the introduction of icts into the tourism industry - dr
TRANSCRIPT
The Introduction of ICT’s into the Tourism
Industry
A Detailed Study with Focus on Thailand
By
Dr. Kenneth Cosh.
Computer Information Systems, Payap University
Contents
1. Introduction
2. Modern ICT 2.1 Digitisation 2.2 Increasing Interconnectivity 2.3 Miniaturisation 2.4 Key Technologies 2.4.1 The Internet
2.4.2 Mobile Technologies
3. ICT Impact on the Hospitality and Tourism Industry 3.1 Computerised Reservation Systems & Global Distribution Systems 3.2 Key Cross Functional Business Systems 3.3 Customer Relationship Management 3.3.1 Service Quality
3.3.2 Online Service Quality 3.4 The Impact of the Internet 3.5 ICT Impact on Particular Tourism Businesses 3.5.1 ICT Impact on Hotels
3.5.2 ICT Impact on Airlines
3.5.3 ICT Impact on Tour Operators
3.5.4 ICT Impact on Travel Agents 3.6 The Impact on the Tourism Supply Chain 3.6.1 The Relationship between Service Providers and
Travel Agents
3.6.2 Disintermediation of Travel Agents
3.6.3 Reintermediation of Travel Agents
3.6.4 Where does that put Travel Agents?
3.6.5 Travel Agents as Cybermediaries
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3 3 5 6 7 7 9
11 13 14 17 18 21 24 28 28 30 32 33 34 40 42 43 45 48
4. ICT Adoption 4.1 ICT Adoption by Small and Medium Tourism Enterprises
5. A Case Study of Thailand
5.1 Internet Adoption by Thai Tourism Industry 5.1.1 The Role of Travel Agents in Thailand 5.2 Customer Perceptions
6. Conclusions
7. References
52 56
59 61 62 65
68
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List of Figures
Figure 1. Enterprise Application Architecture 15
Figure 2. Tourism Industry Supply Chain 35
Figure 3. Porter’s 5 Forces 37
Figure 4. The Technology Adoption Life Cycle 53
Acknowledgements
This work owes much to the excellent work of Dr. Ilian Assenov and his MBA students within the Faculty of Service Industries at Prince of Songkhla University. MBA students who assisted greatly with primary and secondary data collection were Naruemon Pechruttanamunee, Nutjika Saweksup, Sirirat Chobkhay and Suparat Boonthai. Without their efforts this would not have been possible.
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1. Introduction
The face of the world has been forever changed by the
advent of modern Information and Communication Technologies
(ICT’s). The e-revolution has brought us e-mail, e-business, e-
commerce, e-learning, e-governance and of course e-tourism.
Increasingly more traditionally physical entities are becoming
digitized and moving into the electronic domain. Customer’s desire
for greater interconnectivity, coupled with new capabilities has
driven ICT’s to perform a critical role within modern society. The
effects of this pervasive, ubiquitous ICT introduction are clearly
visible as little has been untouched. Throughout all industries,
business processes have been refined and streamlined, business
models revised and supply chains reorganized. This report focuses
on the effects modern ICT has had on the tourism industry.
The tourism industry consists of a wide range of businesses
engaged in providing travel services for holiday makers and business
travelers. Services include accommodation provision by hotels or
guest houses, travel services by airlines and on site services such as
by tour agencies or car rental agencies. A central player within the
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industry is the travel agent who acts as a broker between travelers
and service providers, offering advice and booking services. Many
of these business models have been drastically affected by the
introduction of ICT into the tourism industry.
This work begins by introducing some of the ICT which has
appeared over the past few decades, before investigating the effects it
has had within the tourism industry. It investigates specific types of
business analyzing the effects on travel agents, airlines and hotels
and also analyses the way changes within these business models has
revolutionized the whole tourism supply chain. Specifically it will
address the effect of the Internet and related technologies. The final
part of this report reflects on the position in Thailand, a popular
developing world tourism destination, which boasts a relatively
mature tourism industry, while a relatively immature ICT
infrastructure. Consideration is given to how Thai travel industry
organizations have been affected by the emergence of modern ICT.
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2. Modern ICT
Few can have failed to notice the profound effect modern
ICT has had on society and business. Computers are now
ubiquitous, forming our portal to the rest of the world,
communication takes the form of email, taking over from the
outdated snailmail. Even the most techno phobic laggards have
embraced mobile telephony which facilitates perpetual
communication access no matter where we travel. The wired and
wireless world has swamped the planet ensuring we can stay in close
contact with our loved ones, as well as performing business
transactions 24 hours a day, 7 days a week, wherever we are located.
Whether we resist or embrace modern technology is irrelevant, its
pervasive presence touches our lives. Let’s begin by investigating
some of the technology trends which have led us to the current
situation, and continue to drive the e-revolution[4][70][104].
2.1 Digitisation
Within modern computers and related technology,
everything is stored and transmitted using binary - data is stored in
binary form, and exchanged through binary streams. Binary is at the
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core of all modern information systems. Digitisation refers to the
process of converting entities to a binary (or digital) form, for
instance converting the letter ‘a’ into a sequence of 1’s and 0’s. The
letters of the alphabet can be encoded into binary, with each letter
represented by a string of binary digits. This is much the same to
how Morse code works – with Morse code base 3 and binary base 2.
Colours can also be represented in binary, as digits representing the
proportion of red, green and blue in the colour – and this means
pictures can be digitised, and then moving pictures are not far
behind. Fortunately for the user, this digitisation is automatically
dealt with by the computer, without the user needing to understand
the process. Users need not see the binary stream as software will
convert it to its intended form.
Because of digitization, industries whose products can be
digitized have noticed a huge change in the value of their product.
The properties of a product change when it becomes digitized.
Essentially if the product can be stored in digital format, it can easily
be copied, shared and moved – without the owner necessarily
knowing. Software, music and film industries have all felt this
effect, as consumers take advantage of their ability to make perfect
copies of songs, movies or software, disregarding the author’s
intellectual property[3][80]. While a travel product, such as a hotel
room or an airline seat, currently can not be digitized, the
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information about the product can be, and is particularly important
for travel agents. In an information rich industry, like the travel
industry, the information is easily digitized and so copied.
2.2 Increasing Interconnectivity
As well as more things being stored digitally, more
opportunities are emerging through which those things can be
accessed. Improvements in communication standards have lead to
more devices being able to communicate with each other, and as
devices connect to each other networks emerge. More devices are
being designed and built which are network enabled. While
computers and telephones are the ‘traditional’ technologies for
communication, now cars, PDA’s, lifts, fridges, coffee makers, and
all manner of other device is being equipped to join the digital world
[55][143]. Allowing greater connectivity enables people to
communicate in more innovative ways, and also enables companies
to reach more potential customers in more ways [84].
Because of the widespread demand for connection,
governments and organizations have developed the infrastructure
through which people connect. The backbone capacity has
increased, and reaches out to more potential users. The network is
getting faster and more effective. As the communication technology
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gets faster, more complex entities can be transferred across a
network, with streaming videos now a standard capability for home
computing. For a long while devices needed to be attached
physically to the network through some kind of cabling, but wireless
and mobile technologies facilitate even more flexible connections.
As people can now connect while traveling, this had lead to new
innovations for the tourism industry.
2.3 Miniaturisation
Moore’s Law famously states that the number of transistors
that can be inexpensively placed on an integrated circuit is increasing
exponentially, doubling approximately every two years[90]. While
this law has been interpreted and misinterpreted several ways, it has
held true for some time and it is clear that the same processing power
can be gained from increasingly smaller chips. This observation
leads us to understand the process towards miniaturisation. There is
a trend for the computationally capable devices which can connect to
the network to get smaller, and as they get smaller they become more
transportable. Processing capabilities that would have been housed
in a room a few decades ago are now easily portable. This enables
tourists to take their own electronic devices, from mobile phones to
laptops, with them when they travel.
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In summary, modern ICT as well as getting quicker, is
featuring ever more focally within people’s lives and its adoption is
having a significant effect on the way society interoperates. These
trends have lead to the development of several key technologies
which have had profound effects on the tourism industry amongst
other industries. Before investigating the effect these ICT’s have had
on the tourism industry in particular, in the next section we examine
some of the key technologies having an impact on the future of
tourism.
2.4 Key Technologies
The development of ICT’s has ventured in many directions,
producing many different types of technology. While not all is
applicable to the tourism industry, some of these technologies have
had a particularly noticeable effect on the tourism industry. In this
section we look at some of the key technologies adopted within the
tourism industry.
