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Internet-based tourism services: business issues and trends
Futures 33 (2001) 589–605 www.elsevier.com/locate/futures
Internet-based tourism services: business issues and trends L. Rayman-Bacchus *, A. Molina TechMaPP, Department of Business Studies, University of Edinburgh, 31 Buccleuch Place, Edinburgh, UK
Abstract This paper assesses the current state of development among the Internet-based providers of tourism services. The study focuses on leading intermediary businesses and enabling groups: travel agents; specialist service providers; reservation technology providers; and public agencies. In studying some 50 leading web sites, spanning a range of differing groups of intermediaries, we examined how travel agent sites seek to differentiate themselves, how public tourist information bodies are harnessing the Internet, and the role of computer reservation technology providers. We also examined factors shaping the future of the Internet: institutional tensions; competition for end users and investors; and end user expectations. The conclusions highlight a number of implications for the further development of tourism services provision within Europe, where the Internet plays a significant role. For example, the extent and pace of social and economic change that Internet derived information is facilitating. 2001 Elsevier Science Ltd. All rights reserved.
1. Introduction The Internet as a communication medium and market space is growing at an unprecedented rate. As of August 1999, some 215 million people have access to the Internet, a leap from the 133 million estimated to be online one year earlier and a fivefold increase from 40 million in 1995! [1]. Of the 215 million, 57% are English language users, while 26% access the Internet using European languages (excluding english). It is widely believed that Berners–Lee’s development of the “World Wide Web” in 1989 was key to opening up the Internet as a global and easily accessible
* Corresponding author. Tel.: +44-1276-509503. E-mail address: [email protected] (L. Rayman-Bacchus). 0016-3287/01/$ - see front matter 2001 Elsevier Science Ltd. All rights reserved. PII: S 0 0 1 6 - 3 2 8 7 ( 0 1 ) 0 0 0 0 3 - 9
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information space, accompanied by a new vocabulary: HyperText Transfer Protocol (HTTP); Uniform Resource Locator (URL); HyperText Markup Language (HTML); web site and web page. By April 1998, there were an estimated 320 million web pages [2], a figure that stands in stark contrast to Schwartz’s estimate of 10 million web pages approximately one year earlier, in his assessment of the economic importance of the World Wide Web [3]. Other studies suggest that the number of web sites is doubling in under six months, a slow down from doubling every three months back in 1994 [4]. Statistics in this fast moving and fluid area are notoriously unreliable, nevertheless the picture emerging is one of an electronic market erupting on an unprecedented scale. With little or no regulatory control and low economic barriers to entry, new Internet-based businesses appear like weeds in a garden, but risks are high as the technology continues to develop apace and in unforeseeable ways, and entrepreneurs push the frontier of novel business approaches. In the last five years, we have witnessed centuries old business formulae for success being overturned by those willing and able to exploit the communication possibilities of the Internet and the information storage capacity of the World Wide Web. The Internet provides a fundamentally different economic environment for doing business, its key differentiator being rapid communication of information, accessible globally, and at negligible cost. Examples of these new ways of competing include giving the product away (e.g. Netscape), the emergence of online auctions for air tickets (e.g. Travel Bids), and the unprecedented scope for developing economic networks (e.g. electronic markets). Little is known, beyond these broad statistical patterns and isolated examples, about how the advent of Internet-based business is shaping the provision of tourism services; an industry that arguably accounts for the biggest part of the services sector. This paper seeks to redress this situation by mapping and analysing the business approaches found among those providing Internetbased tourism services. Many of those new online organisations include traditional travel agents, tour operators, national tourist offices, airlines, hotels, car hire firms. However, alongside these traditional providers are other operators unique to the Internet. The aim here is to identify and analyse the ways that these novel forms of business organisation — Internet businesses — are contributing to the evolution of the competitive e-commerce landscape of the tourism sector. By way of contextualising the enquiry and analysis that follows, the following section briefly reviews the shifting socio-economic ground of tourism and information and communication technology (ICT), with an emphasis on Europe. The methodological approach section presents the research method underpinning the enquiry. The findings and analysis section shows the emergence of new models of enterprise, relying on co-operation alongside competition. Heritage is also shown to be very influential even in this new online environment. The Shaping Futures section looks forward, by exploring some underlying socio-technical tensions that will help shape the future development of the emerging Internet-based tourism services sector. These broad tensions, in conjunction with those end user expectations driving the sector’s development, help us understand the longer term prospects for dot.com enterprises. The final section presents the conclusions.
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2. Shifting socio-economic context of tourism In seeking to understand the development of Internet-based tourism services, we first need to appreciate some of the antecedent conditions, the socio-economic movements and technological developments within which tourism is embedded. One movement is the increasing political and economical integration of large regions of the world (e.g. Europe, the Americas, Asia). At the same time citizens of modern societies are attaching ever greater importance to leisure [5] often integrating particular leisure interests with individual work patterns [6]1. Implicated in these movements is the harnessing of ICT to bring about: faster and more widespread communication and greater information dissemination; lower transaction costs and the realisation of electronic commerce; and increased scope for meeting and promoting individual preferences. In this context, European economic space today is experiencing major restructuring, regionally, rurally, and among cities and towns. The reasons are many, including: the creation of the EU as a legal entity; globalisation of trade; and the relative rise and fall of myriad economic sectors. Among the factors credited with facilitating this reshaping of Europe is ICT, which Claval sees as “impacting strongly on service activities and the organisation of enterprises” [7]. Indeed many of Europe’s cities are proactively developing initiatives and policies aimed at encouraging the widespread adoption and adaptation of ICT. The European Telecities network has over 100 cities brought together by their interest in the application of ICT to the transformation of municipal services for the development of local economies [8]. 2.1. Transformation of tourism: supply, demand, technological change One manifestation of the evolving socio-economic space is the changes in the production of tourism. There is evidence that, over the last four decades, the dominant model of tourism production has been shifting from Fordist mass tourism to post-Fordism [9]. The mass consumption of a standardised product, where markets are dominated by a few producers (tour operators and airlines) with many small firms contractually dependent on the tour companies, and involving substantial state support (e.g. transport infrastructure), is giving way to new ways of competing and co-operating. Increasingly, as Montanari and Williams observe, changing cultural values, business competition and national competition for tourism, and improvements in ICT are all facilitating “greater emphasis on more individualistic or specialised forms of holidays” [10]. Furthermore, in the hunt for profitability and global market advantage during the last three decades, providers of tourism information and services have been shaping the evolution of many technologies, including transnational banking, enquiry and booking systems using interactive videotext and computer reservation systems
1 According to the survey of American travellers conducted by Plog Research, Inc. (1997 American Traveler Survey) six out of ten (travellers) extend their business trips to include some vacation days.
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(CRS). Indeed the large airlines have successfully positioned their CRSs as a critical or basic technology [11]2, creating a formidable barrier to new entrants to the travel industry. Travel agents in turn have seen access to CRSs as a necessary source of productivity and competitive advantage. These developments offered the consumer more choice, based on swift access to accurate information. However, the consumer still needed the services of an agency in order to exercise that choice. In tandem with the shift towards flexible specialisation of tourism production, the consumption of leisure information and recreation are playing an ever increasing part in modern European life; more Europeans are travelling to other parts of the world, and an ever increasing number of visitors are converging on Europe. European tourism, accounting for over 50% of international tourism [12], is a major economic generator of income flows, jobs, and business creation. Moreover, Internet-based travel transactions seems set to become a major contributor to those flows. According to Jupiter Communications market research [13], travel is one of the fastest growing sectors of the Internet, accounting for 50% of all www transactions in 1996, and travel and tourism sales are expected to reach US$3 billion in year 2000. While such growth is impressive, Internet-based travel trading is still a fraction of all travel sales of about US$300 billion per annum. 2.2. Blurring distinctions between tourism and work Hitherto distinct divisions associated with the Fordist model are being broken down, because, according to Urry, “the era of mass communication has transformed the tourist gaze” [14]. At one level this phenomenon is evident from the difficulty of classifying many web sites as purely tourist related. The ubiquity of Internet technologies and spiralling consumer expectations, facilitated by the cultural and structural changes noted above, are undermining earlier distinctions between work and leisure. Tourism has become much less singular and distinguishable from other social activities. For example, a recent survey shows that about half of those with Internet access regularly browse the Internet from their workplace, for tourist information.3 Also the flow of tourism between Europe’s cities and towns consists of
2
Ford identifies three types of technologies. Distinctive technologies — giving the company a distinctive competence in relation to competitors. Basic technologies — on which the company depends and without which it would not be able to operate in its markets. External technologies — which are supplied by other companies. Similar concepts are pursued by Whelan: critical technologies, are like Ford’s ‘distinctive’ and ‘basic’ technologies; enabling technologies are the minimum necessary for a company to compete without providing advantage; and strategic technologies which are still in their early stages of development but could eventually lead to new areas of critical technology and competitive opportunities. Whelan RC, How to prioritise R&D, Proceedings of the Conference on the State of the Art in R&D Management, Manchester Business School, Manchester, July 11–13, 1988. An earlier taxonomy on the same lines is also found in Little AD. The Strategic Management of Technology, (AD Little for the European Management Forum in Davos, Cambridge, MA and London, 1981). 3 Street survey of tourists, conducted by TechMaPP, The University of Edinburgh in August 1999. A sample of 100 were interviewed.
