Can the Travel Agent Withstand the Internet Revolution - Literature review Example

Can the Travel Agent Withstand the Internet Revolution? Name of Student Name of Institution Course Lecturer Due Date Can the Travel Agent Withstand the Internet Revolution? Introduction The growth of the internet can be regarded as unforeseen with reference to the pace and scope of developments when considering it in tandem with other technological, social and political changes. Even so this growth is inevitable. With origins reaching back at least as far as the early 1960s, the internet has gone from being a mere idea in the minds of computer scientists at Massachusetts Institute of Technology to being commonplace and, according to the Internet World Stats website, to have achieved 30.2% global penetration by the end of March 2011; an increase of approximately 480% since 2000. Leiner et al. summarise the use of this incredible resource by stating that its influence reaches not only to the technical fields of computer communications but throughout society as we move towards increasing use of online tools to accomplish electronic commerce, information acquisition, and community operations (Leiner et al. 1999). This paper examines weather travel agents whose operations rely solely on the tourism are able to withstand the revolution of the Internet by looking at the various aspects of tourism and the internet revolution before making a conclusion. The operations of travel agents rely heavily on tourism; without tourism there would be very minimal activities undertaken by travel agents. The internet has really impacted heavily on the business of a number of travel agents across the globe, the impacts are slightly positive to some but to many the impact is negative. For this reason, they are left to survive in their business as they cannot withstand the internet revolution. Tourism can be traced back as far as the middle ages and possibly even further with nobility as people travelled mostly for the purpose of making pilgrimage to locations with religious significance. Today, the industry having undergone various metamorphoses, has become one of the most significant in the business world as well as in other fields related to the well being of human life. The development of the industry is evident from the obvious debates in literature related to the actual definition of tourism. One of the debaters pointed out that tourism be regarded as a complete and comprehensive industry like any other. Based on this emphasis, tourism transformed to being referred as an industry and its further development is now augmented by the internet. Wisansing (2005, p. 23) writes that the industry is exceeding the importance of many manufacturing sectors and other services in terms of sales, employment and foreign currency earnings. This scenario is true in many countries both developed and developing ones; for instance, in Singapore tourism is a key industry that contributes about 20% of the total GDP (Longhi, 2008). Naturally, an industry that plays such an integral role in the economic framework of so many countries worldwide – either as an export or an import – must remain current and one of the ways that the tourism industry has done so is to use the internet. Additionally, the need to ensure that tourism remains current is because the industry cuts across many subsectors. According to Smith (1988, p 184), tourism would cease to exist if pure tourism services cease to exist. These services include airlines and hotels meant for travellers. Other services that are directly involved with tourism include food and beverage services, transportation, recreation, culture, and entertainment and retail goods, all of which have endeavoured to be current with tech advancements. Production: The majority of insight into production regards its ties to consumption and the changes there in. Agarwal et al. (2000, p. 243) cite significant changes in UK tourism production as being partially responsible for the changes in size and scope of tourism consumption. He goes on to note the said changes as notably: “technological shifts, the trans-nationalisation of capital, refinements in distribution (especially of package holidays) and an increase in self-provisioning, involving new forms of commodification” (Agarwal et al., 2000, p.243). The internet is a major part of this change and contributes to the idea expressed by Ohmae (1995) of “a borderless world”. Williams & Hall further continue the analysis, stating that “the barriers of space for mobility have been significantly lowered…. [resulting in] consequences for tourism in terms of facilitating the globalization of business and pleasure trips, and the enacting of visiting friends and relatives networks” (Williams & Hall, 2000, p. 11). The primary evidence of the internet impacting upon the production process of the tourism industry is the popularity of the online booking facility. From early on in the development process, service providers like British Airways and Marriott Hotels took advantage of advancements which made it possible and in many cases preferable for customers to book online. Travel agents, Thomson were first to identify the advantage to be had and to establish TOPS which gave them the edge over the competition for a time and multi-suppliers gave consumers the opportunity to compare prices and to choose the best for them.In short, the new process gave consumers more options particularly enabling the creation of the dynamically packaged holiday option. Possibly the most significant change with regard to production has been the definitive shift in power