2.4.1 The Internet
The development of the World Wide Web and Internet is
perhaps the most significant achievement within the realm of modern
ICT. It is the communications platform upon which many other
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ICT’s are built, the facilitator of activities such as sending email or
of course web browsing [9]. To begin with the Internet was used to
convey information, with a webmaster creating content and
displaying it on their webpage. Over time the information became
visually more attractive, with colours and pictures enhancing the
browsing experience. More recently, with the advent of Web 2.0, the
web surfing experience has become more interactive, where users are
encouraged to participate in the website, by posting comments,
uploading images, blogging, using wiki’s etc.[107] All of this is
possible because of the underlying structure of Internet.
Through the Internet, the focus of many businesses has
turned to reach and range, extending their potential customer base
throughout the world. With physical location no longer critical to
communication or business transactions, the Internet revolution has
driven many changes in the way the business world operates. The
Internet has been a crucial development for the travel industry.
Afterall, the travel industry is an information rich industry, and much
of that information is now widely available through the World Wide
Web. With the increased interaction of Web 2.0, users are creating
more travel content in the form of travel blogs, or travel forums,
offering a further source of travel information. The information
provided by other travelers in the form of blogs or forum
contributions could be seen as impartial, as they don’t have the
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ulterior motive of selling a particular travel product. On the other
hand it could be seen as unreliable as there is rarely a peer review or
reference to the writer’s level of experience. Either way, there is
increasing amounts of online information available to guide potential
tourists, which can present a tourism product in a positive or negative
light.
2.4.2 Mobile Technologies
As chips get smaller and more mobile, the opportunity to
travel with technology grows. As many mobile devices now offer
connection to the Internet in some form, there are plenty of new
opportunities for eCommerce and eTourism. While the idea of
offering a broad range of tourism services available everywhere at
anytime is still a vision, it is realistic in the near future [130]. There
are several portable guidance systems available and being tested with
early tourism guide systems using PDA type devices to provide
tourism information to users on location[17][28]. Now many tourists
naturally carry their mobile phones with them, to make use of global
roaming options, and mobile phones have developed to support more
interesting interactions, including Internet connection. It is also not
unusual for travelers (particularly business travelers) to carry laptops
and make use of WIFI hotspots which are now commonly available
in hotels, airports and other tourism locations.
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Many mobile devices are now equipped with Global
Positioning System (GPS) allowing users to identify their location
precisely. Mobile technologies such as these are particularly useful
when used in conjunction with mapping software to assist lost
travelers [157]. This also allows the traveler to access many
different types of location specific information, including traffic
information, directions and navigation assistance, location based
billing, emergency assistance and advertising of local attractions
[45]. An increased integration of technology by future travelers is
not difficult to predict, particularly the use of technologies that are
portable by the traveler [149].
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3. ICT Impact on the Hospitality and Tourism
Industry
The hospitality and tourism industry is an information
intensive industry, much of which depends on finding and
developing new means to distribute its products and services and to
build customer relationships [114]. Tourism industry organizations
are constantly searching for new ways to market its products to
customers, while providing comfort and convenience to travelers to
ensure they are satisfied. Customers too are searching for more
information, and new sources of information before purchasing
travel services [156]. The tourist’s need for information is
highlighted by the unique characteristic of tourism product that is its
intangibility, which means, tourists cannot inspect or pre-test the
tourism product prior to the purchase. Therefore, the customers need
information to help them plan and make decisions among the huge
variety of options before going on a trip [18][106]. The recent
evolution of ICT is satisfying both the needs of the tourism industry
and the desires of travelers providing quick, reliable, up-to-date
communication capabilities. In short, ICTs are creating many new
business linkages and opportunities [123].
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Key ICTs within the tourism industry have evolved
significantly with Computer Reservation Systems (CRS) emerging in
the 1970’s, Global Distribution Systems (GDS) emerging in the
1980’s and the Internet in the 1990’s [42]. In the early years of this
millennium we can add the emergence and use of mobile
technologies, which again are having an impact on the way the
industry operates. The tourism sector is one of the most important
sectors to be influenced by modern ICT, and with every enterprise,
big and small, able to participate the Internet is quickly becoming the
primary channel for communication [6][12][74][150]. Studies show
that as much as 50% of the population in developed countries are
now using the Internet to choose their holiday destination [151].
Because the Internet affords a great deal of interactivity content can
be highly customized and so tailored to a users individual
preferences [100].
In this section we investigate the impact the technologies
introduced in section 2 have had on the hospitality and tourism
sector. We begin by looking at some of the computerized systems
that have been adopted by tourism companies, including the
transition from using Customer Reservation Systems to Global
Distribution Systems. We highlight the importance of Customer
Service to travel industry organizations by reviewing trends in
Customer Relationship Management systems. We investigate the
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impact of the Internet, and in particular look at the effect on Hotels,
Airlines, Travel Agents and Tour Operators before reviewing
changes in the whole tourism supply chain.
3.1 Computerised Reservation Systems & Global
Distribution Systems
Computerised Reservation Systems (CRS) were initially
used by the airline industry in the 1970’s. CRS began as a simple
database system where airlines managed the inventories of seats on
their flights and then shared access to the database with their
partners. The system then placed terminals in their high volume
agencies to allow the agencies to search for information about
relevant flights and book directly themselves. In this way the airlines
were able to easily manage their inventories, while better facilitating
their distribution channels [35]. As well as airlines, hotels and tour
operators later began to use CRS in the same way.
With emerging network technologies and improved network
infrastructures, CRS evolved into a Global Distribution System
(GDS). GDS integrated the automatic booking systems used in
many different organizations. GDS were developed to offer a
comprehensive range of services for information distribution
throughout the entire industry. Essentially once the database system
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was in place, increasingly more sophisticated applications could be
made using queries to it. Famous GDS include Sabre, Galileo
International, Amadeus and Worldspan. These systems allow
centralized access to information on travel, lodging and leisure
services. As airlines, and later other producers, realized that by
allowing travel agents to directly purchase their products, they could
extend their sales team directly into the travel agent.
Originally GDS was intended for Business to Business
(B2B) applications, but more recently buyers (both business and end
customer) can search for information and make bookings through
online GDS applications, with yet further applications, such as
service comparisons or itineraries, added on top and now made
available through the Internet [13][38]. Even with the arrival of the
Internet CRS and GDS play a key role in facilitating changes within
the tourism industry as now the focus has turned to Business to
Customer (B2C) applications [22][102].
3.2 Key Cross Functional Business Systems
Sawhney and Zabin presented an overview of the major
enterprise applications and their interrelationships, highlighting key
systems such as ERP (Enterprise Resource Planning), SCM (Supply
Chain Management) and CRM (Customer Relationship
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Management)[129]. With increasing connectivity, both internally
amongst employees and externally with suppliers, customers and
partners, these systems have been intertwined to provide an
infrastructure on which to operate a supply chain. The
interrelationships between the systems are highlighted in figure
1[104].
Figure 1. Enterprise Application Architecture
Enterprise Resource Planning Internal Business Processes
Supply Chain Management Sourcing, Procurement
Customer Relationship Management Marketing, Sales, Service
Know
ledg
e M
an
ag
em
ent
Collaboration, Decision Support
Part
ner
Rela
tio
nship
Mngt.
Selling, Distribution
Suppliers
Customers
Part
ners
Em
plo
yee
s
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At the center of Enterprise-wide applications appears
Enterprise Resource Planning systems (ERP). ERP forms the
backbone of an organisation’s systems integrating and automating
many internal business processes, focusing on managing a variety of
business resources[62][83][103]. These include personnel resources,
financial assets or physical assets, such as a hotel room, or airplane.
Indeed it is an ERP type system for managing the airplane seat
resource which evolved into CRS and GDS. Similar systems are
used by large hotel chains, although ERP systems are mostly
prevalent in manufacturing type businesses. ERP systems can
manage all business resources, so could be used for effectively
managing human resources. Because of this ERP systems need to
interact intensively with all other business systems. Internal
organization systems include Employee based systems to support
collaboration, knowledge management or support decision making,
often using an Intranet to share and disseminate knowledge [94].
