ICTs are irreplaceable tools for travel agencies as they provide information and reservation facilities and support the intermediation between consumers and principals. Travel agencies operate various reservation systems, which mainly enable them to check availability and make reservations for tourism products. Until recently GDSs have been critical for business travel agencies to access information and make reservations on scheduled airlines, hotel chains, car rentals and a variety of ancillary services. GDSs help construct complicated itineraries, while they provide up-to-date schedules, prices and availability information, as well as an effective reservation method. In addition, they offered internal management modules integrating the “back office” (accounting, commission monitor, personnel) and “front office” (customers’ history, itinerary construction, ticketing and communication with suppliers). Multiple travel agencies in particular experience more benefits by achieving better coordination and control between their remote branches and headquarters. Transactions can provide invaluable data for financial and operational control as well as for marketing research, which can analyze the market fluctuations and improve tactical decisions.
The vast majority of leisure travel agencies used ‘videotext networks’ to access tour operator and the reservation systems of other suppliers such as ferry operators, railways and insurance companies. On the plus side, Videotext systems are relatively inexpensive to purchase and operate, require little training and expertise and are fairly reliable. However on the minus side, they are slow; data has to be retyped for each individual database searched; they fail to integrate interface with multimedia applications; and are unable to take advantage of the emergent ICTs. Effectively, the type of agency and its clientele determine the type of ICTs utilised. Typically business travel agencies are more GDSs dependent, whilst leisure agencies and holiday shops are more likely to use videotext systems (Inkpen, 1998).
The Internet has revolutionised the travel agency industry as for the first time ever. Agencies had the ability to reach travel inventory directly without having to invest in time and costs for acquiring GDSs. They are able to search and book suppliers such as airlines and hotels online, increasing their bookable inventory. They also have the tools to sell their own services and to promote their organisations. However, until recently travel agencies have been reluctant to take full advantage of the ICTs, mainly due to:
a limited strategic scope;
deficient ICTs expertise and understanding;
low profit margins which prevents investments; and
focus on human interaction with consumers.
This has resulted in a low level of integration of ICTs and capitalisation on the Internet’s potential. Many agencies still do not have Internet access and are unable to access online information or suppliers. As a result many agencies lack access to the variety of information and reservation facilities readily available to consumers and therefore their credibility in the marketplace is severely reduced. This may jeopardise their ability to maintain their competitiveness and consequently, they may be threatened by disintermediation. Several forces intensify this threat:
Consumers increasingly search information and make reservations on-line;
principals aim to control distribution costs by communicating directly with consumers and by developing customer relationship management;
commission cuts; and
travel agencies have limited expertise as they employ inadequately trained personnel.
Gradually it is becoming evident that travel agencies around the world not only will have to utilise the Internet to access travel suppliers and information online but will also have to rely on the media to communicate with their clientele, to put the offerings forward to the marketplace and to attract business. Traditional travel agencies can use the Internet to provide extra value to their clientele by integrating additional products and services to their core products. In addition, they may use the internet to specialise to particular niche markets and to offer specialised services to those markets.
In contrast, new players (e.g., Expedia, Travelocity, Orbitz, Lastminute, Opodo) have already achieved a high penetration the marketplace and grown spectacularly. Through a number of mergers and acquisitions, there are effectively 5 major groups that have emerged in the marketplace: 1) Amadeus IT Group includes Vacation.com, Opodo and TravelTainment; 2) the Expedia group includes Expedia.com, Hotels.com, Anyway.com (Expedia.fr), Egencia (formerly Expedia Corporate Travel), Travelnow.com, Hotwire.com, Venere.com, ClassicVacations.com, eLong.net, TripAdvisor and SeatGuru.com; 3) the Orbitz group includes Orbitz, CheapTickets, ebookers, HotelClub, RatesToGo, the Away Network, Asia hotels, and corporate travel brand Orbitz for Business; 4) Priceline includes Priceline.com, Active Hotels.com, Booking.com and Agoda.com; and 5) the Sabre group (Sabre Holdings or Sabre, Inc.) includes Travelocity.com, Sabre Travel Network, Sabre Airline Solutions, Sabre Hospitality Solutions, Cubeless, GetThere,
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Holidayautos.com, IgoUgo, Lastminute.com, Moneydirect, Nexion, Trams, Travelguru, Travelocity Business, World Choice Travel and Zuji.
Interestingly even in areas with low Internet penetration, online travel agencies have taken off. The Chinese market is one of those markets which are growing rapidly (Li & Buhalis, 2006). For example in early 2007 Ctrip.com posted impressive results demonstrating both the potential and the growth of the Chinese eTourism market. Chinese online travel service provider Ctrip.com (CTRP) announced that for the full year ended December 31, 2006, total revenues were RMB834 million, representing a 49% increase from 2005. Hotel reservation revenues were RMB476 million, a 31% increase from 2005. The hotel reservation revenues accounted for 57% of the total revenues in 2006, compared to 65% in 2005. The total number of hotel room nights booked was approximately 6.84 million in 2006, compared to approximately 5.45 million booked in 2005. Air ticket booking revenues were RMB303 million, an 83% increase from 2005. The air ticket booking revenues accounted for 36% of the total revenues in 2006, compared to 30% in 2005. The total number of air tickets sold was approximately 6.39 million in 2006, compared to approximately 3.67 million air tickets sold in 2005. Packaged tour revenues were RMB42 million, an 83% increase from 2005. The packaged tour revenues accounted for 5% of the total revenues in 2006. For the full year ended December 31, 2006, net revenues were RMB780 million, a 49% increase from 2005 whilst gross margin was 80%, compared to 83% in 2005. For the full year 2007, Ctrip expects to continue the year-on-year net revenue growth at a rate of approximately 30%. Before share-based compensation charges, the company expects operating margin to be approximately 35%. This demonstrates clearly not only the size of the Chinese market and the huge potential but also the fact that even markets with low internet penetration experience a dramatic growth of eTourism (ChinaTechNews.com Editor, 2007).
As location becomes less significant electronic travel agents will dominate global travel retailing. Already in the USA more than 80% of online travel retailing is concentrated in the top five players. Therefore, the future of travel agencies will depend on their ability to utilise ICTs in order to increase the added-value to the final tourism product and to serve their customer. Agencies which simply act as booking offices for tourism products will probably face severe financial difficulties in the future. In contrast, knowledgeable and innovative agencies which utilise the entire range of technologies in order to provide suitable integrated tourism solutions will add value to the tourist experience and increase their competitiveness. Traditional travel agencies will have to compete on both price and service with
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