Innovation is best described as the development and creation of unique possibilities for making value added contributions in a particular industry. The entire process of innovation goes beyond the traditional method of implementing new manufacturing processes or developing innovative products because it comprises of innovation in the market, organization and input resources (Kim, Kumar & Kumar, 2012; Ozturen & Sevil, 2009). As the competition in the market is intensifying, it has become mandatory for both product and service-oriented companies to exploit their current capabilities and identify unexploited opportunities (Boon-itt & Rompho, 2012; Veronneau & Roy, 2008).
According to Sheehan (2006), innovation has become a vital component of every firm. The only way of surviving in the tough and competitive environment is to provide the customers with excellent range of products and services that have premium quality so that the commodity trap can be avoided (Chesbrough, 2011) and the satisfaction level of customers can be enhanced at a higher level (Fantazy, Kumar & Kumar, 2010).
Innovation in tourism and hospitality industry
In the last few years, the researchers such as Boon-itt and Pongpanarat (2011), Martinez-Ros and Orfila-Sintes (2009) and Spekman, Spear and Kamauff (2002) have done extensive studies on the role of innovation in service sector especially tourism and hospitality industry. As the world has become global, travelling to different destinations worldwide is now the favorite leisure activity of the people. It has been reported by many countries such as France, USA, UK, Malaysia, Singapore, Turkey, China and Canada that the number of tourists as increased at a fast pace (Nassiry, Ghorban & Nasiri, 2012).
In order to provide exceptional tourism experience to the visitors, the tourism and hospitality industry of each country has to introduce innovative products and services that will meet the expectation level of the customers (Anthony, Johnson & Sinfield, 2008). This industry is mainly made up of tour operators, travel agencies, hotels and accommodation service providers and airline companies. One of the key areas of focus by the players in the respective industry is the development of an effective Supply Chain Management (SCM) that ensures that the tourists are provided the most satisfying level of services (Zhang, Song & Huang, 2009).
Real life examples of SCM initiatives and innovations
Since the demands of customers change at an accelerating pace in each market, it is required by every company to closely monitor the changing patterns of innovation requirements in the products and services. The customers of tourism and hospitality industry are looking for open service innovation which was the concept introduced by FedEx. Almost all the firms existing in the industry have ensured that they employ the latest technology in their services so that they have strong presence in the market (Gunasekara, 2006).
Some of the initiatives that have been observed in the Tourism supply chain (TSC) are integration of supplier and buyer relationship (Rizova, 2006), taking the suppliers on board when developing new products so that the feasibility of the project can be effectively designed (Handfield & Lawson, 2008) and eliminating the unnecessary intermediary steps so that the cost can be saved to a much larger extent (Miles, 2008).
All leading hotels such as Marriott, Hilton Hotel, Pearl Continental (PC) and many more have revamped their SCM processes so that they provide exceptional array of services to their customers (Ottenbacher & Gnoth, 2005). Even in retail industry, Wal-Mart has changed the way in which the supplies of inventory and distribution network are efficiently managed so that there is never shortage of stock and customers are contented every time during their visit to the stores (Kim, Kumar & Kumar, 2012).
Benefits of innovation in SCM
When an organization implements a well-organized and appropriately coordinated SCM, it is able to avail the opportunity of increasing its market share in the industry. The primary aim of the SCM is to assist a firm in reducing its cost level so that it can offer various attractive options to its customers which will eventually increase its sales and revenues (Miles, 2008). In order to enhance the customer satisfaction level, most of the service companies are offering their services online so that they can provide both customized and personalized services to the customers (Anthony, Johnson & Sinfield, 2008).
Although there are many advantages of SCM but some of the appreciated ones by the firms competing in the sector are strong brand reputation, enhanced level of trust, flexibility of responding to the target market's needs, cost-effectiveness and improved sales, revenues and performance in the market (Martinez-Ros & Orfila-Sintes, 2009).
Barriers of innovation in SCM
As the tourism and hospitality is growing by leaps and bounds, there are some challenges that need to be dealt by the companies in the sector related to their SCM so that they can compete strategically. The primary problem in this industry is the uncertainty in the demand of the customers as it is largely dependent on their preference set and economic conditions (Miles, 2008).
In addition to this issue, the other barriers that impact the development of an appropriate TSC are management of demand, fluctuations in government policies, buyer-supplier relationship conflicts, lack of support from the top management, misalignment of company's goals and strategy, up gradation of the information technology, management of supplies, coordination of TSC, unskilled people employed for bringing innovation and continuous development of products (Zhang, Song & Huang, 2009).
Measures of success and performance in SCM
The success and performance in SCM can be judged by studying both financial and qualitative components because financial data such as profit, revenue, sales and performance growth don't consider the other factors that are impact the performance of the entire process (Bertolini, Rizzi & Bevilaqua, 2007).
Other factors that need to be evaluated by the companies are customer satisfaction level, employee feedback about their skill development and training opportunities, effectiveness of marketing communications, level of consistency in service delivery, management of new product development process, involvement of employees in new idea generation, innovation in technology and many more (Fantazy, Kumar & Kumar, 2010; Oztaysi, Baysan & Akpinar, 2009).
New idea sources for SCM initiatives and innovations
Since the changes takes place on a continuous basis, it is required by every company to monitor the effectiveness of its processes on a continuum and avoid getting trapped in consistent mode of innovation. The primary sources of new ideas for creating new processes of SCM comprise of employees working within a corporation, evaluation of competitor's systems, learning from the procedures implemented by top-ranked firms, recruiting fresh graduates who have acquired latest qualification in SCM field and conducting market research to get the input from the target customers (Gunasekara, 2006; Kim, Kumar & Kumar, 2012).