The vertical axis of the figure displays a mini supply chain
with the relationship with suppliers at one end, and the relationship
with customers at the other. The systems of CRM and SCM
therefore interact as they manage both the supplier-customer and
customer-supplier relationships. While all of the systems highlighted
in Figure 1 are important for the success of a business today, for
tourism related companies, dealing with customers stands out as the
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most important. It is easier than ever for customers to compare and
switch service providers, making customer relationships a valuable
asset[62]. Therefore a system that can assist with managing the
relationships with customers becomes a more valuable asset, and so
it is worth specifically investigating both CRM and e-CRM systems
and their role within travel related organizations, especially as the
travel industry continues to evolve with greater demand for online
booking personalization and customer self-service[35]. PRM
systems are also critical for managing relationships with resellers and
intermediaries such as Travel Agents. PRM systems are therefore
also incorporated into CRS and GDS systems and are highly related
to CRM.
3.3 Customer Relationship Management
CRM systems revolve around 2 related objectives, first to
provide the organization and all customer-facing employees with a
single, complete view of each customer at every point of contact in
all channels. Second to provide customers with a single complete
view of the company[134]. The earliest CRM systems used within
the tourism industry have already been discussed in the context of
Computer Reservation Systems (CRS) and Global Distribution
Systems (GDS). Computer Reservation Systems positioned the
travel agent as the customer of the hotel, airline or tour operator, and
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built a relationship with them, allowing them quick access to up to
date information, and the ability to make and confirm reservations.
As GDS become a B2C system operating through the
internet the focus on customer service increases, as now the customer
is the end user directly. The original Global Distribution System
objective was to distribute a company’s products such as a hotel
room or airline seat, to as broad an audience as possible in the most
cost-effective means possible. More recently the GDS has
repositioned itself to become a marketing and service provider for
suppliers providing links between end users and suppliers – thus
filling the CRM role previously introduced [126].
3.3.1 Service Quality
Central to the concept of creating a good customer
relationship is the idea of providing a quality service, after all
satisfying customers needs works towards building a
relationship[110]. A Quality Service is not simply concerned with
satisfying customers’ needs, instead it can be considered as a
function of 5 gaps in expectations [111][60]. First there could be a
gap between the consumer’s requirements and the supplier’s
perception of it. Second a gap between the management’s perception
of the consumer’s needs and the service quality specified. Thirdly a
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gap between the specified service quality and the actual delivered
service quality. Fourth a gap between the delivered service quality
and the advertised service quality. Finally between the customer’s
perception of service quality received and the standard expected.
Any of these gaps can cause customer dissatisfaction with
service quality, or if treated well could lead to customers being
delighted with a better than expected service. These gaps are
particularly noticeable within the tourism industry, where the agent
selling the tourism product may be very remote from the service
provider. In order to exceed the expectations of their customers,
companies must develop reliable systems to provide accurate
information, train staff to complete all processes correctly and
motivate staff to perform all aspects of their jobs correctly the first
time, every time, and in a courteous manner[32].
As satisfaction is based on perceptions and expectations,
thoroughly understanding it is complex. The expectations are
particularly difficult to comprehend as the service offered is often
intangible, arrangements are complex and human interaction is
inherently variable. Therefore each individual customer will have
their own personal definitions of good customer service, and their
definition will change over time as they gain more experience with a
product or service. A good customer oriented organization will
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focus their attention on continually exceeding the expectations of
their customers[53].
Service quality is important as it has a strong link to
customer loyalty [137], and loyal customers can in return result in
large reductions in marketing, advertising and overhead costs. Loyal
customers are likely to re-purchase and also promote the product or
service to their friends and family[144]. Customer service can also
have a major effect on initial purchases, especially in a industry such
as tourism, where often the customer’s purchasing decision is based
on the service offered by their travel agent [10][122]. Indeed for
many tourism related industries, customer service quality is even
more critical than product quality.
Numerous authors have presented service quality
management programs, and practical frameworks to guide tourism
companies in improving their service quality [57][60][86][76].
Advice is centered around ensuring good quality service encounters,
particularly from front line people. Being reliable, having good
communication skills and being empathetic to the customers needs
are also crucial to developing high quality service levels. Modern
ICT has had a few impacts on customer service level improvements
through CRM systems, in the form of process management and
refinement. Larger changes are noticeable as some of the
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traditionally face-to-face interactions move to an online environment.
Here the importance of good customer service becomes particularly
relevant again. While organizations may already have excellent face
to face customer service, when their customer contact extends to an
electronic environment, customer service needs to be reconsidered.
3.3.2 Online Service Quality
As customer service moves online new challenges arise
when trying to ensure high service quality levels, as online customer
service is not the same as offline customer service[138]. There are 2
perspectives on online service quality. First, there is a concern that
an online environment may raise customer’s expectations about the
service, which then leads to a gap between the expected and the
delivered customer service level. Faceless commerce such as this
may then lead to lower customer loyalty [132]. Alternatively, online
services afford customers better capabilities, such as the ability to
better sort and group information, for instance finding the hotels
closest to the airport, and then sorting them by price, or grouping
hotels based on their quality rating. This additional information may
help the customer make better choices which leads to them receiving
higher satisfaction.
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Using online services such as a website could be seen as self
service without the need for interaction with employees[37]. In this
scenario the most vital part of the site is the user interface, as this
then assumes the responsibilities of human to human customer
service [52]. Often the design of the website provides the first
impression of the organization and the functionality offered within a
website acts as an interface between the customer and business.
Assuming the website has attracted the customer’s interest,
the customer may wish to begin an online conversation. Online
conversations are not the same as face-to-face or telephone
conversations[72]. When communicating using a telephone, tone of
voice can often play a significant role in how customers and staff
interact, as staff can judge a customer’s stress level from the tone of
their voice and determine how to respond appropriately. In turn the
calm friendly tone of an employee can provide assurance to the
customer. In person contact adds body language to the repertoire of
additional communication mediums that an employee can use to
interpret and then respond appropriately. Employees inexperienced
in online dialog might not realize the importance of these factors and
this can have an impact on the interpretation of the service level by
the customer. As many customers don’t like talking through a
computer, so customer service in online interactions is even more
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important [112]. While automated systems may be less prone to
error, customers may not appreciate generic responses [44].
Again, several authors have suggested important aspects of
online customer service, always beginning with speed. In an offline
environment customers mostly receive a response immediately, so a
sense of urgency needs to be installed for online service. 24 hours is
the advised cut off point for responses, after all the customer can
easily ask a competitor for a quicker response [58]. Answers still
need to be accurate though, and a quick wrong answer is much worse
than a right answer later. Along with accuracy, answers should be
complete, otherwise customers will need to extend their dialog, or
ask their question a second time. Taking to the next level, answers
should attempt to answer questions that customers may have, but are
yet to ask, so if there is more information that can be given then do
so [120]. These pieces of advice can be combined into 5 P’s of
online customer service; Promptness, Politeness, Personal approach,
Professionalism and Promotional [49][72][78][92][93].
CRM is vital to organizations operating within the tourism
industry, but the challenges of providing high quality service have
evolved along with the adoption of ICT’s. Organisations who take
pride in their face-to-face customer service, need to evolve their
methods to maintain their standards in an online environment. This
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is particularly true for service providing companies who are using
online channels to target their customers directly. Consider a hotel
who offers excellent service to customers upon their arrival, yet fails
to respond promptly and politely to emails received through their
website. In this case the gap between specified service quality and
delivered quality is large, and while unintentional could go unnoticed
for an extended period of time. Therefore, thoroughly utilizing the
CRM systems which have been developed can lead to large benefits
for tourism related organizations.
3.4 The Impact of the Internet
The Internet has transformed modern tourism and amongst
other things has stimulated changes in customer’s information
searching behavior [13]. The Internet supports a wide variety of
different tools and functions such as electronic mail and electronic
commerce that can be used for communication or sharing data
among tourism enterprises. The Internet serves for both distribution
of information and also for reservation and the sale of services
online. It can be accessed by anyone at anytime, and can reach more
potential customers than any other distribution channels. Through
the Internet the power of GDS and CRS can be further shared with
the end user, allowing more flexibility and customization of travel
products by the individual traveler. Online technologies have
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significantly impacted communications, transactions and
relationships between tourism industry operators and with the
customer [50][131][133].
The move online has facilitated businesses to create web
portals which can act as a comprehensive Destination Management
System, providing comprehensive information and services not
previously available. As well as providing information, these portals
include booking and transaction facilities becoming the new medium
for interactions previously carried out elsewhere [42]. Particularly
noticeable is the affordance of direct communication between
customers and suppliers, which has a major impact on the role of
traditional intermediaries and the emergence of e-intermediaries.