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both business and leisure travel. Both groups use overnight accommodation, and visit cultural, entertainment, and shopping facilities. 2.3. Virtual travel no substitute for the real thing Telecommunication developments seem to have sharpened the traveller’s appetite for travel information. Internet technologies are complementing rather than undermining the role of personal travel. For the business traveller Shachar’s observation still holds that within Europe’s urban areas “recent technological breakthroughs in telecommunications are not a substitute for personal interaction, but on the contrary, give more importance and prevalence to such exchanges” [15]; the more complex the business decision, the greater the need for interpersonal dialogue [16]. Indeed the importance of business travel is likely to increase with the complexity of managing globally dispersed enterprises [17]. Set against this, certain communication technologies, such as Internet telephony and video conferencing, have been replacing both routine and ad hoc international travel. ICT, and in particular the Internet, is deeply implicated in these and other social, political, and economic movements. What started out as a tool for facilitating scientific research, has become an enabling technology for industry, and this paper explores the emerging centrality of Internet technology to the competitive dynamic of the tourism sector.
3. Methodological approach: conceptual definitions and confines of the study There are few technological or economic barriers to setting up business on the Internet, and so prospectors are setting up camp with diverse credentials, expectations and recipes for success. This section describes the types of enterprises that are the focus of this study, using the notion of leading sites. Also introduced are the analytical dimensions underpinning the main observations discussed in the findings and analysis section. These devices help highlight some of the significant dynamics and movements within this emerging arena. 3.1. Leading sites We have concentrated on the web sites of intermediary firms and agencies that constitute the sector. These are organisations that facilitate communication and transactions between the primary providers of travel and accommodation services (e.g. airlines, hotels, car hire firms), and potential consumers of those services. We examined 50 leading sites across four broad groups: 앫 앫 앫 앫
travel agents and tour operators; specialist service providers; computer reservation systems providers (CRS); public tourism agencies.
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The 50 sites were made up of 35 agents and specialist service providers, four CRSs, and 11 public tourism agencies. The study is not concerned with the primary providers of travel and accommodation services, since our aim is to gain an insight into how the new Internet-based intermediaries configure their services, relate to the potential tourist, and compete or co-operate with each other in the emerging e-commerce arena. The leading web sites were randomly picked from various sources, including: 앫 selecting winners of Internet contests such as the one promoted by the Internet tourism Enter Conference; 앫 through sites of tourist organisations such as the Association of British Travel Agents (ABTA) and tourist boards. 앫 sites found through web surfing that appeared innovative in some sense. We were particularly interested in identifying leading sites: those sites that in some sense appeared to be setting new trends, assuming that their creators seek to differentiate them in order to attract visitors. Study and reflection on the diversity of sites show that there is no single definition of a leading site. Differing frames of reference generate differing and equally valid candidates. We identify seven such frames: 1. Capability to engage in electronic commerce. How much a site facilitates interactivity: from passivity (advertising and information only) to offering degrees of interactivity (e.g. supporting online enquiries, engaging the user in online service experiences and financial transactions). 2. Posting the number of hits or visits a site receives. Some sites monitor and display such information. Hits are produced through chance visits, links or advertising banners located at other sites, through search engines, and personal references. 3. A site’s role for other sites as a business node. Many operations sub-contract their service provision to others. The names of these others recur across many sites. 4. Whether the site is rooted in a strong technological or commercial heritage. Such heritage includes: reservation technology providers; portal site expertise and database; hotel reservation technology; deep financial reserves. 5. The novelty of the service offered by the site relative to traditional bricks and mortar businesses. Online auction (e.g. Travel Bids), the reverse auction, flight tracking. 6. Sites generating profit. Perhaps the most important criteria for being a leading site, however, this information is sensitive and very difficult to obtain.4 We speculate that while some sites are generating revenue, probably through advertising, reservation transactions, and sponsorship, few are profitable. Indeed leading sites with a strong technological or commercial heritage (4 above), may be surviving through financial subsidy from the parent organisation. 7. Site appeal and presentation. Leading sites are visually attractive, multimedia,
4
A web survey was attempted on this aspect and resulted in very few significant replies.
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provide detailed and current content, and are effective at holding the interest of the surfer, perhaps through interactive activities. The British Tourist Authority, Lufthansa, and Reiservice have all won awards for the appeal of their sites. These frames of reference suggest sources of competitive advantage, and are not exclusive categories. Consequently a few sites could claim to be leading in more than one area. We have chosen examples representing each of these frames, with exceptions: not all sites report hits, and in any case there is much scope for error through inflating (or under stating) the number of meaningful hits; systematic data on profitability is unavailable. Site presentation in itself belongs more to the area of interface quality, and bears only indirectly on our understanding of the dynamics (relationships and drivers) of Internet-based tourism service provision. We have therefore not sought to evaluate the appeal of any site per se. Consequently categories 1, 3, 4 and 5 were used to generate the data for the evaluative work conducted in this study. 3.2. Developing analytical dimensions Through studying the range of web sites of intermediaries, and continual reflection on the data, four analytical dimensions emerged: evolutionary context, competitive positioning, enabling technology, and public services support. The evolving context of online tourism services is one of USA online enterprises leading their European cousins in setting the pace of business innovation. Within this context is: the competitive positioning of online travel agents; the dominance of CRS as a basic technology [11] and its emergence as a conduit for new competitors; and a rejuvenated role for European public agencies supporting economic development. There are many more USA-based dot.com enterprises that their European counterparts. Moreover, USA-based web sites are typically more sophisticated than their European cousins, offering more interactivity including online reservation and payments. Many enterprises position themselves as global operations but the end user must use English, and transact in US dollars. Relatively few enterprises are also High Street (bricks and mortar) travel agents, and those that are seem to be using the web as an advertising channel and not as an additional sales channel. Many of these differences reflect a sector in evolution. Nevertheless, for the foreseeable future USA-based online enterprises are likely to lead in the introduction of novel services, and to play a key role in shaping the dynamics of online tourism services provision. Against this background online travel agents were assessed for how they organised their service offering, including the range of services on offer; and how the agency seemed to be positioning itself in the market place. Taken together these factors shed light on the prospects of online tourism services provision, from which it is clear that the traditional business model of a travel agent is being challenged. First, cooperation through electronic networking is pervasive; the use of hypertext linking is ubiquitous, both as an organising device and as an aid to competitive positioning. Second, novel types of information are being provided by infomediaries, who do not sell tickets as do travel agents, but are more than online travel guides, providing live
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information and links to other relevant sites. For example, Smart Traveler and Map Quest offer interactive maps, while Sidewalk provides traffic information on specific USA cities, while others offer live flight tracking. Third, the emergence of novel approaches to pricing tickets. TISS, Travel Bids and Priceline offer online reservation and discounted tickets, but no reviews/guides or other useful information commonly associated with travel agents. However each proposition is based on a distinctive model: TISS exploits its expertise in developing flight consolidation software; Travel Bids invites travel agents to bid for the traveller’s business (i.e. the opportunity to sell them a ticket at lowest price); and Priceline achieves a discount by encouraging dealers and travel agents to match the traveller’s ideal (i.e. low) price. These examples highlight that within cyber-markets the traditional travel agent model is being accompanied by new business models, some of which bear no resemblance to a traditional travel agent. The centrality of CRS was also evident, both as an enabling technology [11], and as a conduit for new competitors. CRS providers enable travel agents to find schedules and fares, seat and room availability, care hire tariffs, make reservations directly, and provide the traveller with a (potentially) seamless journey across airline operators. Access to a CRS remain an imperative for online travel agents. Moreover, CRS providers are themselves migrating forward into providing tourism services, for example Travelocity (owned by Sabre). The influence of CRS providers, whether as facilitators to online travel agents or as new competitors in their own right, depend on: competition for the number of terminals and agencies connected to their inventory systems (airlines, car hire operators, hotels, travel agents); their ownership structure and its relative influence (airlines, technology providers); financial strength; and challenges from emerging non-proprietary Internet-based communication technologies. In contrast to travel agencies and CRS providers, public agencies, such as tourist authorities, hold different priorities. They are driven by national or regional policy aims that seek to generate wider economic gains through promoting the attractions of their nation or region. These organisations are non-profit seeking, yet as members of the tourism constituency can have a significant influence on the sector’s revenue generating capacity. Indeed, as the initial point of enquiry for many travellers and tourists, they are uniquely positioned to amplify commercial opportunities for travel agents and specialist service providers. Close examination of public agency sites show them exploiting the new medium to exercise greater influence than hitherto possible: providing hypertext links to commercial service providers; varying degrees of interactivity offered; often accessible in multiple languages.
4. Findings and analysis This section discusses the business models suggested from the data collected in the methodological approach section above, with emphasis on the integration of the online tourism services arena, and on how heritage is helping to shape this evolving sector.