UAE Economy and tourism and hospitality industry
General overview of UAE Economy
UAE has an economy that is classified as an open economic system that has the highest per capita income along with huge amount of surplus in trade. The country has done drastic diversifications on economic level as it has moved solely from the oil business to construction, retail, trade, property and tourism businesses. The oil was discovered in the country about more than thirty years ago but the government undertook necessary initiatives to create new jobs in the region and successfully expand the structure of the state ("Travel and Tourism: Economic Impact", 2012).
One of the remarkable accomplishments of UAE's government is the Free Trade Zone that has been attracting huge amount of Foreign Direct Investments in the country. UAE is an important member of Gulf Co-operation Council (GCC) that comprises of five more states i.e. Qatar, Bahrain, Saudi Arabia, Kuwait and Oman. Among all the states of GCC, UAE has reported robust growth in its performance and it accounts for the fifth total GDP of GCC i.e. approximately US $1.5 trillion ("UAE sees robust economic recovery during 2011/12", 2012). With the completion of more infrastructure projects, GDP is expected to increase by 5.2% in between the period of 2012-2015.
Differences in UAE and other Emirates and GCC countries
The main constituents of Emirates are Ajman, Ras-al-Khaimah, Abu Dhabi, Sharjah, Umm al-Quwain, Dubai and Fujairah; Abu Dhabi is the capital of UAE and is also the central hub for cultural, political and industrial activities. Abu Dhabi has been the pioneer state is attracting tourists to the country so that the travelers have a good time in the region. Following the footsteps of Abu Dhabi, Dubai has undertaken various important projects that have made a lot of contribution to the country's economy ("UAE sees robust economic recovery during 2011/12", 2012).
According to Khwaja (2012), UAE will have a robust growth in its GDP in 2012 i.e. 4.5% along with increased business opportunities in Dubai. It is expected that Oman, Bahrain and Kuwait will record growth rate of year-on-year 4%, 3% and 4.9% in year 2012 respectively. All the countries that are members of the GCC and Middle Eastern countries have strengths in three sectors i.e. crude oil production, tourism and logistics and healthcare (Khwaja, 2012).
Facts and figures about healthcare, tourism and retail in UAE, GCC and Middle Eastern Countries
As the GCC countries are regarded as the major contributors in the economy of Middle East, the facts and figures of the respective countries are given below in the form of tables:
Travel and Tourism Industry in 2011
UAE (AED billion)
GCC and Middle Eastern countries (US$ billion)
Direct Contribution to GDP
83.8
71.8
Total Contribution to GDP
175
180.8
Direct Contribution to employment
166
1,756
Total Contribution to Employment
388
4,528
Visitor exports
110.5
70.1
Domestic spending
30.1
58
Leisure Spending
110.1
100.7
Business spending
32.2
28.8
Capital Investment
76.5
37.9
("Travel and Tourism: Economic Impact 2012", 2012)
According to the GCC Retail Industry (2012), the retail industry in Dubai, other Emirates, GCC and Middle Eastern countries will continue to increase at an accelerating pace. The retail sales are expected to grow at the rate of 7.7 % in between the period 2011-2016. Among all the countries, Saudi Arabia has expected CAGR of 9.5%. There will be huge demand for healthier products and sales of food retail will increase within the same period by 8.8% in the region.
Similarly, there is a growing concept of supermarkets and hypermarkets in these countries and the sales within this sector has reached to US$59 billion and it will continue to increase at an average rate of 10.5% in the period of 2011-2016. However, there are huge opportunities for these brands in Qatar, Kuwait and Saudi Arabia. It is anticipated that travel related and duty free retail sales will rise to US$5.6 billion in 2016 from US$ 3.2 billion in the year 2011 in Middle East. The primary reason for such a growth in retail sales in the region is expected because of increase in traffic of passengers at Qatar and Abu Dhabi airports along with opening of the Concourse 3 on Dubai International Airport.
According to the industry reports such as GCC Building Construction and Interiors Overview (2012), the governments of Middle Eastern, GCC and UAE governments have allocated most of their resources in the healthcare segment so that they can provide a good and healthy environment to their residents. It is expected that by the year 2018, the healthcare industry in the countries will grow to US $133 billion. The strong growth in this sector is expected because of changing patterns of lifestyles that resulted in diabetes and obesity along with surge in the demand of medical facilities and services.
About 71% of the spending is done by the government in these regions and UAE government has increased the budget allocation of healthcare sector by 24% so that the medical costs for the residents can be lowered. Even government of Saudi Arabia spends US $13 billion on yearly basis and it will grow to more than US$ 20 billion in 2016. All of the countries are investing money in various healthcare projects so that the health of the citizens is enhanced and they can lead a healthy and enjoyable life.
Performance parameters of tourism and hospitality industry
In order to monitor the performance of hotels, there are key performance indicators utilized by each corporation existing in the tourism and hospitality industry i.e. occupancy, Revenue per available room (RevPAR), Percentage change in RevPAR and Average room rate (O'Neill & Carlback, 2011). The formula of RevPAR is Average room rate multiplied by occupancy rate. Occupancy rate is defined as the number of rooms rented when compared to the total number of rooms available in the hotel. The Average room rate is the price charged to each customer on average to earn the rent amount to make sufficient amount of profit.
The RevPAR is an important indicator for the hotels as it gives a brief snapshot of the growth level of a hotel by calculating the change observed from the previous year. It allows the hotel to ensure that it effectively utilizes all its resources so that there are less chances of deviation from the core business activities and all the customers are provided an excellent range of services.
