Measuring the relationship between the CEO's perceptions and the financial performance of information technology in the hospitality industry

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2011-08

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Abstract

Information Technology (IT) plays an important role in the hospitality industry. IT investments change the traditional organizational structure of businesses. Those investments improve communications of management, build up company strategies and increase customer satisfaction. The CEO’s letter provides understanding for shareholders in reference to future strategies and capital expenditures. The purpose of this study was to examine CEOs’ perspectives on IT by analyzing their Letters to Shareholders and to investigate the relationship between CEOs’ perspectives on IT and financial performance. A total of 262 CEO's letters to shareholders from 24 hospitality companies' annual report were investigated in this study. A total of 84 CEO letters (56.0%) of the 150 letters from the foodservice companies and a total of 64 CEO letters (57.1%) of the 122 letters from the lodging/gaming companies mentioned IT-related terms. There were a total of 394 IT-related terms gathered from 84 CEO letters from 11 foodservice companies. Through the process of categorizing terms, there were 17 “business process,” 8 “communication,” 10 “online” and 8 “service” perspectives identified. There were a total of 724 IT-related terms gathered from 64 CEO letters from 9 lodging/gaming companies. Through the process of categorizing terms, the results yielded the following: 20 business process, 9 communication, 11 online and 10 service perspectives. Comparing the portion of each cluster between foodservice and lodging/gaming industries, the percentage for lodging/gaming (28.13%) in cluster 1 was almost four times greater than the percentage for foodservice (8.33%). The percentage for foodservice (47.62%) in cluster 2 was higher than the percentage for lodging/gaming (26.56%). In the total sample, there were significant correlations between the percentage of total IT words to total number of words in CEO letters and revenue for each year. In the lodging/gaming sample, the correlations of the percentage of total IT words to total number of words in CEO letters with financial performance measures (EBITA; net income; revenue) were statistically significant during the research period. The results of correlation analysis showed that the sample from the multi-brand foodservice segment showed a significantly positive relationship with the EBITA variable in each year, with the net income variable in the second year and with the revenue variable in each year. Among clusters, the correlation analysis for Cluster 3 only showed a positive significance of relationship between the percentage of IT words to total words in CEO letters with financial performance measures (EBITA; revenue) during the research period. In the foodservice industry, "General Information Technology" is important to business because of globalization: business units in both the U.S. and abroad. These focused on general information technology for developing overall company performance. Using the general IT in the foodservice industry, helps businesses communicate effectively and speedily among front-line units, inventory storage, and both regional and corporate headquarters. This segment of the hospitality industry focused on their food product quality and employee service. But, they need to develop their overall service and financial performance using IT; especially, "Online Information Technology" will help with the development of financial performance. In the lodging/gaming industry, results showed that companies developed customer relationship management, overall IT infrastructure, online reservation systems, and advanced technology service for customers' satisfaction and overall financial performance. They had a balanced perception within each IT perspective. "Online Information Technology" helped with companies’ overall financial performance. The hospitality industry could find another cash cow through developing information technologies. Developing customer database, overall IT infrastructure and customer service based on IT is important for healthy financial performance and customer satisfaction. In addition to these, providing online services to customers, has been shown to increase financial performance. All technology systems and customer service based on IT are necessary for developing overall company performance. But, CEOs of hospitality industry firms need to decide which IT is useful and effective, to develop new IT service and to maintain current IT infrastructure. Therefore, it is important to select and concentrate on IT. This study showed that the CEOs’ Letter to Shareholders could be a useful source of qualitative samples for investigating CEO's perception of IT usefulness for developing overall company performance. Future research with CEO's letter to shareholders of other hospitality companies is needed to confirm the finding of this study.

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Information technology

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