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4.1. Towards an integrated online tourism services sector While agencies are intentionally searching for differential advantage, they are also unintentionally engaged in forging an integrated, though not necessarily coherent, Internet-based tourism services sector. Integration here refers to: the development of a web sector based on strong multi-node networks linking differentiated producers and users (rather than linear supply chains and segregated distribution and communication channels); and the emergence of permeable boundaries, for example between CRS providers and agencies, and between the services of portal sites and their configuration as travel agencies. This integration is strengthening through: 앫 the continual building of business alliances and links with public agencies; 앫 the widespread use of a limited number of reservation technologies; 앫 the readiness of competitors and collaborators to juxtapose legacy technologies (CRS), with Internet-based expertise (search engines). Co-operation as much as competition is a feature of the emerging online tourism services sector, where commercial operators and public agencies alike provide access to each other’s resources. The most obvious sign of co-operation is the existence of hypertext links between travel sites that, ostensibly, are competitors. For example many agencies contract out their online reservation offering: Travelweb provides car hire booking via another Internet travel firm, ITN; Epicurious connects the user to MS Expedia for all its online reservations; and Preview is the preferred reservations partner for Excite and many other online intermediaries. Many agencies also offer external links to other related service providers, including CRS providers, Magellan (travel goods), Amazon (for travel books), and flight tracking information. There are also links with less obviously related services, including the Wall Street Journal, employment agencies, and financial services. While Tourist Boards provide contact information on culture and art, travel, accommodation and restaurants, many go further, providing hypertext links to those sources. For example the British Tourist Authority (BTA) offers hypertext links to airlines, enabling the web visitor to move effortlessly from the BTA site to engaging in online reservation with any of a number of major airlines. Perhaps the biggest reason for such co-operative networking is the recognition that catching a user in cyberspace depends on visibility and rich information, which in turn requires creating multiple hypertext links. Links are cheaper, faster at raising the profile of a new site than onsite advertising, and more cost effective than trying to maintain current information in-house. In this environment agencies see the reach of their network as a valuable asset, defining their competitive position and prospects. For example Travelweb claims to be “the web’s second most popular travel and tourism site, with nearly 8000 links from other sites compared with Travelocity’s 3200”. Paradoxically, in the hunt for service differentiation, travel agencies rely on each other to support their individual service offering through electronic networking. Moreover, the same electronic networking is helping to integrate the vast and diverse
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range of tourism related services such that both service provider and end user benefit. Hypertext linking seems achievable at little cost, allowing a travel agent to present themselves as offering as wide a range of services as felt desirable, without them having to enter contractual promises with the service provider, and services can be charged for when used. The user benefits through being provided access to a catalogue of shopping possibilities; access that is also immediate. Such immediacy coupled with the speed and ease of network configuration supports a much faster feedback loop between service provider and purchaser, carrying greater scope for adaptation by both service provider and user, than is possible with traditional High Street-based tourism services provision. 4.2. Exploiting heritage The influence of history in shaping the future is well know; nevertheless a relationship often understated or seen as impeding progress, by those caught up in the excitement of the new. Much of the development and direction of online tourism services provision draws on ingrained attitudes and industry recipes for success, some of which is rooted in a long tradition of CRS technology development. However there is also evidence of legacy technology being a source of innovative behaviour when juxtaposed with new markets. Many companies are engaging with the online tourism services sector by extending the application of their existing competences. Paradoxically, those potentially most closely affected by an emerging technology are often the slowest to react to the changing world, at times regarding new competitors as operating in a different market segment, even as their future revenues are being eroded by the newcomers. Long standing industry recipes for success preclude appropriate anticipatory action. Bricks and mortar agencies have been very slow to engage imaginatively with this new technology. The evidence suggests that despite the growth of Internet surfing, most people still prefer to buy travel and tourism over the counter.3 The High Street agency is a tried and tested model, whereas in its short life the Internet has acquired a reputation for supporting fraud. Moreover, price conscious net-surfers find the quoted airline ticket prices to be higher than they can find in the High Street agency. Thus Internet buyers, wary of Internet fraud and looking for competitive prices, continue to support High Street travel agents, thereby reinforcing the continued confidence of those High Street operations that the Internet is not going to replace them. The widespread dependence of the tourism sector on CRS as a basic technology has already been noted. Various forms of this technology were first introduced by leading airlines in the 1950s and 1960s. Competition ensured decades of investment in CRS and the adoption by other airlines of one of the alternative standards. Industry rationalisation has resulted in four major CRS providers today — Sabre, Galileo, Amadeus, Worldspan — with the first three operators accounting for 87% of the market for CRSs [18]. The advent of Travelocity as an online travel agent (owned by Sabre), represents a recognition among CRS providers that the Internet promises to be a profitable form of forward integration and application extension of its legacy technology. Other software vendors further up the supply chain have started moving
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closer to the end user. Microsoft sees in this new arena an opportunity to generate new profits from its expertise in computing (information handling, multimedia). MS Expedia (owned by Microsoft) is a fast growing full-service travel agency, and expects to become a dominant player in the next few years, supported by its owner’s technological and financial resources. Yahoo! and Excite, have been extending the application of their expertise in managing and providing structured information, by forming an alliance with Preview Travel, the provider of online travel information and transactions.
5. Shaping futures: tensions to expectations We do not offer predictions and visions here; that is easy. As Sardar suggests visions carry more value when they acknowledge uncertainties, such as possible obstacles and contradictions [19]. Historical structures and mythologies may preclude particular futures, but the pattern of social innovation remains open to multiple interpretations, both good and bad; futures are always provisional, and are a product of individual and collective expectations, competition, serendipity, and the tensions and contradictions inherent in all human activity. In recognising that there is no predetermined future, we expect that such futures grow out of social innovation. Here we assess socio-technical junctions as sources of social innovations; such junctions being launch points of social change and development. Having described some features of the emerging Internet-based tourism services, what sort of social and commercial landscape is suggested by the confluence of old institutions and new ideas? How far reaching will change be? We already see oldeconomy businesses adopting a dot.com or similar suffix. Is this evidence that the new-economy is supplanting the old-economy? We do not have the space here to explore all of these questions, but a limited assessment of trends will provide some insight into the commercial and social innovations that seem to be emerging. By way of structuring the discussion we shall focus on three dimensions that seem central to how the new-economy will unfold: the broad socio-technical context; competition for end users and investors; and end user expectations. These three dimensions do not stand independent of each other; the future is a product of their interaction. 5.1. Socio-technical context An important contributor to understanding the future Internet-based business models is an awareness that future scenarios are not realities somehow disconnected from the present. Even revolutionary change can be shown to have its roots in fissures of the past. We have already discussed many of the socio-economic factors shaping the tourism sector of today. Our analysis shows that exploiting and experimenting with this fast developing medium of communication, the Internet, introduces new political, economic, social, and technological tensions. These tensions are manifest in three areas: how far governments should go in bringing the Internet under legislat-
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ive control; globalised competition meeting traditional local constraints; widespread belief that exploitation of communication technologies offer new prosperity. First, individually and collectively, governments are taking tentative steps to harness the Internet world. For example developing or implementing legislation that give them the right to monitor electronic communication and transactions. This prospect is already raising the tension between those who view this development as invasive and undermining civil liberties, and the security services’ goal of containing illegal activities wherever it exists. In addition, as a new medium for commerce governments see the Internet as an irresistible new source of tax revenue, and as is well know, taxation distorts the flows of commerce. Internet-based trading offers few precedents to guide government policy making, but traditional ideological drives are surfacing: capitalist economies seem keen to foster the new medium’s capacity to enable economic growth; and more centrally planned economies seem to attach greater importance to the medium as a conduit for political control. Second, globalisation is often cited as a hallmark of the new-economy. However this does not translate into uniformity of quality of either service offering or its fulfilment. The obstacles to delivering a satisfactory online experience are many and significant, including language, the presumption of a sufficiently sophisticated PC technology available to the end user, poor front and back office transaction processes of the dot.com enterprise, and reliance on local means of fulfilment. Furthermore there is a conflict between the wants of global organisations and individual consumer rights, heightened by differentiated legal frameworks such as between the USA and the EU. For example, the EU recently found Amazon.co.uk to be in breach of EU law when that company shared its customer lists with the US sister company, Amazon.com. Third, the diversity of applications of, and unflinching investment in, ICT continues to develop at a blistering pace, delivering ever greater functionality to an ever broader population for the same or lower price. Drivers of these developments include: an upward spiral of user expectations and service provider promises; converging technologies; the impending deregulation within the EU of “the last mile” of copper from the telephone exchange to the home or office; international collaboration and competition for third generation (3G) wireless licences. Governments are also mining this new medium, for example by holding Internet-based auctions to bid up the price of 3G licences; a strategy that, many argue, will return to haunt us in the form of higher prices for 3G services and/or stifled investment in this or other technologies. 5.2. Competition for end users and investors These broader socio-technical tensions are generating both opportunities and constraints that are shaping, and are being shaped by, the particular features of Internetbased commerce, of which tourism services form a large part. The unfolding competition for end users, and the revenue generation models of online tourism services providers give some insight to who will inherit the future. Competition is driving the convergence of certain technologies (e.g. content and
