RFID in Hospitality Industry

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Abstract

The hospitality industry is considerably a customer and service oriented industry. With growing consumerism, hospitality sector has seen a significant growth in consumer demand. The industry is often closely watched by customers and the smallest has serious implications on the brand image and competitive positioning.  Therefore, it has become essential for resorts, cruise ships hotels, theme parks and other hospitality businesses to provide excellent quality services for optimal customer satisfaction to build a strong brand image. Radio Frequency Identification has been adapted as the answer to the problem and challenges that affect the hospitality industry. As a result, there has been improvement in profitability arising from overall customer experience of the service providers.

Introduction

Once an esoteric and expensive technology, RFID is now used across a wide range of industries. The technology has found wide application beyond tracking inventories into such service industries like hospitality. The core concept in the utilization of this technology in most businesses is to deliver the right inventory to the correct place at the correct time. Business keeps track of its inventory items by tagging each individual inventory item.  As a result, the business can keep track of each item located in the distribution channel. RFID has been adapted in the hospitality industry to offer a similar opportunity for greater control over logistics and to enable accurate provision of customer services. From mega style casino resorts to ski resorts, most of the properties have implemented RFID technology to facilitate in streamlining operations and improving profitability. RFID has potential benefits as it pertains to improving services offered as well as targeting specific guest preferences.

Basics of the RFID components

The question for hospitality companies is how RFID technology helps cut costs and improve operations. Tracking of inventory is the first component in the use of RFID. It has the ability to identify and locate an individual or an item. A restaurant that has RFID tag on every item would have continuous, real-time record of stock. While it may be necessary to carry out a visual inspection of the inventory, RFID technology allows for efficiency of the process. Stock-outs and overstocks are quickly identified, thus allowing the decision makers to implement necessary changes to the menu. Another RFID component is smart infrastructure. There are various ways that RFID might be helpful for hospitality businesses in addition to automatically taking inventory.  RFID readers may be placed on “smart carts,” employee check-in and baggage tracking. RFID sensors could also be important in identifying check HVAC, water leaks, and utility controls, cooling triggers and set heating based on occupancy. They could also automatically operate screens, hallway lights, and blinds (Ustundag, 2012).

A RFID system consists of tags built into key fobs. The fobs are carried by both guests and readers. Readers receive tags’ transmitted ID numbers, and then transmit identity back to a gateway, which corresponds to a cloud-based server. A computer behind displays data collected about the guest carrying the fobs. RFID technology in the hospitality industry can be used pass mission by providing security solutions that recognize when an object or individuals enter specific areas. These readers may be installed in elevators to identify guests and their room number. Another primary concern in the hospitality sector is to make it possible for employees to simply recognize customers before providing services. For example, when employees know customers who enter a restaurant, spa or swimming pool area, they can greet customers by name, cater to any specific requirements and directly bill services to their rooms without being asked (Oztayşi et al., 2009).

Advances in RFID

There are key advances in RFID that are used in the system. Currently, the technology is tied to social networking sites like Twitter and Facebook. By linking RFID with social networks, attendees at sporting events, concerts and other venues can share information with other parties instantaneously. The social media feature provides a fun new twist to RFID technology. It also performs an important role behind the scenes by helping the technology gain greater acceptance from consumers. For long, the technology has been viewed as one that invades privacy. With such advances, it is losing its image as a suspicious technology to become a cool and trendy technology that enhances communication in an ever-growing mobile world.

Industry Standards that are used in the system

Industry standards pertaining to how RFID technology is currently being used in the hospitality industry is important to understanding some of the parameters surrounding the use of this technology. Most often, the use of RFID is accomplished by attaching a thin plastic wristband on the customer’s wrist allowing them to access the services and make purchases. By securing customer’s information into a database, it becomes easy to associate the data with a specific RFID tag. Such information may include credit limits, guest preferences, access hours, guestroom numbers, group and other information. Customers can roam the business premise without carrying room keys, money, and the other items. Guest can focus on enjoying the attractions being offered.