Traditionally travel agents have acted as intermediaries between
tourism product producers and their customers.
The effect the Internet has had on traditional tourism
business models has been emphasized by the massive growth in
popularity of this medium. The number of internet users world wide
is growing. Internet users are also spending money online, with a
forecasted annual 94 billion US dollars in online booking revenues
from the US travel market by 2009 [27][77]. Users in the US are
particularly comfortable with spending their money online, while
users in Europe often search for information online but make
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bookings offline[89]. The driving forces behind this revolution are
customers’ insistence on convenience, ease of use, customer service
and accurate information[67]. New capabilities are reshaping the
way the tourism industry operates.
The advantages the Internet offers the tourism industry
include individual access, cost reductions and low cost marketing
and sales opportunities. The Internet also presents organizations
with the unique opportunity to make travel expertise available in the
world at any time for anyone who has access to the Internet
[95][106] [154][156]. Users are able to gain access to information
easily either by typing in the direct Uniform Resource Locator
(URL) or by using a search engine, which enables individuals to find
travel firms even without knowing the name of their company [139].
The Internet also offers the opportunity to develop closer
relationships with customers enabling the better implementation of
Customer Relationship Management (CRM) programs to enhance
the opportunities for interaction[23].
Over the past few years there has been a perceived second
generation of the internet dubbed Web 2.0, indicating a significant
evolution in the web. The 2nd version doesn’t refer to any updated
software or technology, just a different perception on how users
interact with it. While the original model of the web consisted of
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webmasters producing content that was then read by site visitors, in
web 2.0 the visitors experience is much more interactive as visitors
are allowed and encouraged to produce content and participate in
web based communities [107]. Within the travel industry this allows
travelers to produce content which other travelers can use to make
travel decisions, thus producing a further threat to travel agents as
there could be less demand for their advisory role. Several different
types of site have emerged, some intending to act as online travel
agents, while others inadvertently enter the travel agent market.
TripAdvisor is an example of a web 2.0 online travel agent
allowing users to plan their trips online, while encouraging users to
participate in forums sharing their experiences and giving advice to
fellow travelers. Sites such as wikitravel allow a community to
create content about certain destinations to be used to help make
tourism decisions, while not providing users the opportunity to make
bookings online. The more users who use wiki sites, the better the
reliability and quality of the content produced[33]. Other sites such
as travel blogging sites aren’t intended as online travel agents and
also don’t intend to produce travel guide information. However they
still act as a substitute for an online travel agent as users share their
experiences[136].
28
Travel agents are not the only tourism business to be affected
by the features of web 2.0. For tourism producers, the importance of
excellent customer service, and providing a quality experience for
customers, is even more critical as it is easier than ever before for
dissatisfied guests to share their bad experiences, or preferably
pleased guests to provide free promotion for a product or service.
Web 2.0 means companies are no longer in sole control of their
message[43].
3.5 ICT Impact on Particular Tourism Businesses
Having introduced some of the key ICT’s that have been
developed over the past few decades, attention is now turned to how
these ICT’s have impacted on particular tourism business models.
First the tourism producers are investigated, and then the
intermediary business model used by travel agents is assessed. After
looking at individual business models, the interrelationships between
these business models is evaluated, focusing on the whole tourism
supply chain.
3.5.1 ICT Impact on Hotels
ICT was first used by hotels to assist with inventory and
asset management and control. This extended to integrate hotel
29
operations with marketing functions, while providing tools for
market research, partnership building and improving customer
service[20]. Given the inventory management systems installed,
reservations systems were easily added to a GDS. Consumers
increasingly expect IT facilities in rooms, and often access to the
Internet through the telephone lines or more often through wireless
access points. Internet services are now a standard feature in many
hotels. For hotels offering business and conference facilities, in
order to stay competitive they need to offer state of the art
technology solutions including modern presentation equipment and
increasingly virtual conferencing and teleconferencing systems. For
early adopters ICT such as this was a means to achieve competitive
advantage, now it is used as standard practice.
Internet Based travel distribution intermediaries such as
Hotels.com, Travelocity and priceline.com have revolutionized the
way customers can book their hotels. Companies such as Expedia
are now highly valued and have established themselves well as a
means for customers to purchase rooms online [26]. Hotels too have
attempted to adopt electronic distributions channels, by developing
their own electronic distribution channels and websites, which in turn
reduces their intermediary costs [126]. Many hotel chains are now
mixing their own direct sales with other marketing efforts to reach
their market. While companies such as Marriott can boast 75% of
30
online bookings being direct through their own website, for smaller
hoteliers with lower world wide recognition the need for
intermediaries is still strong [26][135].
3.5.2 ICT Impact on Airlines
The Airline Industry has for a long time been early adopters
of technology, with a long history of technological innovation,
certainly compared to other tourism related businesses[19]. The
airline industry is also often described as an oligopoly or even a
natural monopoly[14][152]. Because of this many strategic alliances
have been formed, which have in turn invested heavily in modern
technology. So a comprehensive use of modern ICT’s can be found
within the airline industry. Communication, such as surface air
communication, is essential to the safe operations of airlines, and
technology has also been used for other tasks such as navigation.
It was the airlines who pioneered the use of CRS and GDS to
manage their sales through their supply chain. While sales through
travel agents were traditionally the largest share of the airline ticket
market, these sales soon were conducted through CRS and later
GDS. Most airlines also operate their own direct sales activities,
through call centers and self branded websites, aimed at bypassing
the traditional travel agent intermediary[68]. As the use of internet
31
technologies grew, the direct access to customers through this
channel became a more significant opportunity for airlines reluctant
to continue paying commissions to travel agents.
CRS/GDS was only the first step towards developing direct
relationships with customers. Now all customer facing employees
have complete access to a passengers itinerary, from booking clerks
to the check-in counter to the boarding gate [81]. As well as using
ICT to develop relationships with their customers, similar
technologies have been utilized for developing relationships with
alliance partners – showing the relationship between CRM systems
and PRM systems. Airlines sharing alliance partnerships use e-
marketplaces to unite and manage their procurement activities[147].
The airline industry has also invested heavily in technology
to improve customer service, through improvements in in-flight
entertainment systems. Airlines invested $1.8 billion on in-flight
entertainment in 1998 to introduce new ways of keeping their
customers entertained during flights[1]. This reflects a shift from
transactional marketing to relationship marketing. As airlines
traditionally offer similar services, i.e. transportation, competitors
have attempted to add technology related value added services to
their core product[85][119].
32
3.5.3 ICT Impact on Tour Operators
Tour operators are key players in the package holiday
business, as they function as industry wholesalers. They also
vertically integrate both backwards into the charter airline and
accommodation sectors and forwards into the travel agent sector
[121][65]. Over recent years many tour operators have undergone
major system enhancements or complete replacement of systems,
particularly distribution systems[64]. By splitting the elements of a
tour into individual data entries to be stored in a relational database,
tour operators were able to offer much more flexible and individual
packages to their customers. Tour Operators have then made their
offerings available through websites and email contact, making ICT
important for distribution [148].
Some tour operators have further introduced ICT’s to assist
with improving their customer’s experiences. Real time, on-site
destination recommendations can be made to customers by using
artificial intelligence and having previously captured their
preferences [101]. Intelligent software agents can also be used to
find travel alternatives and choose the option most likely to satisfy
the traveler with minimal involvement [24][97][155]. Using a
semantic web and related web services, optimized travel plans can be
developed more quickly[63].
33
3.5.4 ICT Impact on Travel Agents
Traditionally Travel Agents have acted as intermediaries
between customers and travel industry organizations such as hotels,
airlines or tour operators. Many choose to use travel agents as a
“search and book” service for their travels. They act as an advisor,
and a consolidator, packaging different travel components together
and marketing them as a single seamless product. Some government
tourism organizations are also intermediaries distributing information
and brochures for tourism suppliers in their region. The primary role
in all of these cases is to facilitate the information exchange and
importantly the purchasing process [106]. To this end, tourism
suppliers, including airlines, car-rental agencies, hotels, tour
operators and more, must provide all the important information to
these intermediaries and infomediaries in an appropriate format to
support the sales process.