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delivery, education and entertainment, voice and data), fuelled by a promise to deliver ever richer and unimagined experiences to the consumer. For the foreseeable future this experience will not be universally deliverable or receivable to the same level of quality until significant challenges are overcome. The more immediate competitive challenges include: overcoming slow website downloads; securing online financial transactions and the use of personal data; improving sites strong on animation but weak on content or interactivity; and eliminating the irritating need for plug-ins. Over the longer term dot.com tourism services providers face more formidable challenges: from their traditional bricks and mortar cousins; other types of service provider; and increasingly wary institutional investors. The severity of these challenges is manifest as a high turnover of dot.coms; a mortality rate that is likely to remain high for the foreseeable future. In common with all start-ups, there is a predictable demise of unsustainable business ideas and the continual emergence of new propositions. Moreover, website advertising, the most common revenue generator to-date, seems likely to decline as would-be advertisers and investors become increasingly critical of the value of this form of promotion. Furthermore, the cost of web site advertising is falling as the number of competing website hosts multiply. Clearly unless new ventures can add value in some other way they are set to fail. Investors are also increasingly unwilling to fund dot.com ventures. Dramatic collapses of a string of dot.coms during 1999–2000 resulted in many venture capitalists losing considerable sums because of what they now regard as unrealistic growth projections and inflated market capitalisations of most dot.coms. Moreover, investors are no longer enamoured by a business development model based on very high levels of cash burn by dot.coms (on promotional campaigns to establish global awareness quickly) that far outstrip any medium term prospect of revenue generation through the delivery of services. Paradoxically, over the last two years market valuations of many dot.com ventures have been much higher that long established and profitable bricks and mortar businesses. However the spectacular failures of some dot.coms has paved the way for more sober evaluations by investors, based on profitability models more common among traditional bricks and mortar businesses. In the medium term, bricks and mortar enterprises seem likely to catch up, and in many cases absorb, their dot.com cousins. Many dot.coms for their part have been using their financial strength (market valuations) to establish a foothold in the traditional bricks and mortar world, acquiring established businesses. The future seems likely to belong to bricks and clicks. The Internet will be absorbed and become an irrelevance in its own right. 5.3. End user expectations Clearly, while recognising the broader socio-technical context and competition among, and for, dot.com tourism services providers, we should not lose sight of the expectations and fears of the end user, and the tensions inherent in their preferences. Much of the competition is to get a share of the end user’s business. Among the highest expectations is that the Internet will transform our lives for
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the better, for example by being able to conduct almost all of our affairs from a desktop. Paradoxically, many see such a prospect as a turn for the worst, hatching a social innovation that is detrimental to the development of society. Perhaps the strongest fear among end users is that of falling prey to viruses, hackers, and marauding online bandits, as evidenced by the reluctance of consumers to carry out high value transactions over the Internet. This fear is not entirely irrational since the new medium attracts all forms of social innovation, both for good and ill. This new medium also opens up new tensions and contradictions. For example there is universal support for free and open communication and access to all information. Inherent in this openness is the destructive power available to those who abuse this freedom. There is also a tension between end users’ desire to receive tailored information, against their reluctance to release personal information (to better effect that tailoring), aware of the scope for misuse of that information. These fears and tensions bring the spectre of legislative control ever closer. The advent of the Internet is not likely to change our every-day experience of the tangibility distinction between products and services, where products are said to be easier to sell because they offer a “touchy feely” experience. However, as the opportunity to experience the sight and sounds of places far away is increasingly mediated by the use of new-economy technology, that age-old desire to add tangibility to services is becoming achievable. Competition, raised expectations, and technological innovation, will enable dot.com tourism enterprises to appeal directly to our sensory, emotional, and intellectual experience. The competitive landscape of Internet-based service provision, of which tourism is a large part, is becoming more differentiated, fuelling the continued convergence of communication technologies, and forcing down the cost of bandwidth. The traditional utilitarian assumptions of the rational consumer making cost/benefit assessments will give way to innovations appealing to our emotions more forcefully than hitherto possible. We can expect our senses and imagination to be exercised from the comfort of our desktop: to be able to see, hear, touch, and smell far away places, without ever going there. 6. Conclusions This paper set out to shed light on the ways that pioneering and novel forms of Internet-based tourist organisations are contributing to the evolution of the tourism sector. Competitive use of ICT, in particular the Internet, to provide information and enable financial transactions is proving to be a significant shaper of social and economic life within Europe and North America. One of our first observations, borne of methodological necessity, is that the scope for pioneering activity, based on the notion of leading sites, gives rise to a recognition of the variety of factors that Internet start-ups focus on as they seek to engage surfers; we found seven frames of reference. All Internet-based businesses are to some degree pioneers. Moreover, these new enterprises are pursuing a diversity of strategies, as infomediaries, online traders, auctioneers, and publicly funded network enablers like the BTA. Many have adapted conventional business models, such as trading and auctioneering, to the new medium.
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The strategies of these Internet start-ups have in common their exploitation of the Internet’s technological capacity for storing and communicating unlimited amounts of data, at marginal cost, instantaneously accessibly globally, and available 24 h a day. Competitive action based on innovative uses of ICT is lowering the cost and risk to entrepreneurs, especially those wishing to compete in sophisticated and international niche markets. Indeed the low cost of setting up web sites (small financial investment and technically straightforward) enables small firms to become globally present and accessible very quickly. At the same time Internet firms seem to recognise that survival depends on co-operation as much as on competitive action. All are providing a free service hitherto not feasible or economically viably, in the form of networks built on hypertext links. Furthermore, the scale and diversity of information provided or accessible at the click of a mouse, and the virtual juxtaposition of that information, is unprecedented: the vast amounts of up-dated and largely accurate travel information, both quantitative (destination weather conditions, currency rates, ticket prices, flight tracking) and qualitative (cultural events, political conditions, visual imagery), with immediate links to a host of other potentially relevant information (books, daily news, retail). Perhaps the most powerful competitors emerging in Internet-based tourism services are those with the resources to invest. From our study, they seem to be the portal sites, reservation technology providers, and Microsoft. Portal sites are approaching the sector through structuring their vast data warehouses into thematic sites (e.g. tourism). CRS providers see the Internet as another distribution channel that compliments their existing arrangements, while Microsoft recognise the potential of the sector for exploiting their own considerable technological and financial strengths. Opportunities for differentiation appear to rest with developments in electronic transactions, providing interactivity and rich data, and taking online reservation and itinerary planning to new heights of sophistication. For example there is room for more culturally sensitive sites, moving beyond those that offer a choice on language, and improving on the one example of cultural sensitivity found, that of the Spanish Tourist Office. In addition, technological developments that enable the ambience (including smell and feel) of the destination to be sampled by the surfer would take Internet-based tourism in new directions, into the realms of virtual reality. Periodic press reports note that most Internet start-ups are making no profit as yet. However there continues to be a constant stream of new Internet enterprises, many providing travel and tourism information. The evidence presented here suggests that there are as yet no clear frameworks for making money from the provision of Internet-based tourist services. Recent dot.com fatalities have injected a strong dose of scepticism to the financial markets, but valuations of Internet start-ups still reveal the widespread belief among investors that the Internet technology will be a major part of the social and economic fabric of our society, and that some of these businesses will deliver profit in the future. While the Internet is, for the most part, seen as a liberating force, there are also looming economic and social costs attached to such open access. For example, network congestion and governance. Easy access increases the chances of Internet con-
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gestion, which leads to degradation of network service quality. This could be managed by making Internet users pay for bandwidth. For example through the development of a differentiated service framework offering multiple levels of service quality (e.g. Internet 1, Internet 2), and incorporating non-Internet technologies like EDI. More fundamentally, innovative use of the medium is raising questions about how we wish to be governed. Many see the new medium as a way of taking democracy to new heights, allowing electronic voting. Some governments see it as weapon enabling unauthorised political movements and businesses to undermine their political and economic sovereignty. Even before the advent of the Internet Dann observed that [20], both developed and developing countries have become locked into a new international economic order where supply and demand yield to the symbiotic practices of mass advertising, information technologies, marketing segmentation, consumerism and data bank networking, whose multinational operators seek no more or less than the world itself… and national champions cheerfully surrender their identities on the altar of progress. Individual governments, uneasy with the open access of the Internet and its independence of national borders, are making independent assessments of the risks and opportunities of online trading of information. They see danger lurking in the medium’s exploitation by hitherto poorly co-ordinated virtual communities, both benign and malignant, from discussion groups to those trafficking pornographic material and banned substances. Opinions are divided on whether the information moving around this medium and access to it, needs to be regulated, and if so by whom, and how.
Acknowledgements This paper was born out of a TechMaPP project, InTouriSME, and funded by the EU. InTouriSME consisted of a large group of collaborating agencies, who were committed to helping develop and implement EU policy on the promotion of Internet-based tourism among SMEs in Europe’s “less favoured regions”. Prof. Molina led the formulation of this project.