from the businesses to the consumers. With the access to information came a level of discretion that had not been seen previously, thereby encouraging consumers to abandon established patterns. In fact, some researchers go so far as to identify a post-Fordist, new tourism “driven by consumers on the demand side and by technology on the supply side” (Poon, 2001, p. 77). The new era is one of choice and of the individual. Consumers are able to design their travel plans and holidays to suit them and to their own exact specifications. This is advantageous as they are more likely to get what they want or at least what they think they want. As a direct result of developments in Information and Communication Technology (ICT), there has been a change in the cost of production. Whereas previous undertakings had depended on a company’s ability to provide trained staff to carry out operations, technological advancements and the internet in particular have made such behaviour unnecessary. As expressed by Agarwal et al. “ITs have created a new business environment and can be instrumental in reducing unit operating costs and enhancing the competitiveness, efficiency, flexibility and interactivity of tourism businesses” (Agarwal et al., 2000, p. 251–52). In addition to this, the production line has been altered as viability of travel agents is challenged – a topic that will be discussed in more detail as an aspect of distribution. Changes in focus have made it more difficult for traditional travel agents to cater to consumer’s needs. With a savvier clientele, travel agents have been forced to down-grade to booking offices with many if not all resorting to hiring under-qualified staff as a means by which to save money as they struggle against the ever-growing number of competitors that flooded the market. Ironically, this means that consumers are being denied that personal and individualised service which can be considered a disadvantage should they be unable to find the internet and ICT to be an apt replacement. Despite the obvious advantages of a web presence and while a large number of businesses have recognised and embraced the use of the internet to market and give access to their services, some remain unrepresented and thus it is not an exhaustive link to services or options available. While undoubtedly the inability to create a presence on the internet or the decision to not do so is a business mistake, as highlighted by Buhalis - “Players who fail to participate in the electronic marketplace therefore, will face severe competitive disadvantages in the long term and will probably lose considerable market share” (Buhalis, 1998, p. 419) – there remain those who, for whatever reason, are not online. This negatively impacts the tourist as there is a possibility that these businesses could better fill their need. The internet, however, creates the illusion that one is in possession of all the information and this could prevent consumers from resorting to more traditional methods of recommendation e.g. travel agents who could be better placed to advise. After all, the usefulness of the medium is proportionate to the abilities of the person using it. The internet now provides a means by which consumers can broadcast opinions thereby furthering their influence. Sites like Tripadvisor have become essential to the booking process as the industry is not one in which customers can ‘try before they buy’. “According to the Travel Industry Association of America (TIA 2005), a bigger percentage of American tourists have resorted to the web to look for facts regarding destinations or confirm prices. Even more remarkably, about 41% of US tourists have made reservations of their trips by use of the internet (Litvin et al., 2007, p. 461). From this the influence is shown to extend to include encouraging use of a service and not just discouraging the same. This has the advantage of endowing the online tourist with yet more information from which a choice can be made. But the information does not flow one way. An aspect that could be considered a disadvantage is the industry’s use of cookies. Companies collect information on their customers in various ways and the internet has enabled a more subtle and less intrusive mode of survey and data collection. The ethical dilemma is that more often than not, users do not realize that their preferences are being recorded and tabled into a profile that can be used to market additional goods and services. However, ethical questions aside, some could view this as an advantage as it, once again, makes information readily available and enables companies to provide a more personalised service. This is even more important when one explores other linked technological advancements, e.g. mobile phone applications geared towards appealing to the tourist market. Not only is there more information but there are more platforms from which to access it. Distribution: In part, the success of a product relies on the creation of a successful marketing mix. A particularly important part of that puzzle is distribution. As highlighted by Cooper and Lewis (2001), the part played by distribution in the marketing mix can be defined as central to the sector. Cooper and Lewis cite a premise favoured by Kotler et al. (1999) that “competition, a international flea market, electronic delivery systems and a delicate product have amplified the significance of distribution” (2001, p. 315). From this, the link between the internet and the industry in general and specifically its place as a distribution channel is clear. Buhalis builds on this idea giving focus to Information