In order to differentiate themselves, many companies have
begun using the internet as a new distribution channel for their travel
products. This corresponds to market demand as the majority of
travel shoppers begin planning their trips through an online travel
website[99]. In responding to the new demand for online travel
services, travel agents have encountered a variety of problems. The
biggest difficulty encountered by Internet based travel agents is that
34
of perceived insecurity concerning financial transactions. While the
transaction may be completely secure, customers are afraid to enter
their personal data and credit card numbers in order to complete a
purchase [108]. A further problem encountered is insufficient
internet infrastructure for some potential customers. While this is
gradually being addressed, the lack of social interaction also causes
some disadvantages. Some customers need to contact directly with
their provider for them to feel comfortable with the transaction.
Success in the cyber world, is dependent not only on having
great high technology skills and experiences, but also on the ability
to market at website and attract prospects to it. Hospitality and
tourism companies have adopted websites to take full advantage of
the practical and creative uses of the internet. Websites are used as
means of communication, marketing, information distribution and
selling products. The aim being to reach customers first, then
educate them, and finally to sell to them. The first priority for travel
agents is therefore to identify the specialties of their organization in
terms of abilities, ideas and concepts [79].
3.6 The Impact on the Tourism Supply Chain
While the introduction of modern ICT’s has impacted on the
way individual firms operate, it has also had a big effect on how the
35
tourism industry operates as a whole, and how the firms within it
interoperate. One significant effect is that sales commissions paid by
airlines have decreased significantly since they introduced alternative
channels to their customers, and this change amongst others has had
a major effect on the relationships between organizations within the
tourism supply chain. First let’s have a look at the supply chain as it
exists in the tourism industry today, as shown in figure 2 [61].
Figure 2. Tourism Industry Supply Chain, adapted from [61]
Customer
Distributors
Material Suppliers
Service Providers
GDS/CRS
Supplier Reservation
Centers & Ticket Offices
Supplier Websites
Internet Travel Agents
Con- solidators
Brick & Mortar Travel Agents
36
The supply chain shows how a variety of industry players
interoperate to provide and distribute tourism products. The material
suppliers produce key materials needed by the service providers.
Examples of this include food producers who provide food for
airlines or hotels, or the physical tickets and boarding passes used by
airlines [39]. Service providers include all the companies offering
tourism products, such as airlines, car rental agencies, tour operators
or hotels. These companies can then sell their products through their
own internal distribution channels, or through external distributors.
The internal channels include a companies ticket offices, or websites.
External channels are normally organized through a Global
Distribution Channel or Customer Reservation Service. Travel
agents (both online and offline) then sell the tourism products,
leaving the customer with several channels available through which
to purchase their tourism requirements.
The tourism supply chain has of course evolved over the past
few decades as industry players have adapted the way they do
business and interoperate. The introduction of ICT’s by some of
these organizations has been a driving force for changes in the
supply chain, indeed from the model displayed here, it can be seen
that supplier websites offers an alternative channel bypassing travel
agents. This process of removing the travel agent role, known as
disintermediation, has been discussed at length as a major change
37
within the tourism industry [2][7][25]. In order to fully understand
these changes, it is worth investigating the forces driving
organization strategy within the supply chain, and to do that Porters
five forces provides insight [115][116][117].
Figure 3. Porter’s 5 Forces
Porter’s 5 Forces can be used to qualitatively assess a
marketplace – in our case it can be used to assess the strength of each
of the key business models that exist within the supply chain. As the
Bargaining Power of Suppliers
Bargaining Power of
Customers
Threat of Substitutes
Threat of New Entrants
Competitive Rivalry
38
business models gain and lose power, the interrelationships between
them also change[82]. The Threat of Substitutes concerns whether a
substitute product or service exists which customers could be
tempted to use as an alternative. For instance, when a traveler could
travel by train rather than airplane. The strength of this threat
depends on how well the current product is differentiated, and how
well the substitute product matches the needs of the customer, as
well as switching costs involved.
The Threat of New Entries concerns how feasible it is for
more competitors to enter the marketplace. Various things can affect
the likelihood of new entrants emerging, for instance the capital
requirements for set up costs, any learning curve advantages,
government policy or access to distribution channels. If we consider
traditional brick and mortar travel agents, the capital requirements
are high, and access to distribution channels limited, compared to
online travel agents where start up costs are minimal and access to
distribution channels universal.
The Bargaining Power of Suppliers and Bargaining Power
of Customers cover the balance of power in a supplier/customer
relationship, each with reciprocal effects to the other. The
Bargaining Power of Suppliers depends much on the level of
differentiation of the supplier’s products - unique products can
39
demand a higher price. A supplier’s switching costs, relative to the
customers switching costs, can also increase power in the form of
fear that a customer may use an alternative. For airlines operating in
a natural monopoly, the customer switching costs could be
substantial. The role of the GDS within the tourism industry became
increasingly more powerful as utilizing an alternative distribution
channel became increasingly more expensive. Another important
factor in this power relationship comes from the potential to forward
or backward integrate. Travel agents are generally unable to
backward integrate to their suppliers (i.e. a Travel Agent is not able
to start offering flights or rooms in their own hotel). On the other
hand, airlines and hotel chains, particularly with the affordances of
the Internet, are able to forward integrate and develop their own
distribution channels as alternatives to using a travel agent. This
supports the idea that the balance of power lies in the producers
favour.
Finally Competitive Rivalry concerns the intensity of
competition within the market, often influenced by the number and
diversity of competitors. In a saturated market, many players will
lose power, unless they can differentiate their product offering from
their competitors. One popular means of differentiation is through
the integration of ICT’s, which could be as simple as adding a new
40
online distribution channel, or by setting up an electronic booking
system.
It is natural for organizations to want to increase their power
in their relationships with suppliers, customers and competitors and
Porter’s framework can be used to identify opportunities for this,
threats and highlight potential strategies. If organizations, or certain
business models, can establish a means to radically affect their
strength relative to organizations around them, then the supply chain
can be revolutionized. With the introduction of ICT’s, and the
ability for airlines and hotels to directly target their customers
through the Internet, the tourism supply chain was drastically altered.
3.6.1 The Relationship between Service Providers and Travel
Agents
The introduction of ICTs has led to alternative perspectives
on the future role of intermediaries in electronic marketplaces, i.e.
the role of the travel agent. From one perspective the modern ICT
infrastructure allows the creation of extended global enterprises,
where companies such as airlines have the ability to vertically
integrate and directly target their end customers [54][69]. From an
alternative perspective, the ICTs have afforded complex
interconnections between the firms operating within a supply chain,
41
and thus the creation of virtual corporations or networked
organizations [124]. Here each organization focuses on their core
competencies, be it operating planes and flight schedules or
distributing the product, but the boundary between the organization
roles is blurred as ICTs enable closer communications. These
differing perspectives have been attributed to differing effects within
the tourism supply chain.
From one perspective intermediaries add a significant cost to
the value chain, which results in higher final prices [8]. Because of
this some organizations feel pressure to bypass the intermediaries
and internalize the value added functions they perform. This is
demonstrated when an airline opens a web portal to their services
which can offer the consumer better prices than through a traditional
travel agents. The distribution role is still being performed, but now
by the service provider. This has happened while airlines are under
particular pressure to reduce costs, due to global rises in fuel costs.
When the service provider can offer more competitive prices, and the
network facilitates direct transactions, then consumers should prefer
to purchase from the service provider.
42
3.6.2 Disintermediation of Travel Agents
This argument has been observed and presented as the
disintermediation of travel agents, and inevitable progression to a
stage where the role of travel agents is no longer required. Indeed
the risk of disintermediation is related to the ease with which
technology can be used to replace the role of an intermediary in a
virtual space. The travel agents role includes transaction processing
(ticketing), and supplying raw unprocessed product information.
These roles can be easily replaced by technology, which can then
easily be managed by the service provider [11][105]. This follows
the reasoning of earlier predictions that suggested transaction
processing and information provision would be the intermediary
functions most easily replaced by technology – a feature that has
already been seen in the Banking industry [16][73].
Airlines have recently made moves which demonstrate their
threat to the Travel Agent’s transaction role. Airlines have capped or
reduced Travel Agent commissions, while making greater efforts in
direct sales. The introduction of electronic tickets also negates the
need for a physically based transactions. Some travel agents have
then compounded this threat by focusing on recommending and
selling preferred suppliers products, due to better commissions
available. This effort then compromises the perceived independence
43
of the Travel Agent. However, not all evidence is pointing towards
the end of Travel Agents.