References [1] http://glreach.com/com/globstats/evol.html. [2] http://www.openmarket.com/intindex/98-05.htm. [3] Schwartz EI. Webonnomics: nine essential principals for growing your business on the world wide web. London: Penguin, 1997. [4] http://www.mit.edu/people/mkgray/net/web-growth-summary.html. [5] Claval P. The impact of tourism on the restructuring of European space. In: Montanari A, Williams
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AM, editors. European Tourism: regions, spaces and restructuring. Chichester, UK: Wiley, 1995. p. 247. Plog Research Inc., American Traveler Survey, 1997. http://www.sys1.com/company/sept30.stm. Claval P. The impact of tourism on the restructuring of European space. In: Montanari A, Williams AM, editors. European tourism: regions, spaces and restructuring. Chichester, UK: Wiley, 1995. http://www.telecities.org. Urry J. The tourist gaze: leisure and travel in contemporary societies. London: Sage, 1990. Williams AM, Montanari A, Introduction: tourism and economic restructuring in Europe. In: Montanari A, Williams AM, editors. European tourism: regions, spaces and restructuring. Chichester, UK: Wiley, 1995. p. 4. Ford D. Develop your technology strategy. Long Range Planning 1988;21(5):85–95. Claval P. The impact of tourism on the restructuring of European space. In: Montanari A, Williams AM, editors. European tourism: regions, spaces and restructuring. Chichester, UK: Wiley, 1995. p. 248 http://www.Jup.com. Urry J. The tourist gaze: leisure and travel in contemporary societies. London: Sage, 1990. p. 82. Shachar A. Metropolitan areas: economic globalisation and urban tourism. In: Montanari A, Williams AM, editors. European tourism: regions, spaces and restructuring. Chichester, UK: Wiley, 1995. p. 157. Castells M. The informational city. Oxford: Blackwell, 1989. Shaw G, Williams AM. Critical issues in tourism: a geographical perspective. Oxford: Blackwell, 1994. Travel Industry Monitor, Travel and Tourism Intelligence. The Economic Intelligence Unit 1998, March. Sardar Z, editor. The morning after (special issue). Futures February 2000;32(1):1. Dann GMS. Limitations in the use of “nationality” and “country of residence” variables. In: Pearce GD, Butler RW, editors. Tourism research: critiques and challenge. London: Routledge, 1993. p. 97–98.
Internet-based tourism services: business issues and trends L. Rayman-Bacchus *, A. Molina TechMaPP, Department of Business Studies, University of Edinburgh, 31 Buccleuch Place, Edinburgh, UK
Abstract This paper assesses the current state of development among the Internet-based providers of tourism services. The study focuses on leading intermediary businesses and enabling groups: travel agents; specialist service providers; reservation technology providers; and public agencies. In studying some 50 leading web sites, spanning a range of differing groups of intermediaries, we examined how travel agent sites seek to differentiate themselves, how public tourist information bodies are harnessing the Internet, and the role of computer reservation technology providers. We also examined factors shaping the future of the Internet: institutional tensions; competition for end users and investors; and end user expectations. The conclusions highlight a number of implications for the further development of tourism services provision within Europe, where the Internet plays a significant role. For example, the extent and pace of social and economic change that Internet derived information is facilitating. 2001 Elsevier Science Ltd. All rights reserved.
1. Introduction The Internet as a communication medium and market space is growing at an unprecedented rate. As of August 1999, some 215 million people have access to the Internet, a leap from the 133 million estimated to be online one year earlier and a fivefold increase from 40 million in 1995! [1]. Of the 215 million, 57% are English language users, while 26% access the Internet using European languages (excluding english). It is widely believed that Berners–Lee’s development of the “World Wide Web” in 1989 was key to opening up the Internet as a global and easily accessible
* Corresponding author. Tel.: +44-1276-509503. E-mail address: [email protected] (L. Rayman-Bacchus). 0016-3287/01/$ - see front matter 2001 Elsevier Science Ltd. All rights reserved. PII: S 0 0 1 6 - 3 2 8 7 ( 0 1 ) 0 0 0 0 3 - 9
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information space, accompanied by a new vocabulary: HyperText Transfer Protocol (HTTP); Uniform Resource Locator (URL); HyperText Markup Language (HTML); web site and web page. By April 1998, there were an estimated 320 million web pages [2], a figure that stands in stark contrast to Schwartz’s estimate of 10 million web pages approximately one year earlier, in his assessment of the economic importance of the World Wide Web [3]. Other studies suggest that the number of web sites is doubling in under six months, a slow down from doubling every three months back in 1994 [4]. Statistics in this fast moving and fluid area are notoriously unreliable, nevertheless the picture emerging is one of an electronic market erupting on an unprecedented scale. With little or no regulatory control and low economic barriers to entry, new Internet-based businesses appear like weeds in a garden, but risks are high as the technology continues to develop apace and in unforeseeable ways, and entrepreneurs push the frontier of novel business approaches. In the last five years, we have witnessed centuries old business formulae for success being overturned by those willing and able to exploit the communication possibilities of the Internet and the information storage capacity of the World Wide Web. The Internet provides a fundamentally different economic environment for doing business, its key differentiator being rapid communication of information, accessible globally, and at negligible cost. Examples of these new ways of competing include giving the product away (e.g. Netscape), the emergence of online auctions for air tickets (e.g. Travel Bids), and the unprecedented scope for developing economic networks (e.g. electronic markets). Little is known, beyond these broad statistical patterns and isolated examples, about how the advent of Internet-based business is shaping the provision of tourism services; an industry that arguably accounts for the biggest part of the services sector. This paper seeks to redress this situation by mapping and analysing the business approaches found among those providing Internetbased tourism services. Many of those new online organisations include traditional travel agents, tour operators, national tourist offices, airlines, hotels, car hire firms. However, alongside these traditional providers are other operators unique to the Internet. The aim here is to identify and analyse the ways that these novel forms of business organisation — Internet businesses — are contributing to the evolution of the competitive e-commerce landscape of the tourism sector. By way of contextualising the enquiry and analysis that follows, the following section briefly reviews the shifting socio-economic ground of tourism and information and communication technology (ICT), with an emphasis on Europe. The methodological approach section presents the research method underpinning the enquiry. The findings and analysis section shows the emergence of new models of enterprise, relying on co-operation alongside competition. Heritage is also shown to be very influential even in this new online environment. The Shaping Futures section looks forward, by exploring some underlying socio-technical tensions that will help shape the future development of the emerging Internet-based tourism services sector. These broad tensions, in conjunction with those end user expectations driving the sector’s development, help us understand the longer term prospects for dot.com enterprises. The final section presents the conclusions.
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2. Shifting socio-economic context of tourism In seeking to understand the development of Internet-based tourism services, we first need to appreciate some of the antecedent conditions, the socio-economic movements and technological developments within which tourism is embedded. One movement is the increasing political and economical integration of large regions of the world (e.g. Europe, the Americas, Asia). At the same time citizens of modern societies are attaching ever greater importance to leisure [5] often integrating particular leisure interests with individual work patterns [6]1. Implicated in these movements is the harnessing of ICT to bring about: faster and more widespread communication and greater information dissemination; lower transaction costs and the realisation of electronic commerce; and increased scope for meeting and promoting individual preferences. In this context, European economic space today is experiencing major restructuring, regionally, rurally, and among cities and towns. The reasons are many, including: the creation of the EU as a legal entity; globalisation of trade; and the relative rise and fall of myriad economic sectors. Among the factors credited with facilitating this reshaping of Europe is ICT, which Claval sees as “impacting strongly on service activities and the organisation of enterprises” [7]. Indeed many of Europe’s cities are proactively developing initiatives and policies aimed at encouraging the widespread adoption and adaptation of ICT. The European Telecities network has over 100 cities brought together by their interest in the application of ICT to the transformation of municipal services for the development of local economies [8]. 2.1. Transformation of tourism: supply, demand, technological change One manifestation of the evolving socio-economic space is the changes in the production of tourism. There is evidence that, over the last four decades, the dominant model of tourism production has been shifting from Fordist mass tourism to post-Fordism [9]. The mass consumption of a standardised product, where markets are dominated by a few producers (tour operators and airlines) with many small firms contractually dependent on the tour companies, and involving substantial state support (e.g. transport infrastructure), is giving way to new ways of competing and co-operating. Increasingly, as Montanari and Williams observe, changing cultural values, business competition and national competition for tourism, and improvements in ICT are all facilitating “greater emphasis on more individualistic or specialised forms of holidays” [10]. Furthermore, in the hunt for profitability and global market advantage during the last three decades, providers of tourism information and services have been shaping the evolution of many technologies, including transnational banking, enquiry and booking systems using interactive videotext and computer reservation systems
1 According to the survey of American travellers conducted by Plog Research, Inc. (1997 American Traveler Survey) six out of ten (travellers) extend their business trips to include some vacation days.
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(CRS). Indeed the large airlines have successfully positioned their CRSs as a critical or basic technology [11]2, creating a formidable barrier to new entrants to the travel industry. Travel agents in turn have seen access to CRSs as a necessary source of productivity and competitive advantage. These developments offered the consumer more choice, based on swift access to accurate information. However, the consumer still needed the services of an agency in order to exercise that choice. In tandem with the shift towards flexible specialisation of tourism production, the consumption of leisure information and recreation are playing an ever increasing part in modern European life; more Europeans are travelling to other parts of the world, and an ever increasing number of visitors are converging on Europe. European tourism, accounting for over 50% of international tourism [12], is a major economic generator of income flows, jobs, and business creation. Moreover, Internet-based travel transactions seems set to become a major contributor to those flows. According to Jupiter Communications market research [13], travel is one of the fastest growing sectors of the Internet, accounting for 50% of all www transactions in 1996, and travel and tourism sales are expected to reach US$3 billion in year 2000. While such growth is impressive, Internet-based travel trading is still a fraction of all travel sales of about US$300 billion per annum. 2.2. Blurring distinctions between tourism and work Hitherto distinct divisions associated with the Fordist model are being broken down, because, according to Urry, “the era of mass communication has transformed the tourist gaze” [14]. At one level this phenomenon is evident from the difficulty of classifying many web sites as purely tourist related. The ubiquity of Internet technologies and spiralling consumer expectations, facilitated by the cultural and structural changes noted above, are undermining earlier distinctions between work and leisure. Tourism has become much less singular and distinguishable from other social activities. For example, a recent survey shows that about half of those with Internet access regularly browse the Internet from their workplace, for tourist information.3 Also the flow of tourism between Europe’s cities and towns consists of
2
Ford identifies three types of technologies. Distinctive technologies — giving the company a distinctive competence in relation to competitors. Basic technologies — on which the company depends and without which it would not be able to operate in its markets. External technologies — which are supplied by other companies. Similar concepts are pursued by Whelan: critical technologies, are like Ford’s ‘distinctive’ and ‘basic’ technologies; enabling technologies are the minimum necessary for a company to compete without providing advantage; and strategic technologies which are still in their early stages of development but could eventually lead to new areas of critical technology and competitive opportunities. Whelan RC, How to prioritise R&D, Proceedings of the Conference on the State of the Art in R&D Management, Manchester Business School, Manchester, July 11–13, 1988. An earlier taxonomy on the same lines is also found in Little AD. The Strategic Management of Technology, (AD Little for the European Management Forum in Davos, Cambridge, MA and London, 1981). 3 Street survey of tourists, conducted by TechMaPP, The University of Edinburgh in August 1999. A sample of 100 were interviewed.