Technologies (ITs) and stating that as they “have pivotal implications for the distribution channel” (1998, p. 412). This is furthered by Agarwal et al. who define the implications, stating that the developed technologies“enhance the coordination of activities regionally, nationally and globally, thereby creating new opportunities for competitive advantage” (Agarwal et al., 2000, p. 251–52). The internet has created a means by which suppliers can eliminate the intermediaries and sell direct to the consumer. As noted above, the majority of consumers prefer the direct approach and therefore being able to take charge of their purchase is preferred. This development has been instrumental in the decline of the traditional travel agent with particular significance for the independents whose greatest fear is disintermediation, whereby the tour operator sells direct to customers and removes the agent altogether. The Internet is providing the major tour operators and customers with opportunities for direct interaction” (Harris & Duckworth, 2005, p. 216). Harris & Duckworth conclude that the only option available by which these businesses can survive is by investing in dynamic packaging technology and providing added value services to key customer groups (Harris & Duckworth, 2005, p. 216). As noted with regard to production, the internet and ICT are invaluable resources when it comes to customer profiling. Technological advancements have created ‘new’ platforms from which to market, advertise, sell and operate. The added bonus of no longer having national or regional limitations, with the exception of restrictions put in place by government censorship, has further lowered costs incurred by businesses.Distribution remains “one of the few elements of the marketing mix which can still enable tourism enterprises to improve their competitiveness and performance” (Buhalis, 1998, p.412). This is not only advantageous to the business but also to the tourist as, being able to access a wider range of information regarding everything from their chosen destination to the activities available, they are equipped to shop for the best deal. This is possibly the leading advantage to the tourist when discussing distribution channels. The trend of booking on the internet is particularly favoured as businesses, following the cost cutting ventures mentioned above, are now able to offer lower rates direct to the consumers. There are issues of security linked with using the internet for booking or paying for services. In addition to the potential for monetary loss, there is also the fact that the internet is considered impersonal by comparison to the traditional travel agent. As noted by Lang, the difference remains. “While consumers may be happy to purchase small consumer items via the Internet, they may not be ready to make larger, more intimidating purchases online, such as travel…. travel agents can benefit by providing this `human touch' to fulfil the need for a human interface…. they can also verify the information the consumer has obtained and reduce the `insecurity of travel' by being responsible for all travel arrangements” (2000, p. 371 -72). Main Internet Challenges Faced by Travel Agents The 2009 survey conducted regarding the travel agents in the greater US nation revealed some fairly appalling news that in every four travel agents, one of them do not have representative website. One of the U.S trade associations responsible for counting a vast majority of travel agents in various intervals in the U.S. released this statistics as part of its end year survey where nearly 90 percent of the members took part in it. The result of these survey coupled with many other related views indicate that many travel agents face never ending setbacks with aspects of technology. According to this survey, the technology challenges can be highlighted as follows, 26% of the agents showed the lack of website, 25% register very low or almost no visits to their sites (Schaal, 2011). The survey goes on to indicate that 15% are in dire need of help with their sites. While it is understandable that most travel agents would carry out their businesses over a telephone conversation, it is only logical and realistic that they would consider establishing an informational website to promote the integrity of their operations. Few travel agents normally use a selection of vendors as well as Passport Online, whose main focus is in creating websites for domestic travel agents (Schaal, 2011). Still borrowing from this survey, the tech-oriented news in it reveals that travel agents employ an array of techniques to book airline tickets. Based on the survey, 29% book on airline websites, 29% book via consolidators, 10% book the tickets via a host agency and 15% merge these techniques or use extra options (Schaal, 2011). These figures confirm that travel agents are just surviving in their business as they have not fully soared with internet revolution. From the survey, a section of travel agents said that their profitability scaled high while a bigger percentage admitted that their profitability was static and remained hopeful for better performance if they go the electronic way of operations. Economist and business experts in the tourism sector agree that profitability of most businesses is closely related to how well the business utilizes the internet. This is also supported by information from the global economic data comparing global tourism earning for the last five years as captured by the 2004 IMF report. Year/Region 2003 2002 2001 2000 1999 Europe 43% 41% 39% 35% 30% America 53% 52.4% 48% 43% 40% Africa 57% 