Ski resorts and theme parks primarily use RFID technology in areas such as identification, setting up a cashless marketplace, ticketing, and tracking.  It is almost impossible to place a wristband on the typical resort customer. Hospitality businesses may provide an RIFD-enabled key card which could be tracked throughout the business. An RFID-enabled guest key card could provide a considerable amount of information on customer’s spending patterns, preferences and behavioral like a casino’s player tracking card. RFID technology has also been adapted to track guest’s movements and preferences in other businesses providing hospitality services. Given a particular environment, a business can anticipate how the customers are going to behave, and they are more likely to spend their time and money, their demographic profile and experience. These variables are important to the execution of marketing efforts. This technology has allowed businesses in the hospitality industry to anticipate guests’ needs and wants with an extreme amount of certainty.

Benefits and disadvantages of the RFID system

The implementation of RFID system comes with many benefits and disadvantages.

Benefits

Managing inventories

Washable RFID tags allow personnel to trace sheets, towels, pillowcases, napkins, tablecloths, guest robes and other items that can be counted during transportation or when being laundered. It ensures that everything is returned to the correct location. RFID helps locate robes, towels left in the spa, by the pool or on the beach. Apart from allowing effective management of inventories, it saves time otherwise spent in retrieving or locating items saving money for replenishment and replacement. If stolen, the technology can identify when, the quantity of items leaving the premises.  RFID also speeds up receiving and sending of items and can reduce human error and billing discrepancies. It can also be used to track telephones, lamps, televisions as well as other portable inventory items. Tagging uniforms with RFID ensures that they are clean and ready for employees accounted for by staff. It reduces guesswork common with keeping the right sizes in stock at the right locations and reordering (Ustundag, 2012).

Enhancing Standard Key Cards

Key card systems may feature RFID readers on the cards themselves or in the doors and RFID chips. Rather than sliding the card into a slot, customers can unlock the door through waving the card over the door handle. Such as system allows guests to access specific areas of the facility such as gym, pool, spa, parking lot and pay for drinks or dinner. RFID-enabled key cards can also enhance purchases. RFID technology offers an added layer of security and safety to customers and staff, with all information and data on the cards encrypted. Regular or repeat customers can be issued permanent RFID cards that allow them to check in and check out fast without interacting with the front desk. Using RFID customer cards, individuals can make reservations, receive a room assignment, pay online, and proceeds without having to check-in on arrival. When necessary, they can make personal requests and record their preference for certain types of services.

Monitoring

Hospitality businesses have implemented RFID on liquor pour system.  The implementation has helped improve profit margins and reduce waste by monitoring the accurate volume of alcohol and beverage served to customers. The process helps keep the bar fully stocked for more sales while reducing theft.  Beverage and Food items can be tagged and monitored to maintain freshness, inventory accuracy, monitor and reduce shrink and theft.  RFID also helps speed restocking, including the replacement of service items (Zhu et al., 2012).

Enhancing the Customer Experience

Positioning RFID readers at the entryway, a business can effectively capture and use the data transmit by the RFID to provide loyalty card as customers enter the facility. Capturing this data allows employees to greet guests by name, follow up on special requests, deliver messages and add other elements to provide a more personalized guest experience. RFID tags also help monitor guest movements for higher security and better service. RFID-enabled wristbands, access cards, staff badges with in-built RFID chips aid in accomplishing the goals.  Customers also benefit from the technology by tracking members of their groups and children within the premises of the facility. Management easily monitors employees’ activity when staffs are provided with RFID-enabled badges and identification. They can keep a check on locations, unauthorized access in particular areas and monitor staff attendance.

Capturing Data

RFID in the hospitality industry has helped managers and other decision makers track patterns of use to items are generating the highest revenue and items generating the lowest revenue. Facility owners use this data to discern patterns of customer behavior identify different areas of the facility that are frequently visited. In any operation, the technology is most applied in areas characterized by a high level of human error, mishandling, and shrink due to theft. Within the hospitality industry, this includes a range of items. Given the effectiveness of RFID in reducing labor for items that need manual counts, many businesses find it appropriate to use RFID technology.  In the past, such items were not being accounted for as they were too difficult or labor intensive. For this reason, resorts, hotels, cruise lines and other hospitality businesses welcomed RFID with enthusiasm.