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both business and leisure travel. Both groups use overnight accommodation, and visit cultural, entertainment, and shopping facilities. 2.3. Virtual travel no substitute for the real thing Telecommunication developments seem to have sharpened the traveller’s appetite for travel information. Internet technologies are complementing rather than undermining the role of personal travel. For the business traveller Shachar’s observation still holds that within Europe’s urban areas “recent technological breakthroughs in telecommunications are not a substitute for personal interaction, but on the contrary, give more importance and prevalence to such exchanges” [15]; the more complex the business decision, the greater the need for interpersonal dialogue [16]. Indeed the importance of business travel is likely to increase with the complexity of managing globally dispersed enterprises [17]. Set against this, certain communication technologies, such as Internet telephony and video conferencing, have been replacing both routine and ad hoc international travel. ICT, and in particular the Internet, is deeply implicated in these and other social, political, and economic movements. What started out as a tool for facilitating scientific research, has become an enabling technology for industry, and this paper explores the emerging centrality of Internet technology to the competitive dynamic of the tourism sector.
3. Methodological approach: conceptual definitions and confines of the study There are few technological or economic barriers to setting up business on the Internet, and so prospectors are setting up camp with diverse credentials, expectations and recipes for success. This section describes the types of enterprises that are the focus of this study, using the notion of leading sites. Also introduced are the analytical dimensions underpinning the main observations discussed in the findings and analysis section. These devices help highlight some of the significant dynamics and movements within this emerging arena. 3.1. Leading sites We have concentrated on the web sites of intermediary firms and agencies that constitute the sector. These are organisations that facilitate communication and transactions between the primary providers of travel and accommodation services (e.g. airlines, hotels, car hire firms), and potential consumers of those services. We examined 50 leading sites across four broad groups: 앫 앫 앫 앫
travel agents and tour operators; specialist service providers; computer reservation systems providers (CRS); public tourism agencies.
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The 50 sites were made up of 35 agents and specialist service providers, four CRSs, and 11 public tourism agencies. The study is not concerned with the primary providers of travel and accommodation services, since our aim is to gain an insight into how the new Internet-based intermediaries configure their services, relate to the potential tourist, and compete or co-operate with each other in the emerging e-commerce arena. The leading web sites were randomly picked from various sources, including: 앫 selecting winners of Internet contests such as the one promoted by the Internet tourism Enter Conference; 앫 through sites of tourist organisations such as the Association of British Travel Agents (ABTA) and tourist boards. 앫 sites found through web surfing that appeared innovative in some sense. We were particularly interested in identifying leading sites: those sites that in some sense appeared to be setting new trends, assuming that their creators seek to differentiate them in order to attract visitors. Study and reflection on the diversity of sites show that there is no single definition of a leading site. Differing frames of reference generate differing and equally valid candidates. We identify seven such frames: 1. Capability to engage in electronic commerce. How much a site facilitates interactivity: from passivity (advertising and information only) to offering degrees of interactivity (e.g. supporting online enquiries, engaging the user in online service experiences and financial transactions). 2. Posting the number of hits or visits a site receives. Some sites monitor and display such information. Hits are produced through chance visits, links or advertising banners located at other sites, through search engines, and personal references. 3. A site’s role for other sites as a business node. Many operations sub-contract their service provision to others. The names of these others recur across many sites. 4. Whether the site is rooted in a strong technological or commercial heritage. Such heritage includes: reservation technology providers; portal site expertise and database; hotel reservation technology; deep financial reserves. 5. The novelty of the service offered by the site relative to traditional bricks and mortar businesses. Online auction (e.g. Travel Bids), the reverse auction, flight tracking. 6. Sites generating profit. Perhaps the most important criteria for being a leading site, however, this information is sensitive and very difficult to obtain.4 We speculate that while some sites are generating revenue, probably through advertising, reservation transactions, and sponsorship, few are profitable. Indeed leading sites with a strong technological or commercial heritage (4 above), may be surviving through financial subsidy from the parent organisation. 7. Site appeal and presentation. Leading sites are visually attractive, multimedia,
4
A web survey was attempted on this aspect and resulted in very few significant replies.
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provide detailed and current content, and are effective at holding the interest of the surfer, perhaps through interactive activities. The British Tourist Authority, Lufthansa, and Reiservice have all won awards for the appeal of their sites. These frames of reference suggest sources of competitive advantage, and are not exclusive categories. Consequently a few sites could claim to be leading in more than one area. We have chosen examples representing each of these frames, with exceptions: not all sites report hits, and in any case there is much scope for error through inflating (or under stating) the number of meaningful hits; systematic data on profitability is unavailable. Site presentation in itself belongs more to the area of interface quality, and bears only indirectly on our understanding of the dynamics (relationships and drivers) of Internet-based tourism service provision. We have therefore not sought to evaluate the appeal of any site per se. Consequently categories 1, 3, 4 and 5 were used to generate the data for the evaluative work conducted in this study. 3.2. Developing analytical dimensions Through studying the range of web sites of intermediaries, and continual reflection on the data, four analytical dimensions emerged: evolutionary context, competitive positioning, enabling technology, and public services support. The evolving context of online tourism services is one of USA online enterprises leading their European cousins in setting the pace of business innovation. Within this context is: the competitive positioning of online travel agents; the dominance of CRS as a basic technology [11] and its emergence as a conduit for new competitors; and a rejuvenated role for European public agencies supporting economic development. There are many more USA-based dot.com enterprises that their European counterparts. Moreover, USA-based web sites are typically more sophisticated than their European cousins, offering more interactivity including online reservation and payments. Many enterprises position themselves as global operations but the end user must use English, and transact in US dollars. Relatively few enterprises are also High Street (bricks and mortar) travel agents, and those that are seem to be using the web as an advertising channel and not as an additional sales channel. Many of these differences reflect a sector in evolution. Nevertheless, for the foreseeable future USA-based online enterprises are likely to lead in the introduction of novel services, and to play a key role in shaping the dynamics of online tourism services provision. Against this background online travel agents were assessed for how they organised their service offering, including the range of services on offer; and how the agency seemed to be positioning itself in the market place. Taken together these factors shed light on the prospects of online tourism services provision, from which it is clear that the traditional business model of a travel agent is being challenged. First, cooperation through electronic networking is pervasive; the use of hypertext linking is ubiquitous, both as an organising device and as an aid to competitive positioning. Second, novel types of information are being provided by infomediaries, who do not sell tickets as do travel agents, but are more than online travel guides, providing live
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information and links to other relevant sites. For example, Smart Traveler and Map Quest offer interactive maps, while Sidewalk provides traffic information on specific USA cities, while others offer live flight tracking. Third, the emergence of novel approaches to pricing tickets. TISS, Travel Bids and Priceline offer online reservation and discounted tickets, but no reviews/guides or other useful information commonly associated with travel agents. However each proposition is based on a distinctive model: TISS exploits its expertise in developing flight consolidation software; Travel Bids invites travel agents to bid for the traveller’s business (i.e. the opportunity to sell them a ticket at lowest price); and Priceline achieves a discount by encouraging dealers and travel agents to match the traveller’s ideal (i.e. low) price. These examples highlight that within cyber-markets the traditional travel agent model is being accompanied by new business models, some of which bear no resemblance to a traditional travel agent. The centrality of CRS was also evident, both as an enabling technology [11], and as a conduit for new competitors. CRS providers enable travel agents to find schedules and fares, seat and room availability, care hire tariffs, make reservations directly, and provide the traveller with a (potentially) seamless journey across airline operators. Access to a CRS remain an imperative for online travel agents. Moreover, CRS providers are themselves migrating forward into providing tourism services, for example Travelocity (owned by Sabre). The influence of CRS providers, whether as facilitators to online travel agents or as new competitors in their own right, depend on: competition for the number of terminals and agencies connected to their inventory systems (airlines, car hire operators, hotels, travel agents); their ownership structure and its relative influence (airlines, technology providers); financial strength; and challenges from emerging non-proprietary Internet-based communication technologies. In contrast to travel agencies and CRS providers, public agencies, such as tourist authorities, hold different priorities. They are driven by national or regional policy aims that seek to generate wider economic gains through promoting the attractions of their nation or region. These organisations are non-profit seeking, yet as members of the tourism constituency can have a significant influence on the sector’s revenue generating capacity. Indeed, as the initial point of enquiry for many travellers and tourists, they are uniquely positioned to amplify commercial opportunities for travel agents and specialist service providers. Close examination of public agency sites show them exploiting the new medium to exercise greater influence than hitherto possible: providing hypertext links to commercial service providers; varying degrees of interactivity offered; often accessible in multiple languages.