55% 52% 52% 50% Asia 61% 60.1% 60% 58% 57.5% This survey and many other surveys as well as views from industry players indicate that the internet is a major threat to the stability of travel agents even if they embraced technological advancements in their operations. Travel agents will find it hard to withstand the revelation owing to the fact that in the recent past to date, likely travellers have had the chance to seek out, discover and do their hotel and flight and reservations through the internet. According to the Litvin et al. (2007, p. 459), only of late has it been probable for these same travellers to book online products in their relevant destinations for instance, sightseeing tours and attraction tickets. This trend notwithstanding, there is still no principal allotment system; implying that travellers are forced to visit various individual websites so that they be in a position to procure their destination products. Unless travel agents are up to date with web progress, they stand to lose many potential clients. The major aim and one that is vital for any travel agents is to sell seats and the challenge comes in regarding how to ensure more seats are sold and the systems that should be employed to manage those sales (Poon, 2001, p. 59). Even those agents that have viable websites, there are a myriad of challenges facing them especially when deciding to sell their products by use of their website or a booking portico. To begin with, the first challenge is choosing the type of solution to employ given that there are two basic systems of booking over the internet; the stand alone and hosted. The stand alone is integrated on the agent’s site while the hosted one is installed and run by a third party differently (Braun 2002, p. 15). Though very beneficial to the travelling agency, the requirements of standalone systems are immense. For instance, an upfront license, IT professionals and ability to install and manage the software are some of the necessities. Additionally, products are available in the agent’s website only, hence, cannot be distributed openly. Secondly, the main challenge for travel agents is choosing whether to employ a flat fee structure or commission based one (Poon, 2001, p. 59). This presents a very difficult challenge to conquer since the charges by the hosted and stand-alone systems are on a flat fee and commission basis. In light of this, once travel agents have decided on the appropriate technology, they ought to then choose if the cost of the structure is apposite. Commission structure is somewhat of beneficial to an agent since the agent incur extremely little cost until a sale is made. After the sale the commission to be paid ranges from about five percent on sale payable via the system. On the other hand, costs of this system can rapidly add up. The flat fee systems are not popular for the travel industry. This systems charge a standard monthly fee as well as a flat booking fee. Hence, the system appears very attractive than the commission based. Thirdly, the most imperative technology challenge is the methodology or modality of distributing products via manifold on line and off line sales paths and at the same time controlling inventory. Fortunately though, this challenge is not that complex to surmount, simply because only few choices are available for tour distribution schemes. Presently, the foremost global distribution systems do not account for destination products but are totally fixed on the distribution of main airlines, cruises, and hotels. The paramount preference for the travel industry is to locate a system that permits them to administer their inventory, restructure their sales practice and offers the freedom to market through their website. In synopsis, there is an enormous number of industry players who have hardly taken the bound to software oriented answers for inventory, sales, and customer service. Even though the number of solutions that offer some or all of these needs is rising, they all show some strong points and flaws. The finest and most supple resolution would show itself as a hosted solution characterized by an all inclusive distribution structure. The solution would enable the travel agents to administer their inventory, bookings, customer service, and offer considerable reporting. This would ideally be a flat fee structure as it charges a monthly fee depending on the capacity of bookings instead of a commission. Common Benefits towards the Identified Internet Tools and Services Much as the travel agents may not be better placed to withstand internet spread, there is no doubt that developments in technology and tourism have been in close relationship for the last couple of years dating back to the 1980s where ICTs had been positively changing tourism across the globe (Braun, 2002, p. 17). Advancements in the ICT have without a doubt transformed business traditions and approaches as well as industry formations. The coming up of the computer reservation system (CRS) in the 1970 and the GDS the late 1980s flanked by the growth of the internet in the late 1990 have changed the most excellent functioning and planned practices in the industry spectacularly. Tourism has of late been considered a global industry that provide the highest number of employment opportunities on the planet; for this reason it possess superior range of diverse stakeholders compared to any industry. The vigorous enlargement and progress of the industry are perchance only reflected by the intensification of the ICTs. The step up and synergistic interface of technology and tourism in modern period has resulted to essential