«Course Leader MSc in eTourism, School of Management Studies for The Service Sector, University of Surrey, Guildford, GU2 7XH, UK ...»
The Future eTourism intermediaries
Dimitrios Buhalis1, Maria Cristina Licata2
Course Leader MSc in eTourism, School of Management Studies for The Service Sector,
University of Surrey, Guildford, GU2 7XH, UK
Genesys Information Limited
Clarendon House, 125 Shenley Road,Borehamwood, Herts WD6 1AG, UK
Acknowledgement: The authors would like to acknowledge Paul Richer and Dr Karsten Kärcher (Genesys Information Limited) for their contribution to this paper.
Note: An earlier version of this paper was presented at the ENTER2001 conference in Montreal, Canada.
The Future eTourism intermediaries Keywords: eTourism, Internet, intermediaries, disintermediation, Computer Reservation Systems, Global Distribution Systems, Digital TV, mobile commerce, Electronic Intermediaries
Internet portals and vortals, and auction sites. The expected proliferation of Digital TV and mCommerce will gradually intensify competition further. As a result, traditional eMediaries must reengineer their business processes in order to survive and remain competitive. This exploratory research identifies experts’ opinions on the future of both new and traditional eMediaries as well as the evolution of their business models.
1. Introduction In the last few decades, Information Communication Technologies (ICTs) have deeply affected the way business is performed and the way that organisations compete (Porter, 1985, 2001; Porter and Millar,1985). The tourism and travel industries were particularly affected by these developments and in particular the way organisations distributed their tourism products in the marketplace (Poon,1993; Buhalis, Tjoa, Jafari,1998; Buhalis, Schertler,1999; Fesenmaier, Klein, Buhalis, D. 2000; Sheldon, Wöber, Fesenmaier, 2001). Traditionally the travel distribution role has been performed by outbound travel agencies (OTAs), tour operators (TOs) and inbound travel agents or handling agencies (ITAs) (Buhalis and Laws, 2001). They were supported by Computer Reservation Systems (CRSs), Global Distribution Systems (GDSs) or tour operators’ Videotext systems (Leisure Travel Networks) (Karcher,1997,1998; Bordat,1999). In addition, tour operators used teletext to display late deals and special offers directly to consumers’ TV. These traditional electronic intermediaries (or ‘eMediaries’), particularly GDSs, progressively consolidated their position to four major systems, namely SABRE, AMADEUS, GALILEO, WORLDSPAN (Kärcher,1996;
French, 1998; Copeland, 1991; Copeland and McKenney,1988; Truitt, Teye and Farris, 1991;
Archdale, 1996; Sheldon, 1997; Hawkins, Leventhal, & Oden, 1996; WTO,1995). This was due to their predominance as the largest existing repositories of travel stock information, with backing from the travel suppliers that had created and funded them. This illustrated in Figure 1, where Leiper’s (1985) tourism system is used to explain the ICT supported distribution channel. The figure demonstrates that the tourism system is composed by the place of consumers’ origin and the destination, with a number of tourism firms offering their services. In the transit region there are transportation companies and traditional intermediaries supported by GDSs, Teletext and Viewdata.
However, the Internet and electronic Commerce (eCommerce) developments in the late 1990s and the adoption of Tourism as one of the prime B2B (Business to Business) and B2C (Business to Consumers) application has changed the situation rapidly (Buhalis,1998; O’Connor,1999; Smith and Jenner,1998). The development of advent of the Internet as a universal and interactive means of communication, and a parallel change in consumer behaviour and attitude, have therefore shifted the traditional way tourism and travel products are distributed (Werthner and Klein,1999;
O’Connor and Frew,2000). Increasingly, consumers can undertake their entire tourism product search and booking on-line and therefore the role of eMediaries has been changing dramatically.
The Internet is widely used as a means to deliver up-to-date content. As a result it created the conditions for the emergence of a wide range of new tourism eMediaries. The proliferation of eMediaries followed a period of euphoria when a great member of players hoped that they will generate a high volume of profit by targeting the tourism industry. Tourism suppliers (particularly airlines, car rental and hotels chains) took advantage of the new opportunities and developed eCommerce applications by allowing users to access directly their reservation systems. This included single supplier provisions, such as British Airways (www.britishairways.com), Marriott Hotels (www.marriott.com), Avis (www.avis.com) as well as multi-supplier web pages that emerged to support airlines disintermediating travel agencies (e.g. www.opodo.com, www.orbitz.com). In addition, several destinations developed Destination Management Systems (DMSs) to distribute their smaller properties and to present the destination as a holistic entity (eg www.tiscover.com, www.holland.com). A number of web-based travel agencies also emerged (e.g.
Expedia.com, ebookers.com, Travelocity.com) whilst off-line agencies developed their on-line provision (e.g. www.thomascook.com, www.lunnpoly.com). Internet portals (e.g. Yahoo, Altavista, Excite) and vertical portals (or vortals) (e.g. www.ski.com, www.golfonline.com, www.tennis.com) also developed on-line travel distribution, often by sourcing their travel content from external online agents and suppliers. Media companies such as newspapers (travel.telegraph.co.uk) and television networks (www.cnn.com/travel) gradually integrated their off-line with their on-line provision and expanded to include eCommerce capabilities on their sites. On-line last minute agencies emerged to enable distressed inventory to be distributed efficiently (e.g.
www.lastminute.com). Priceline.com reversed the pricing method and allowed passengers to search for suppliers that would be prepared to serve them for the amount of money that consumers specified. Finally, a number of sites (e.g. www.QXL.com, www.ebay.com) specialised in the sale of distress stock through auctions. The proliferation of eMediaries confused consumers and the industry as many marketing managers rushed to ensure that their products were represented in all distribution channels and realised the difficulty and cost of doing so.