3.6.3 Reintermediation of Travel Agents
An alternative perspective suggests that the introduction of
ICT’s has opened opportunities for the re-intermediation of travel
agents, i.e. has created further intermediary possibilities.
Opportunities exist for the travel agent of the future to be a network
information broker. Research has suggested that eticketing has
actually reduced the importance of the ticket, with the ability to
create personalized packages becoming more important [87]. While
modern ICT’s offer the ability to capture, store and process
information, without a semantic web it can’t yet analyse the
semantics of that information, certainly not to the same level as a
human expert. This means that human intermediaries are still needed
to assess the quality and reliability of information found online. If
Travel Agents position themselves appropriately and strategically to
deal with the threats posed by modern ICT, then there are still huge
prospects for increased income [114].
To see the potential for an intermediary role within the
tourism industry, it is worth reviewing an alternative view of the
44
intermediary function. Intermediaries often carry out the following
tasks[128];
• Search and Evaluation
• Needs Assessment and Product Matching
• Customer Risk Management
• Product Distribution
• Product Information Dissemination
• Purchase Influence
• Provision of Customer Information
• Producer Risk Management
• Transaction Economies of Scale
• Integration of Consumer and Producer Needs
While part of this function can be easily taken over by
modern technology, there are still several functions which are
difficult to perform using ICTs. For instance Needs Assessment and
Product Matching; Travel Agents often discuss with their customers
different options before advising them on the most suitable products.
While some customers may have a clear understanding of their
needs, others look to Travel Agents for suggestions. The Travel
Agent provides a neutral aggregation service which can be seen to
reduce a customer’s risks. Noticeably intermediaries also leverage
45
the producers risk, so there is some incentive for producers to
maintain intermediaries.
3.6.4 Where does that put Travel Agents?
A travel agent can be seen as a retailer of travel services,
whose income actually comes directly from suppliers (airlines,
hotels, tour operators etc.) and other intermediaries in the form of
commissions. In many ways travel agents have been agents of the
tourism industry product suppliers. Commissions vary from business
to business, but traditionally when using GDS for example Travel
agents would receive around 10% for airline or lodging reservations
[30]. Typically tourists contact travels agencies during the planning
process for a trip. The nature of this encounter, and as such the
intermediary service provided by the travel agent, varies greatly
depending on the needs of the tourist. Some tourists are well
prepared, having definite plans and only requiring the agent to make
the necessary bookings. Others may simply have the desire for a
holiday, needing assistance in selecting and then booking a
destination, the travel provider, the accommodation and activities.
The outcomes of these encounters has effects in different phases of
the travel experience[32].
46
Travel agencies had an almost exclusive lock on travel
knowledge before the advent of the Internet. They had sole access to
up-to-date transportation information and they had the
documentation needed to make intelligent travel decisions, including
information on hotels, cruises, visa information etc. Some travel
agencies installed computer terminals in the 1970’s, even before
other small businesses in other industries began to use them[79].
Airlines then granted travel agencies CRS access, allowing them to
gather information and process reservations more efficiently. GDS
later provided similar effective mechanisms for a wider range of the
tourism products[18].
Many traditional ‘brick and mortar’ travel agencies are now
reinventing themselves [126]. The airline commissions have been
reduced or even eliminated, forcing travel agencies to cut costs, often
turning to the Internet to achieve this. By turning to the Internet the
physical limitations of brick and mortar operations are removed,
allowing an expanded potential market of end users[127]. Travel
agents are making further use of computer capabilities by creating
inventory systems of accurate information, as well as establishing
databases of customers for use with CRM. Products from diverse
suppliers are combined to create packages, such as by combining
golf and hotels to create golfing holidays. Successful intermediaries
have benefited from creating attractive packages for different clients.
47
Here we see the role of the travel agent becoming more of a trusted
counsel for travelers, using their greater knowledge of the travel
market to present the ideal option to their customers[32].
As the industry evolves it appears that travel agents may play
4 key roles in the future. First acting as an information broker,
passing information between guests and suppliers. Secondly,
processing transactions by booking rooms or flights and then
transferring money. Thirdly, to provide advice to customers, specific
to their requirements. Finally, providing value added services by
integrating a wider variety of travel products[41][142].
This reflects a need for travel agents to redefine their role
within the value chain, to position themselves as infomediaries rather
than intermediaries [95]. As the infomediary product, i.e.
information, is easily copied, and redistributed, Travel agents must
devise a new business model which can still add value to a travelers
experience in order to survive[29]. There are several options for this
including, providing travel advice, enhancing customer satisfaction
and bundling hotel bookings with other services. To succeed travel
agents must provide their customers with personal service and
support, as well as developing a deep understanding of their target
customer’s preferences in order to best satisfy them.
48
Travel agents need to reposition themselves and those that
don’t will not survive. Customers are becoming more sophisticated,
demanding personalized packages for more exotic and specialized
holidays, and so finding a niche is an important option. Travel
Agents will need to increasingly become agents of the people who
are traveling, rather than agents of the service providers [105].
When considering a new position, Travel Agents need to remember
that intermediaries will only survive while they continue to add
value. Relationships are also important, as has been discussed in
terms of CRM, but one of the key strengths a travel agent has is the
deep knowledge of what it takes to satisfy their customers, this is a
strength which can and should be leveraged [98]. Travel Agents also
need to use their experience to structure information appropriately, in
a way that is more usable than the information generally available on
the internet.
3.6.5 Travel Agents as Cybermediaries
A further threat to or opportunity for existing brick and
mortar travel agents is the emergence of online travel agents, the so
called cybermediary business model. Some cybermediaries represent
the evolution of traditional travel agents to become click and brick
travel agents, some are the virtual existence of a GDS, and yet more
are new players who have entered the marketplace. The opportunity
49
for cybermediation exists in markets where product/service bundling
opportunities exist, where the market is fragmented with many
different sellers and buyers, markets with low barriers to entry and
where there is a scope for establishing novel price discovery
mechanisms [51]. These features appear to well describe the Travel
Agent business.
There is clear evidence that customers are turning to the
Internet and there is demand for online travel agents [5]. While
customers are not always prepared to complete their purchase online,
they are increasingly being reassured by the security of online
transactions, particularly in America [89]. There is clear growth in
the online travel market [27][77]. The number of customers making
online purchases of travel products has grown rapidly in recent years.
Taking the US as an example, 29 percent of US travelers make all
their travel arrangements on the Internet, and 52 percent of all
travelers purchase more than half of their travel online [36]. Almost
one third of the US citizens were planning to increase their online
travel purchases over the following year and 17 percent of all online
purchases in the country were travel-related [47]. The majority of
online travel shoppers start travel planning at an online travel website
because of the one-stop shopping convenience, while 73 percent of
respondents who purchased travel online researched travel at a
50
general site, but then went to a specific company's site to book travel,
attributing their decision to lower prices and special deals [99].
While online travel agents appreciate increasing traffic
levels, it is important that customers not only use the Internet for
information search, but to make bookings or purchases too.
Research shows that in spite of the advantages that e-Tourism offers,
many travelers remain reluctant online buyers. Several factors are
highlighted as reasons for this reluctance; navigation difficulties,
reluctance to rely on machines rather than people, fears that mistakes
are easy to make and difficult to correct, lack of personal approach
and most importantly concerns about security and safety when
providing personal and credit card information
[18][67][71][118][139].
Online marketing managers are responsible for persuading
customers to make online purchases, i.e. to convert clicks to sales.
Ensuring adequate security should be the first priority, but further
issues include price, product information and availability, help desk
and support. Once these features are available, designing and
developing an attractive and efficient website is crucial to attract
customers [79][156]. Having designed the website, the next phase is
to raise its profile on the web through search engine optimization and
persuading other organizations to link back to the site. Finally when
51
traffic to the website is established, the task turns to converting clicks
to sales. Failures here are often due to misunderstanding a
customer’s demands, and the misconception that the priorities of
online presence are better marketing and cost savings, rather than
providing better customer service [139].
The role and functions of a cybermediary are therefore in
some ways different to a traditional intermediary. To succeed as a
cybermediary a travel agent must add excellent web skills and
knowledge to their destination knowledge and array of tourism
products. Despite the move to new media, both cybermediaries and
intermediaries should have the same focus on providing excellent
customer service if they are to succeed. There is a growing demand
for cybermediaries, but to be certain of generating sales online travel
agents must nurture their visitors so that they become customers too.