4. Findings and analysis This section discusses the business models suggested from the data collected in the methodological approach section above, with emphasis on the integration of the online tourism services arena, and on how heritage is helping to shape this evolving sector.
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4.1. Towards an integrated online tourism services sector While agencies are intentionally searching for differential advantage, they are also unintentionally engaged in forging an integrated, though not necessarily coherent, Internet-based tourism services sector. Integration here refers to: the development of a web sector based on strong multi-node networks linking differentiated producers and users (rather than linear supply chains and segregated distribution and communication channels); and the emergence of permeable boundaries, for example between CRS providers and agencies, and between the services of portal sites and their configuration as travel agencies. This integration is strengthening through: 앫 the continual building of business alliances and links with public agencies; 앫 the widespread use of a limited number of reservation technologies; 앫 the readiness of competitors and collaborators to juxtapose legacy technologies (CRS), with Internet-based expertise (search engines). Co-operation as much as competition is a feature of the emerging online tourism services sector, where commercial operators and public agencies alike provide access to each other’s resources. The most obvious sign of co-operation is the existence of hypertext links between travel sites that, ostensibly, are competitors. For example many agencies contract out their online reservation offering: Travelweb provides car hire booking via another Internet travel firm, ITN; Epicurious connects the user to MS Expedia for all its online reservations; and Preview is the preferred reservations partner for Excite and many other online intermediaries. Many agencies also offer external links to other related service providers, including CRS providers, Magellan (travel goods), Amazon (for travel books), and flight tracking information. There are also links with less obviously related services, including the Wall Street Journal, employment agencies, and financial services. While Tourist Boards provide contact information on culture and art, travel, accommodation and restaurants, many go further, providing hypertext links to those sources. For example the British Tourist Authority (BTA) offers hypertext links to airlines, enabling the web visitor to move effortlessly from the BTA site to engaging in online reservation with any of a number of major airlines. Perhaps the biggest reason for such co-operative networking is the recognition that catching a user in cyberspace depends on visibility and rich information, which in turn requires creating multiple hypertext links. Links are cheaper, faster at raising the profile of a new site than onsite advertising, and more cost effective than trying to maintain current information in-house. In this environment agencies see the reach of their network as a valuable asset, defining their competitive position and prospects. For example Travelweb claims to be “the web’s second most popular travel and tourism site, with nearly 8000 links from other sites compared with Travelocity’s 3200”. Paradoxically, in the hunt for service differentiation, travel agencies rely on each other to support their individual service offering through electronic networking. Moreover, the same electronic networking is helping to integrate the vast and diverse
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range of tourism related services such that both service provider and end user benefit. Hypertext linking seems achievable at little cost, allowing a travel agent to present themselves as offering as wide a range of services as felt desirable, without them having to enter contractual promises with the service provider, and services can be charged for when used. The user benefits through being provided access to a catalogue of shopping possibilities; access that is also immediate. Such immediacy coupled with the speed and ease of network configuration supports a much faster feedback loop between service provider and purchaser, carrying greater scope for adaptation by both service provider and user, than is possible with traditional High Street-based tourism services provision. 4.2. Exploiting heritage The influence of history in shaping the future is well know; nevertheless a relationship often understated or seen as impeding progress, by those caught up in the excitement of the new. Much of the development and direction of online tourism services provision draws on ingrained attitudes and industry recipes for success, some of which is rooted in a long tradition of CRS technology development. However there is also evidence of legacy technology being a source of innovative behaviour when juxtaposed with new markets. Many companies are engaging with the online tourism services sector by extending the application of their existing competences. Paradoxically, those potentially most closely affected by an emerging technology are often the slowest to react to the changing world, at times regarding new competitors as operating in a different market segment, even as their future revenues are being eroded by the newcomers. Long standing industry recipes for success preclude appropriate anticipatory action. Bricks and mortar agencies have been very slow to engage imaginatively with this new technology. The evidence suggests that despite the growth of Internet surfing, most people still prefer to buy travel and tourism over the counter.3 The High Street agency is a tried and tested model, whereas in its short life the Internet has acquired a reputation for supporting fraud. Moreover, price conscious net-surfers find the quoted airline ticket prices to be higher than they can find in the High Street agency. Thus Internet buyers, wary of Internet fraud and looking for competitive prices, continue to support High Street travel agents, thereby reinforcing the continued confidence of those High Street operations that the Internet is not going to replace them. The widespread dependence of the tourism sector on CRS as a basic technology has already been noted. Various forms of this technology were first introduced by leading airlines in the 1950s and 1960s. Competition ensured decades of investment in CRS and the adoption by other airlines of one of the alternative standards. Industry rationalisation has resulted in four major CRS providers today — Sabre, Galileo, Amadeus, Worldspan — with the first three operators accounting for 87% of the market for CRSs [18]. The advent of Travelocity as an online travel agent (owned by Sabre), represents a recognition among CRS providers that the Internet promises to be a profitable form of forward integration and application extension of its legacy technology. Other software vendors further up the supply chain have started moving
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closer to the end user. Microsoft sees in this new arena an opportunity to generate new profits from its expertise in computing (information handling, multimedia). MS Expedia (owned by Microsoft) is a fast growing full-service travel agency, and expects to become a dominant player in the next few years, supported by its owner’s technological and financial resources. Yahoo! and Excite, have been extending the application of their expertise in managing and providing structured information, by forming an alliance with Preview Travel, the provider of online travel information and transactions.
5. Shaping futures: tensions to expectations We do not offer predictions and visions here; that is easy. As Sardar suggests visions carry more value when they acknowledge uncertainties, such as possible obstacles and contradictions [19]. Historical structures and mythologies may preclude particular futures, but the pattern of social innovation remains open to multiple interpretations, both good and bad; futures are always provisional, and are a product of individual and collective expectations, competition, serendipity, and the tensions and contradictions inherent in all human activity. In recognising that there is no predetermined future, we expect that such futures grow out of social innovation. Here we assess socio-technical junctions as sources of social innovations; such junctions being launch points of social change and development. Having described some features of the emerging Internet-based tourism services, what sort of social and commercial landscape is suggested by the confluence of old institutions and new ideas? How far reaching will change be? We already see oldeconomy businesses adopting a dot.com or similar suffix. Is this evidence that the new-economy is supplanting the old-economy? We do not have the space here to explore all of these questions, but a limited assessment of trends will provide some insight into the commercial and social innovations that seem to be emerging. By way of structuring the discussion we shall focus on three dimensions that seem central to how the new-economy will unfold: the broad socio-technical context; competition for end users and investors; and end user expectations. These three dimensions do not stand independent of each other; the future is a product of their interaction. 5.1. Socio-technical context An important contributor to understanding the future Internet-based business models is an awareness that future scenarios are not realities somehow disconnected from the present. Even revolutionary change can be shown to have its roots in fissures of the past. We have already discussed many of the socio-economic factors shaping the tourism sector of today. Our analysis shows that exploiting and experimenting with this fast developing medium of communication, the Internet, introduces new political, economic, social, and technological tensions. These tensions are manifest in three areas: how far governments should go in bringing the Internet under legislat-
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ive control; globalised competition meeting traditional local constraints; widespread belief that exploitation of communication technologies offer new prosperity. First, individually and collectively, governments are taking tentative steps to harness the Internet world. For example developing or implementing legislation that give them the right to monitor electronic communication and transactions. This prospect is already raising the tension between those who view this development as invasive and undermining civil liberties, and the security services’ goal of containing illegal activities wherever it exists. In addition, as a new medium for commerce governments see the Internet as an irresistible new source of tax revenue, and as is well know, taxation distorts the flows of commerce. Internet-based trading offers few precedents to guide government policy making, but traditional ideological drives are surfacing: capitalist economies seem keen to foster the new medium’s capacity to enable economic growth; and more centrally planned economies seem to attach greater importance to the medium as a conduit for political control. Second, globalisation is often cited as a hallmark of the new-economy. However this does not translate into uniformity of quality of either service offering or its fulfilment. The obstacles to delivering a satisfactory online experience are many and significant, including language, the presumption of a sufficiently sophisticated PC technology available to the end user, poor front and back office transaction processes of the dot.com enterprise, and reliance on local means of fulfilment. Furthermore there is a conflict between the wants of global organisations and individual consumer rights, heightened by differentiated legal frameworks such as between the USA and the EU. For example, the EU recently found Amazon.co.uk to be in breach of EU law when that company shared its customer lists with the US sister company, Amazon.com. Third, the diversity of applications of, and unflinching investment in, ICT continues to develop at a blistering pace, delivering ever greater functionality to an ever broader population for the same or lower price. Drivers of these developments include: an upward spiral of user expectations and service provider promises; converging technologies; the impending deregulation within the EU of “the last mile” of copper from the telephone exchange to the home or office; international collaboration and competition for third generation (3G) wireless licences. Governments are also mining this new medium, for example by holding Internet-based auctions to bid up the price of 3G licences; a strategy that, many argue, will return to haunt us in the form of higher prices for 3G services and/or stifled investment in this or other technologies. 5.2. Competition for end users and investors These broader socio-technical tensions are generating both opportunities and constraints that are shaping, and are being shaped by, the particular features of Internetbased commerce, of which tourism services form a large part. The unfolding competition for end users, and the revenue generation models of online tourism services providers give some insight to who will inherit the future. Competition is driving the convergence of certain technologies (e.g. content and