Most of these emerging eMediaries are new entrants often owned or powered by existing nontourism organisations (e.g. Microsoft’s Expedia). The major GDSs, following a period of inertia realised the dramatic changes, are gradually entering the online market by developing interfaces for consumers [e.g. Travelocity.com (owned by Sabre) and TRIP.com (owned by Galileo)], although they are still less proactive than newer players (O'Connor, 1999; Buhalis, 1998,2000;
Richer & O’Neill-Dunne, 1999). In addition to the above Internet-based new eMediaries, there is a gradual emergence of further new eMediaries using mobile devices (mobile phones, palm tops etc as well as vehicle fitted devices) and interactive digital television. A framework identifying a number of new eMediaries based on the three emerging ePlatforms (Internet, mobile devices and IDTV) is demonstrated in Figure 2. Table 1 also demonstrates examples of traditional and new eMediaries.
2. Methodology As this is an exploratory research, a qualitative approach was adopted to enable the researchers to appreciate all aspects of the subject and to develop a set of critical variables. Extensive secondary research was used to revise the theoretical framework and also to identify critical areas deserving further investigation. Primary research included both qualitative and quantitative methods. As this is one of the most dynamic areas of both tourism and eCommerce, it was decided to concentrate the primary research only on expert opinion as this would have enabled the identification of longterm trends and provide the research with up-to-today and fairly unbiased evidence. All research activity was undertaken in the UK.
The survey was conducted in three phases, using three primary research tools: an unstructured interview-discussion, a questionnaire and an interview structure. Qualitative interviews with a small number of experts (mainly academics and consultants) helped to obtain more in-depth information and clarify points of debate. These experts were identified by their contribution to the literature and also their active participation in international tourism and IT conferences. An unstructured discussion enabled the researchers to interact with participants and to identify critical issues.
Based on this activity a questionnaire was drafted, including a number of variables to record experts views and beliefs. The questionnaire contained 14 questions, selected based on the background study, the secondary research and pilot interviews with a select number of experts.
The quantitative survey, allowed to quantify, relate and justify opinions and attitudes of a greater number of people. The questionnaire was e-mailed twice over the period of one month to a total of 62 experts and a total of 30 questionnaires were completed (response rate 49 percent). Quota and judgmental sampling methodologies were used to obtain a pool of possible expert respondents. Experts were chosen as experts on their field and included participants from most tourism industry sectors, such as airlines, hotels, travel agencies, tour operators, as well as consultants and leading academics in the area. The vast majority of the respondents work in the UK, although a few operate overseas. Questionnaire respondents were asked to indicate the level of agreement to particular statements. Given the exploratory nature of this research and the limited number of experts on the field, the number of questionnaires and interviews was assessed as satisfactory.
Following the analysis of the unstructured interviews and questionnaires a further round of qualitative research was undertaken, mainly to qualify, support and appreciate the findings of the quantitative research. This research constituted by a set of follow-up telephone interviews with industry experts, through which more in-depth opinions and comments on the subject were obtained. A standardised but open-ended approach to questioning was used. Certain areas were explored in greater depth, through probing questions not originally included in the interview schedule. Notes were kept on all additional questions asked. Interviews were tape recorded and tapes were listened to at the analysis stage for further input. The interviewees’ answers were not influenced by the interviewer’s comments. Twenty people were contacted for telephone interviews of which 10 people were interviewed. This sample contained a well-proportioned cross-section of business types: systems suppliers (3), online travel agents (2), a product supplier, a consultancy and GDSs/Leisure Travel Networks (3). The interviews lasted between 30 minutes and 1 hour.
The adopted research methodology offered a great depth of knowledge on the research area and enabled the researchers not only to quantify a number of trends, as perceived by experts, but also to collect a great wealth of qualitative and exploratory information.
3 Effectiveness of Modern eTourism platforms It was considered vital to the purpose of this research to determine the advantages and disadvantages of the emerging ePlatforms used by the new eMediaries, namely the Internet, mCommerce and Interactive Digital TV, in order to produce a more meaningful comparison with traditional distribution channels.
3.1 Internet Distribution
Similarly to Sheldon (1997) and Buhalis (1998), most respondents felt that the Internet gives access to a great number of people, as well as offers the opportunity to develop closer relationships with customers. Respondents felt that the Internet enables consumers to communicate with organisations on a 24 hours, 365 days a year basis and also it enables organisations to implement Customer Relationship Management programs enhancing the opportunities for interaction and a better understanding of both sides. This interaction generates a whole range of new requirements for organisations, as they need to be accessible and available constantly. Hence, calling centres and interactive teams have been developed by a wide range of organisations to support their Internet distribution. Although this is expensive to develop and maintain, tourism organisations have reduced their distribution costs and overhead costs. This is because they can afford to pay less commission (or no commission in some airlines’ case) to intermediaries and at the same time consumers do the manual work of data entry, instead of employees of the company. The Internet was therefore identified as a clear beneficial distribution platform for principals (Table 2).
The Internet also enables principals to identify and target customers more accurately and effectively. A wide range of segmentation questions are often asked in the profiling of consumers and specific market segments are frequently diverted to specialised parts of the Internet provision.