52
4. ICT Adoption
Technology adoption concerns the introduction of new
technologies into a company or industry. Decisions about
technology adoption are critical to the success of a business. These
decisions include choosing which technologies to use, and
importantly the timing of technology adoption. Choose the wrong
technology and using it before it has been thoroughly tested may
result in a company finding themselves with an expensive mistake,
while adopting a technology too late could result in losing a lot of
ground on competitors. For technology producers the rate at which
their product is purchased is crucial to their success, and studies have
illustrated that there are different types of personalities that affect the
purchase timing. Fig 4 shows the technology adoption lifecycle
created by [91][125].
53
Figure 4. The Technology Adoption Lifecycle
There are 5 different types of technology user identifies in
the chart;
I: Innovators
EA: Early Adopters
EM: Early Majority
LM: Late Majority
L: Laggards
Time
Sales
I EA
EM LM
L
The Chasm
54
When new technology is invented, the first types of people
to purchase and use it are the innovators, people who love
technology for the sake of having technology. They are prepared to
purchase new technology without having any real use for it and then
will search for an innovative way of using it. The next group of
users are called early adopters. These are more respected than
Innovators, as there will be a good reason why they start using new
technology and it is often the early adopters who other users will turn
to for purchasing advice. The majority of users will purchase
technology after the early adopters have tested the new technology
and demonstrated its usefulness. This majority will include most
businesses making prudent investment decisions and is often split
into early majority and late majority. The final group of users are the
laggards, the technophobes who will avoid using technology as long
as possible.
In between the early adopters and early majority there is a
crucial phase called the chasm. During the chasm, technology
product sales drop off. This happens before the majority of users
start buying, i.e. before the early adopters can persuade others to buy
the technology. Therefore, getting past the chasm is particularly
important for high-tech companies [91]. If a superior competitive or
substitute product is launched during the chasm, there is a chance
55
that the majority in the mass market will chose the alternative
product.
From the perspective of the user, such as one of the business
models existing in the tourism supply chain, there is a choice of what
type of user to be. Either a technology based company that
innovatively uses new technologies, or a company that waits until the
technology is well tested before adopting it. There are advantages
and disadvantages to both being and early mover and being a late
mover. Early mover advantage can be gained by adopting new
technology quickly, as then internal knowledge and capabilities grow
through experience. In the case of technology like the internet, early
movers were able to establish their position in the new marketplace
before their competitors. There is an inherent risk to that strategy
too, as newer technology is normally more expensive and untested.
Late mover advantage comes in the form of investments only being
made in tried and tested technologies, an investment that is often
carries less financial risk and is a more prudent decision.
As there can be advantages and disadvantages to bother early
and late mover strategies, there is no guarantee of greater success for
either strategy. The superior option will vary from technology to
technology, for different business models and in different
competitive environments. This makes technology adoption timing a
56
difficult and yet crucial decision, a decision that could make an
organization a strongly differentiated market leader, or could
financially cripple it. In order to make better strategic decisions,
knowledge is essential, so gaining technological knowledge and
experience can be valuable for organizations.
4.1 ICT Adoption by Small and Medium Tourism
Enterprises
There can be many factors that go into a company’s ICT
investment decisions, but as investments can be costly, the size of a
company can affect it’s ability to introduce modern technology.
Several surveys have found that large companies have been much
quicker to embrace the potential of modern ICTs, while smaller
companies are slower to adopt new technologies [15][146]. The
principal factors driving small business ICT adoption are commercial
considerations and potential returns, rather than other factors such as
government incentives for example. In countries with readily
available ICT solutions, such as India, the adoption by Small and
Medium Tourism Enterprises (SMTE) is still relatively low [6]. In
countries, such as Greece, with relatively poorer IT skills and low
technology awareness adoption rates lag even further behind their
neighbours [21].
57
Several studies have shown that larger organizations, such as
airlines, have adopted technology much more readily than smaller
organizations. Of the SMTE business models, then service providers
such as spas and restaurants have a much lower adoption than
organizations like travel agents [102]. In contrast studies indicate
that the size of a hotel doesn’t affect its likelihood to adopt new
technology, rather the age of the hotel is a factor, with newer hotels
more likely to go online [56]. Conflicting results have been found
when considering the location of the organization, with some studies
reporting that urban locations with existing ICT infrastructure leads
to a higher uptake, while others report that remote little known
destinations are turning to ICT to develop their profile [59][102].
This suggests that there are other factors driving ICT adoption.
Lack of IT skills and experience have been shown to have a
strong correlation with lack of IT adoption. Companies that have
employees who have had IT training and experience are more likely
to adopt modern ICTs. The benefits that can be gained from using
ICTs once the investments have been made are also less likely to be
limited when companies have appropriate IT skills and training
[48][66][88][145]. As well as level of education, a secondary factor
contributing to adoption resistance is a lack of incentive to change
business models when the returns are unclear [146]. This is the case
for travel agents who are resistant to the threats of disintermediation.
58
A further contributing factor is the cost associated with using new
technologies – costs both in terms of finances and time, with online
activities for example being perceived as complicated and
unwieldy[106].
The Internet is now not considered a new technology, but
many SMTEs are still yet to develop a web presence. The potential
benefits to SMTEs of using modern ICTs such as the Internet have
been covered by many writers. Benefits include transaction cost
reductions [153], improved efficiency [59] and opportunities for
better communication with customers, which can then lead to
improved customer service. Therefore, in order to stimulate the
adoption of ICTs by SMTEs, governments and local authorities need
to first create an awareness of the potential benefits that SMTEs
could gain, and second provide training for employees. To increase
awareness and improve IT skills, organizations have to provide easy,
affordable access to modern technology. For SMTEs with limited
budgets this is a challenge, particularly when the benefits aren’t
immediately received.
59
5. A Case Study of Thailand
Thailand is a South East Asian holiday destination popular
for its beaches and its cultural heritage locations. According to the
Tourism Authority of Thailand, the number of tourists visiting has
been increasing rapidly, with 15 million visitors in 2006. Thailand
also recently boasted two of the top five voted city destinations in the
world, in Bangkok and Chiang Mai [141]. Thailand has a diverse
array of attractions to offer its visitors, with world wide reputations
in several markets. Chiang Mai offers a cultural experience, with
temples and jungles, Phuket is a world class beach resort with
beautiful tropical islands, while Pattaya offers an alternative holiday
with a lively nightlife. The capital Bangkok has a eclectic mix
including nightlife and temples, but also acts as a hub for both the
rest of Thailand and South East Asia.
Thailand is an emerging market and while in many, more
developed, countries the tourist service providers, such as hotels,
airlines and car rental agencies, have aggressively taken advantage of
the direct link to customers provided by the internet, forcing
intermediaries to reconsider their business model. In Thailand, the
use of ICTs is still relatively immature and there appears to be less
60
incentive for travel agents to modify a currently successful business
model. However, recent national developments within the IT sector
suggests new investment incentives and creates an interesting
position for the Thai tourist industry, an industry which accounts for
6% of the Thai economy.
In 2002 Thailand established the Ministry of Information and
Communication Technology, with the mission of developing and
supporting comprehensive electronic processes for government,
commerce, industry, business and education [96]. This ministry is
responsible for driving national projects to improve Thailand’s ICT
infrastructure through egovernance projects and also with tourism
related projects such as the development of an interactive map of
Chiang Mai. Given this scenario, Thailand presents itself as a
relevant case study illustrating how the use of ICTs within a
developing country’s tourism industry could evolve the industry
itself.
In this section the use of ICT’s within Thailand’s tourism
industry is evaluated. First the internet adoption rate and quality of
online activities by various business models within the Thai tourism
industry is summarised, before focus is turned on the Travel Agent
business model. Here the critical customer relationship management
activities are reported. Next the focus shifts towards the tourists
61
visiting Thailand with a review of how they currently use the internet
to book their trips and concerns they have regarding the Internet.
5.1 Internet Adoption by Thailand’s Tourism Industry
Currently there are around 11,000 travel businesses
registered with the Thai tourism authorities, including hotels,
airlines, nationwide car rental agencies and of course travel agents,
both traditional and online. Of these businesses currently only 13%
have a web presence [34], and many of these are simply placed in
directories or free hosting sites, rather than on their own specific
domain. This reflects a very low adoption rate amongst SMTEs in
Thailand. A sample of those websites were assessed in terms of
Information Provision, Product and Service Range, Design and
Functionality, Trust and Safety and E-Business Service. These
criteria were derived from several previous related surveys used to
assess the quality of websites [31][40][75][92].