Disadvantages

There are few drawbacks that are associated with the implementation of RFID technology. RFID is implemented with a few risks in mind that must be considered. The first risk is customer perception.  Some customers may view RFID tracking system as an invasion of privacy. Collecting information about customers is the core of the utilization of RFID in the hospitality industry. The system may be viewed as obtrusive and giving the atmosphere a cheap feeling. Constant monitoring of employees activity may be viewed as distrust on the side of management. In the long run, it may deter optimal performance (Ngai et al., 2008).

Security concerns or practices associated with the RFID system

Increasing adoption of RFID technology has opened a new frontier for data security measures and data threats. RFID technology is made up of a full spectrum of wireless devices of varying sophistication, power, and capabilities.  The security risks involved with a RFID is equivalent to those of wireless system. Viruses can compromise the entire system when programmed into RFID chips.   RFID data security is a critical factor that must be addressed correctly from both a business process and technical point of view to ensure prevalent ubiquity of RFID technology. However, various measures may be undertaken to minimize this risk. Such may include proper database configuration (Ip et al., 2011).

Impact of implementation

The implementation of RFID technology has a positive impact on cost, efficiency and the bottom line of companies implementing it.  Supply cost makes up more than one-third of business operating budget and comprises the one of the largest expenditure in the hospitality industry. As businesses have sought to reduce these costs, RFID technology has been used as the optimal solution.  Although there are numerous concerns pertaining to RFID technology, deploying RFID in the supply chain can considerably reduce costs. The cost of implementation has remained the main barrier for RFID adoption as a result of uncertain Return on Investment. RFID technology allows for efficiency of the process. Stock-outs and overstocks are quickly identified, thus allowing the decision makers to implement necessary changes to the menu(Tan, & Chang, 2010).

Administrative procedures human and process changes

Entities require implementing RFID technology requires undertaking training on employees as the best way a business to ensure that they understand the purpose for its implementation and the benefits to business.  Employees should also understand the risk associated with RFID and other limitations. Organizations should not assume the risks as the RF footprint of current generation tags is limited. Understanding the required time required to access, crack, alter and deny their use is a prerequisite to ensuring RFID implementation embodies the values and objectives of the organization’s corporate security policy. Some RFID technologies present needs and challenges similar to those of IT system.  Such include those that draw power by the kilowatt in server rooms.  They are also subject to many attack vectors. Educating employees may be the most cost-effective way to increase an initial understanding ways to mitigate them (Nath et al, 2006).

Conclusion

The hospitality industry is a customer and service oriented industry. Given the effectiveness of RFID in reducing labor for items that need manual counts, many businesses find it appropriate to use RFID technology.  The implementation of RFID system comes with many benefits and disadvantages.  The implementation of RFID technology has a positive impact on cost, efficiency and the bottom line of companies implementing it.  However, the system is also viewed as obtrusive and an invasion of privacy.


References

Ip, C., Leung, R., & Law, R. (2011). Progress and development of information and communication technologies in hospitality. International Journal of Contemporary Hospitality Management, 23(4), 533-551.

Nath, B., Reynolds, F., & Want, R. (2006). RFID technology and applications. IEEE Pervasive Computing, (1), 22-24.

Ngai, E. W. T., Suk, F. F. C., & Lo, S. Y. Y. (2008). Development of an RFID-based sushi management system: The case of a conveyor-belt sushi restaurant. International Journal of Production Economics, 112(2), 630-645.

Oztayşi, B., Baysan, S., & Akpinar, F. (2009). Radio frequency identification (RFID) in hospitality. Technovation, 29(9), 618-624.

Tan, T. H., & Chang, C. S. (2010). Development and evaluation of an RFID-based e-restaurant system for customer-centric service. Expert Systems with Applications, 37(9), 6482-6492.

Ustundag, A. (2012). The value of RFID. Springer London Limited.

Zhu, X., Mukhopadhyay, S. K., & Kurata, H. (2012). A review of RFID technology and its managerial applications in different industries. Journal of Engineering and Technology Management, 29(1), 152-167.



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