Location-Based Services Show Potential

By Cihan Cobanoglu, Ph.D., CHTP | August 01, 2011

Twenty years ago, cell phones were used by only a handful of business people. Today however, a number of technological advancements are responsible for not only an increase in the number of mobile device on the market, but a cultural shift as more and more have come to depend upon the use of mobile applications in their daily lives. Currently, 85% of Americans, 18 and older, own a cell phone. And according to comScore data from January 2011, 74.6 million people in the U.S. own smartphones. What’s more, mobile technology applications, like location-based services, are gaining in popularity because of their increasing availability, ease-of-use, and low cost.
 
A location-based service (LBS) is an information and entertainment service that is accessible though a mobile network, and makes use of the geographical position of the mobile device. Gartner, which identified LBS as a top consumer application for 2012, expects the consumer LBS user base to include 1.4 billion people by 2014.
 
Hospitality companies are among the first taking advantage of LBS. Today, mobile LBS apps have expanded beyond basic information search and distribution functions, to travel tools and alerts to mobile reservations capabilities. The market potential of LBS is significant, thus representing a new revenue opportunity for hospitality marketers. According to Jupiter Research, the market revenue for LBS could reach as high as $12.7 billion by 2014, with an estimate of 486 million LBS users by 2012.
 
LBS: two types
According to “An Overview of Location-Based Services,” by Thomas D’Roza and George Bilchev, there are two broad categories of LBS: push and pull. Push LBS relies on an advance condition that is set-up by the end-user. Such push services are activated by an event, which could be triggered if a user enters a specific area or triggered by a timer. Pull LBS requires that a user retrieve his/her position for location-dependent information. Hospitality companies need to look into LBS as an opportunity to market products and services to consumers in very different manners. Some examples of such new LBS apps include Google Latitude, MyTown, Yelp, Facebook Places, Foursquare, Urbanspoon, Where, Poynt, Loopt, Whrrl, SCVNGR, Brightkite, and Gowalla.
 
In addition, Global Positioning Systems (GPS) provide a new platform for LBS for hospitality companies. Dunkin’ Donuts and Cold Stone Creamery are using GPS devices to alert users of their proximity to store locations and promotions. According to a survey conducted at the University of South Florida Sarasota- Manatee, 30% of consumers said that they travel more because of their GPS. More than half of consumers (55%) would like their GPS to suggest tourist attractions, and 42% think that a GPS could help them plan their vacation. Furthermore, 65% of consumers who used a GPS in the past 12 months found and ate in restaurants that they did not know of before because of their GPS. When it comes to lodging, 51% found hotels this way, while 47% were able to find tourist attractions with the help of their GPS.
 
Privacy pitfall
This is all good news. However, there is also an important side of LBS that hospitality companies need to be very careful of: the privacy policy of LBS applications. Location-based information in LBS often reveals the position of a person in real-time, resulting in the potential intrusion of privacy. More than half of consumers are concerned about loss of privacy and they are very concerned for their personal safety. Hospitality companies must receive permission to send them location-based services in a clean and simple explanation of privacy policies. The Wall Street Journal tested 101 iPhone apps and found that 56 of those apps transmitted unique device identifiers (UDID). Those UDIDs, which are 40-character strings of letters and numbers that tag each specific iPhone to a third-party, such as advertisers, were transmitted without the user‘s awareness or permission. Although the iPhone does not transmit users’ real names, it is evident that the UDID when combined with other personal information collected from the device, such as location, age, and gender data, can determine a user’s real identity. The advantages of being a pioneer in LBS applications can turn into nightmare if companies do not take due diligence in protecting the privacy of their consumers.
 
Cihan Cobanoglu, Ph.D., CHTP is Dean of the School of Hotel & Restaurant Management, University of South Florida Sarasota-Manatee. Share your questions and comments with Dr. Cobanoglu online at htmagazine.com or e-mail him directly at cihan@cihan.org.
 
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