The survey of Thai travel agents was conducted by a focus
group of online travel business professionals having previously
assessed the websites of some globally recognized leaders to gather
appropriate measures. While the approach included both a
qualitative and quantitative assessment, the results for each were
comparable and not very positive. The results from this survey
62
indicated that airlines and car rental agencies performed best, while
traditional travel agents and hotels were the worst performers. These
business models rarely scored above average. The report
summarised the main weaknesses as insufficient information, poor
navigation, lack of security, unclear booking functions and no special
features [34]. Other research has supported this assessment, with
sites found to rarely display rates or fares, resulting in many visitors
just searching for information rather than booking online [46].
Given the low adoption rates, and then poor performance by
those who have adopted the Internet in Thailand, the reasons behind
this have also been investigated. The principal reasons are lack of
knowledge and even fear of e-commerce, no web design capabilities
and a feeling that the internet channel is already overpopulated while
their existing channels and focus are already time consuming enough
[34].
5.1.1 The Role of Travel Agents in Thailand.
The tourism industry in Asia still mostly relies on wholesaler
agencies (i.e. through travel agents rather than direct purchases)
because they provide effective and reliable B2B and B2C channels
[95]. Currently the majority of bookings are still made through
traditional travel agencies and travel agents in Thailand are only just
63
starting to use the Internet for communication. The lack of adoption
is due mostly to expensive technology and inexperienced staff [140].
Few agencies have access to the Internet from their desks, while
most prefer to user the telephone to confirm bookings. Low Internet
and Credit Card penetration within Asia have created obstacles,
hampering the growth and development of e-travel services.
Airlines and hotels, however are well aware of their costs
associated to distribution, and have been applying pressure to reduce
the commissions paid out. Support in the form of content and
functionality is therefore supplied as more travel businesses are
encouraged to go online [109]. As highlighted in the previous
section, those travel agents who have gone online rarely perform
well in terms of website quality. Online Travel Agents who are
solely dedicated to their online customers performed much better
than traditional travel agents who are not as focused on their online
activities.
Having highlighted the importance of customer relationships
and the new challenges of developing them online, further
assessment of travel agents performance in terms of online customer
service has been conducted [34]. At the heart of CRM systems is
communication, and modern ICTs offer many innovative means of
maintaining contact with customers. The key means of electronic
64
communication is e-mail, as it has the unobtrusive properties of snail
mail, while affording speedy answers to questions.
Building online relationships is arguably much more difficult
than providing offline service, as online services tend to be less
personalised and many people are reluctant to communicate through
computers [112][132][138]. As previously illustrated, auxiliary
signals such as body language or tone of voice are lost, opening up
the possibilities of semantic ambiguity. These problems are
amplified when communication is through a second language, such
as by a Thai native responding in English. While email is a valuable
tool for building and maintaining customer relationships, it has to be
used effectively to be successful and poor use can have disastrous
effects. Previous studies highlight that poor email response can lead
to not only losing guests, but can result in the guest choosing a
different destination entirely [78]. Common problems include late
answers, or no answers at all, insufficient information and not
following standard email protocol. Providing the wrong or
incomplete information can also lead to lost customers [92][93].
Minimal efforts to improve email practice can lead to immediate
competitive advantages.
In order to measure how effectively organizations use email
to communicate with their customers, several metrics have been
65
proposed. Good emails can be measured in terms of Promptness,
Politeness, Professionalism, Promotional and Personal Approach.
In other words, emails should be replied to within 24 hours with a
polite and professional response which promotes the travel agency,
while treating the customer with the same personal service which
they would normally use in face to face contact [72]. Out of 5,970
travel agents listed by the Thai tourism authority, less than half have
a listed email address – 2,258. A recent ‘mystery guest’ survey
contacted all of these email addresses, and the findings were not very
promising [34].
Firstly, only 7% of travel agents even responded to the
enquiry, with the replies being on average 2-3 days after the enquiry.
The responses that were received were just average when evaluated
using the 5 P’s metric, but again, those travel agents using branded
emails (indicating their own domain) fared much better than those
using free email accounts. These results indicate that tourism
businesses in Thailand, and specifically Travel Agents, are not
optimally using the capabilities of the Internet.
5.2 Customer Perceptions
Rather than simply dismissing the online performance of
Thai Travel Businesses, it is prudent to investigate the specific needs
66
of tourists when visiting Thailand. An extensive survey of
international tourists visiting the Thai resort island of Phuket
investigated their use of the Internet during trip planning. The results
indicated that the majority of visitors (87%) used the Internet to
search for information in some way, while much fewer actually
contacted an online agent or purchased through an online agent [5].
Breaking the different components of a holiday down, the travelers
preferred to use a travel agent in their home country to book their
flight, hotel and insurance, while destination based travel agents
were responsible for package tours, car rental and excursions.
However these bookings were generally made once the tourist
arrived in Phuket, with tourists choosing a travel agents by chance
without influence from the Internet. However, the Internet was used
as an alternative when booking flights or hotels. This indicates that
the Internet currently plays a small role for Travel Agents in Phuket,
as reflected in the assessment of online travel agent websites. The
question remains as to whether the lack of adoption of online activity
by Phuket based travel agents is due to the lack of demand or
whether the lack of demand is caused by poor service provision.
The survey indicated the reasons behind the lack of online
purchases revolved around security concerns and a preference for
dealing with real people, with the feeling that both were performed
better in a face-to-face scenario rather than online. The flexibility of
67
booking through a traditional travel agent was also proffered as a
reason. The perceived benefits of the Internet were Time saving,
Convenience and Low Price, but clearly these properties were not as
high priority as customer service and security [5]. Advances are
being made in online purchase security, and it is a matter of time
until users are persuaded that it is safe to make online purchases.
Online travel agents are therefore advised to use standardized
security systems, rather than their own bespoke systems.
The research points towards a strong demand for online
information, even if users aren’t yet willing to complete purchases
online, they are searching for information. 75% of those surveyed
believed it was better to find the information directly from Thai
websites rather than websites in their home country, although only
14% would feel more secure about making the purchase through the
Thai website. This indicates a demand for an infomediary role by
Thai online travel agents, but establishing a way to finance this role
becomes the challenge.
68
6. Conclusions
Modern ICTs are continually being developed and new
innovative means of communicating through technology will carry
on being developed in coming decades. Many technologies that are
considered modern ICTs are now well established with advances
such as mobile telephony and the Internet nearly globally accessible.
Modern ICTs such as these have had major effects on many business
models existing in many different industries, with few surviving
unaffected by their adoption. There is no evidence to suggest that
these trends will not continue for the foreseeable future.
One industry that has been affected by the introduction of the
Internet and related communication technologies is the tourism
industry and within the tourism industry, the business model feeling
the biggest effect is that of the intermediary – the travel agent.
Traditionally the travel agent has acted as an intermediary between
tourism product producers, such as airlines and hotels, but now
modern communication technologies afford these businesses the
ability to directly communicate with their customers, bypassing the
traditional travel agent. This has resulted in much discussion about
the ‘disintermediation’ of the tourism industry.
69
As well as being a threat to the traditional travel agent
model, the Internet can also be seen as an opportunity, with the
potential for cybermediation, so long as travel agents can establish a
value adding and so revenue generating business model. Either way,
evidence points towards necessary evolution within the travel agent
business model. There has also been evolution for tourism product
producers as airlines seek ways to cut their distribution costs by
connecting directly with their customers. All business models should
be aware of the potential effects of modern ICT.
In Thailand, the online performance of travel agents has been
weak, with low adoption rates, and for those who have built a web
presence, disappointing results. The key reasons behind these
findings centre around a lack of IT skills and knowledge within the
industry, both in terms of a lack of appreciation of the potential of
ICT, as well as a lack of skills to produce a quality web presence. As
Thai travel agents are focused on providing walk in services,
arranging local tourism services, the general perception is that there
is no real threat to this business, and so no real need to adapt their
business model. Without the skills needed to operate online,
developing an online presence is a low priority for most Thai travel
agents.
70
This scenario means that Thai travel agents miss out on
potentially greater revenues that could be gained by offering a
complete tourism product to foreign visitors, including flights and
accommodation. While Thai travel agents are best equipped to
provide destination information, it is home country travel agents who
receive much of the commission available for doing so. In order to
change the inertia within Thai travel agents, attention needs first to
be turned to education, with ICT training programs needed.
71
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