products, diversify products lines, and expand the firm’s scope of activities. All of these outcomes can help contribute to achieving sustainable competitive advantage.” Evidence from this study also points to the importance of managerial emphasis on the creation of an internal business environment conducive to innovative activities, focusing on the needs of the customer. Specifically, customer orientation, entrepreneurial orientation with innovativeness was found to have a positive effect on business performance in the long-term (K. Tajeddini, 2010). The purpose of this study was twofold: to measure hotel operational performance through the number of new products or services introduction with existing technology- based amenities.
126.96.36.199. Cost efficiencies
Cost efficiency means comparison of the work input and the work output level. The amount of work could refer to time, effort, capacity, or tangible item. High level of efficiency implies a minimal amount of wasted time, effort, capacity, and material. In three method used to measure the cost efficiency: first way is labor efficiency: difference between actual labors worked hours and standard hours multiplied by standard labor cost: Second way is material yield variance: different between actual and standard hours works multiplied standard cost per unite. Third way is variable overhead efficiency variable: different between actual and standard overhead rate multiplies standard overhead cost. The purpose of this study was twofold: to measure hotel operational performance through the level of cost efficiencies with existing technology- based amenities.
188.8.131.52. Time saving
According to the Brencic, Vera and Youg (2009) time is the major input into production of good and services. The study of “time saving innovations, time allocation, and energy us: evidence from Canadian households” highlight time saving is innovations allows household to change their activities patterns and to reallocate their time across competing activities. This study mansion adoption of time- saving technologies for basic household chores, such as meal preparation and laundry, can impact energy use due to the fact that time saving technologies.
184.108.40.206. Service quality
Service quality defined as the customer gets out and is willing to pay for services or products rather than what the supplier puts in (Ducker, 1991). Service Quality has been identified as to which extent where the service fulfils the needs or the expectations of consumers. Service can also be defined as an intangible offer by one party to another. Service Quality should start from the needs of the customer and ends with customer satisfaction or dissatisfaction and positive or negative perception of service quality. Both consumer and service provider have a significant value on service creation or the delivery process. Somehow the complete definition for Service Quality was defined as “a long term process of cognitive evaluation of service delivery in the firms, according to the above mentioning it implies that the customer has a particular service standard in mind prior to the service consumption, observe the service performance and then compare it with their expectation and the prior experience after that they are forming the satisfaction based on the comparison (Lovelock, 2002). The purpose of this study was twofold: to measure hotel operational performance through the level of service quality with existing technology- based amenities.
According to the Kayhan Tajeddini’s study customer orientation, entrepreneurial orientation, and innovation technology have a positive impact on hotel service performance. This research highlight customer orientation and innovation technologies has positional advantage. Birgit Pikkemaat & Mike Peters (2014) study innovative technological amenities in the small and medium sized hotel industry. Under their research they testing six hypothesis. According to their one of hypothesis larger and stranded hotels are use the more innovative technological amenities. And also innovation are positively impact to hotel performance by increasing the quality of the hotel. It’s identify three indicator to measure the degree of innovation. Cihan, Kateina, Michael and Mehmet (2011) study relationship between overall accommodation-based customer satisfaction and the innovative technological amenities. According to past researchers’ empirical gap in this research measure the impact of the innovative technological amenities on hotels operational performance by using service quality, customer satisfaction, and time save and cost effective. According to Cihan, Kateina, Michael and Mehmet study this research also take their dimensions to develop the hypothesis.