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delivery, education and entertainment, voice and data), fuelled by a promise to deliver ever richer and unimagined experiences to the consumer. For the foreseeable future this experience will not be universally deliverable or receivable to the same level of quality until significant challenges are overcome. The more immediate competitive challenges include: overcoming slow website downloads; securing online financial transactions and the use of personal data; improving sites strong on animation but weak on content or interactivity; and eliminating the irritating need for plug-ins. Over the longer term dot.com tourism services providers face more formidable challenges: from their traditional bricks and mortar cousins; other types of service provider; and increasingly wary institutional investors. The severity of these challenges is manifest as a high turnover of dot.coms; a mortality rate that is likely to remain high for the foreseeable future. In common with all start-ups, there is a predictable demise of unsustainable business ideas and the continual emergence of new propositions. Moreover, website advertising, the most common revenue generator to-date, seems likely to decline as would-be advertisers and investors become increasingly critical of the value of this form of promotion. Furthermore, the cost of web site advertising is falling as the number of competing website hosts multiply. Clearly unless new ventures can add value in some other way they are set to fail. Investors are also increasingly unwilling to fund dot.com ventures. Dramatic collapses of a string of dot.coms during 1999–2000 resulted in many venture capitalists losing considerable sums because of what they now regard as unrealistic growth projections and inflated market capitalisations of most dot.coms. Moreover, investors are no longer enamoured by a business development model based on very high levels of cash burn by dot.coms (on promotional campaigns to establish global awareness quickly) that far outstrip any medium term prospect of revenue generation through the delivery of services. Paradoxically, over the last two years market valuations of many dot.com ventures have been much higher that long established and profitable bricks and mortar businesses. However the spectacular failures of some dot.coms has paved the way for more sober evaluations by investors, based on profitability models more common among traditional bricks and mortar businesses. In the medium term, bricks and mortar enterprises seem likely to catch up, and in many cases absorb, their dot.com cousins. Many dot.coms for their part have been using their financial strength (market valuations) to establish a foothold in the traditional bricks and mortar world, acquiring established businesses. The future seems likely to belong to bricks and clicks. The Internet will be absorbed and become an irrelevance in its own right. 5.3. End user expectations Clearly, while recognising the broader socio-technical context and competition among, and for, dot.com tourism services providers, we should not lose sight of the expectations and fears of the end user, and the tensions inherent in their preferences. Much of the competition is to get a share of the end user’s business. Among the highest expectations is that the Internet will transform our lives for
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the better, for example by being able to conduct almost all of our affairs from a desktop. Paradoxically, many see such a prospect as a turn for the worst, hatching a social innovation that is detrimental to the development of society. Perhaps the strongest fear among end users is that of falling prey to viruses, hackers, and marauding online bandits, as evidenced by the reluctance of consumers to carry out high value transactions over the Internet. This fear is not entirely irrational since the new medium attracts all forms of social innovation, both for good and ill. This new medium also opens up new tensions and contradictions. For example there is universal support for free and open communication and access to all information. Inherent in this openness is the destructive power available to those who abuse this freedom. There is also a tension between end users’ desire to receive tailored information, against their reluctance to release personal information (to better effect that tailoring), aware of the scope for misuse of that information. These fears and tensions bring the spectre of legislative control ever closer. The advent of the Internet is not likely to change our every-day experience of the tangibility distinction between products and services, where products are said to be easier to sell because they offer a “touchy feely” experience. However, as the opportunity to experience the sight and sounds of places far away is increasingly mediated by the use of new-economy technology, that age-old desire to add tangibility to services is becoming achievable. Competition, raised expectations, and technological innovation, will enable dot.com tourism enterprises to appeal directly to our sensory, emotional, and intellectual experience. The competitive landscape of Internet-based service provision, of which tourism is a large part, is becoming more differentiated, fuelling the continued convergence of communication technologies, and forcing down the cost of bandwidth. The traditional utilitarian assumptions of the rational consumer making cost/benefit assessments will give way to innovations appealing to our emotions more forcefully than hitherto possible. We can expect our senses and imagination to be exercised from the comfort of our desktop: to be able to see, hear, touch, and smell far away places, without ever going there. 6. Conclusions This paper set out to shed light on the ways that pioneering and novel forms of Internet-based tourist organisations are contributing to the evolution of the tourism sector. Competitive use of ICT, in particular the Internet, to provide information and enable financial transactions is proving to be a significant shaper of social and economic life within Europe and North America. One of our first observations, borne of methodological necessity, is that the scope for pioneering activity, based on the notion of leading sites, gives rise to a recognition of the variety of factors that Internet start-ups focus on as they seek to engage surfers; we found seven frames of reference. All Internet-based businesses are to some degree pioneers. Moreover, these new enterprises are pursuing a diversity of strategies, as infomediaries, online traders, auctioneers, and publicly funded network enablers like the BTA. Many have adapted conventional business models, such as trading and auctioneering, to the new medium.
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The strategies of these Internet start-ups have in common their exploitation of the Internet’s technological capacity for storing and communicating unlimited amounts of data, at marginal cost, instantaneously accessibly globally, and available 24 h a day. Competitive action based on innovative uses of ICT is lowering the cost and risk to entrepreneurs, especially those wishing to compete in sophisticated and international niche markets. Indeed the low cost of setting up web sites (small financial investment and technically straightforward) enables small firms to become globally present and accessible very quickly. At the same time Internet firms seem to recognise that survival depends on co-operation as much as on competitive action. All are providing a free service hitherto not feasible or economically viably, in the form of networks built on hypertext links. Furthermore, the scale and diversity of information provided or accessible at the click of a mouse, and the virtual juxtaposition of that information, is unprecedented: the vast amounts of up-dated and largely accurate travel information, both quantitative (destination weather conditions, currency rates, ticket prices, flight tracking) and qualitative (cultural events, political conditions, visual imagery), with immediate links to a host of other potentially relevant information (books, daily news, retail). Perhaps the most powerful competitors emerging in Internet-based tourism services are those with the resources to invest. From our study, they seem to be the portal sites, reservation technology providers, and Microsoft. Portal sites are approaching the sector through structuring their vast data warehouses into thematic sites (e.g. tourism). CRS providers see the Internet as another distribution channel that compliments their existing arrangements, while Microsoft recognise the potential of the sector for exploiting their own considerable technological and financial strengths. Opportunities for differentiation appear to rest with developments in electronic transactions, providing interactivity and rich data, and taking online reservation and itinerary planning to new heights of sophistication. For example there is room for more culturally sensitive sites, moving beyond those that offer a choice on language, and improving on the one example of cultural sensitivity found, that of the Spanish Tourist Office. In addition, technological developments that enable the ambience (including smell and feel) of the destination to be sampled by the surfer would take Internet-based tourism in new directions, into the realms of virtual reality. Periodic press reports note that most Internet start-ups are making no profit as yet. However there continues to be a constant stream of new Internet enterprises, many providing travel and tourism information. The evidence presented here suggests that there are as yet no clear frameworks for making money from the provision of Internet-based tourist services. Recent dot.com fatalities have injected a strong dose of scepticism to the financial markets, but valuations of Internet start-ups still reveal the widespread belief among investors that the Internet technology will be a major part of the social and economic fabric of our society, and that some of these businesses will deliver profit in the future. While the Internet is, for the most part, seen as a liberating force, there are also looming economic and social costs attached to such open access. For example, network congestion and governance. Easy access increases the chances of Internet con-
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gestion, which leads to degradation of network service quality. This could be managed by making Internet users pay for bandwidth. For example through the development of a differentiated service framework offering multiple levels of service quality (e.g. Internet 1, Internet 2), and incorporating non-Internet technologies like EDI. More fundamentally, innovative use of the medium is raising questions about how we wish to be governed. Many see the new medium as a way of taking democracy to new heights, allowing electronic voting. Some governments see it as weapon enabling unauthorised political movements and businesses to undermine their political and economic sovereignty. Even before the advent of the Internet Dann observed that [20], both developed and developing countries have become locked into a new international economic order where supply and demand yield to the symbiotic practices of mass advertising, information technologies, marketing segmentation, consumerism and data bank networking, whose multinational operators seek no more or less than the world itself… and national champions cheerfully surrender their identities on the altar of progress. Individual governments, uneasy with the open access of the Internet and its independence of national borders, are making independent assessments of the risks and opportunities of online trading of information. They see danger lurking in the medium’s exploitation by hitherto poorly co-ordinated virtual communities, both benign and malignant, from discussion groups to those trafficking pornographic material and banned substances. Opinions are divided on whether the information moving around this medium and access to it, needs to be regulated, and if so by whom, and how.
Acknowledgements This paper was born out of a TechMaPP project, InTouriSME, and funded by the EU. InTouriSME consisted of a large group of collaborating agencies, who were committed to helping develop and implement EU policy on the promotion of Internet-based tourism among SMEs in Europe’s “less favoured regions”. Prof. Molina led the formulation of this project.
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