transformations in the industry and on our view of its feature. The role played by the ICTs is critical particularly for the aggressiveness of organizations within the industry and destinations. The growths in search engines delivery capacity and swiftness of networks have influenced the global travellers that use technology for scheduling their travels. There has also been a far-reaching change brought by the ICTs in the competence and value of tourism organization. This change is also evident in the way that operations are carried out in the market place and the relations between consumers and organizations (Buhalis 2003, 121). The ICT based model of business operation witnessed in the industry progressively breeds new shifts of concept which changes the formation of the whole industry and builds up a range of prospects and threats for the stakeholders. In addition to empowering consumers to recognize, tailor and procure tourism commodities, ICTs also facilitate globalization of the industry by offering valuable tools for dealers to build up, administer and dispense their offerings globally. This has resulted to the materialization of key research fields as the participants seek to comprehend and write the importance of the new expertise and attempt to project the way forward for both industry and technological progress (Buhalis 2003, p. 125). Time and again, ICTs have made it possible for travellers to obtain dependable and precise information as well as to take on reservations in the shortest time and at friendly cost. Internet tools can aid in the enhancement of the service excellence and results to traveller satisfaction. This is because the tools place users in the centre of their operation and product release. As a result of these tools, tourists from the key generating areas of the globe have turned out to be regular travellers, adept in languages and technology and able to operate in diverse culture and challenging environments in foreign countries. Therefore, expansion of the internet in the wider ICTs has sanctioned the modern tourist who is becoming well-informed and is in quest of outstanding worth for money and time (Braun 2002, p. 20). Travels and holidays are among the extremely costly commodities purchased frequently around the globe and it forms a considerable percentage of a person’s yearly budget. Nonetheless, the internet tools have significantly transformed the activities of consumers in the tourism sector. The consumers have direct access to wealth of information offered by tourism organization and other stakeholders in the industry and ICTs provide the tools to make this possible. Buhalis (2003, p 121) indicates that information hunt is a vital part of the buying process and was revolutionised with the emergence of the internet. In addition to plummeting improbability and apparent risk, ICTs also augment the value of trips. Buhalis also mentions that the more enquiries are made regarding a trip the more the information is found, hence, the better travellers’ needs are met (2003, p. 126). The internet tools are a direct answer to the factors that have a direct impact on the information hunt in the framework of tourism. These factors include; the makeup of trip groups, the existence of families and acquaintances at the destination, previous travels to the destination and the level of uniqueness related with the destination. The current purchaser is unwilling to wait or entertain delays, hence, the key to achievement in this industry as well as in other industry lies in the speedy recognition of consumer requirements and in reaching them with full, customized and current product that answer to those needs. Concerns and Opportunities towards the Identified Internet Tools There are several concerns with the internet tools that make travel agents not able to cope with growth in internet; in these concerns, there are opportunities available for them and the entire tourism industry. Borrowing from the sentiments of Buhalis (2003, p. 132), “upcoming research should survey impending travellers concerns and snags when arranging and purchasing trips through the web”. He proposes that this can be attained when an in depth examination about information hunt and inter cultural impact is resorted to. On the other hand, Longhi (2008), pointed out that prospective tourist have turned out to be more autonomous and stylish on employing a wide variety tools to plan their travels. Pricing presents a major obstacle to the travel agents given the internet tools. This is due to the fact that a vast majority of agents use ICT to directly convey to their online consumers the rates and fares only. Customers also take more time comparing prices on various websites of travel agents in the hope that they would find optional products that can lessen their travel costs. Based on the recent researches, the reasons why travellers are uncertain about buying these products online are the absence of special service, safety issues, absence of knowledge and time consuming (Longhi 2008). Even if travel agents were to be deeply rooted on the internet, this would be a major concern; and those that have not yet embraced the internet fully are hesitant to do so because of this technicality. While loads of preferences are available on the web for consumers to select, psychological hurdles frequently thwart consumers from online transactions and resorting to offline transaction. Given the less time involved in waiting and preparation and more time on pleasure, consumers definitely would prefer doing their reservations online. Travel agents may not cope with the pressure to keep incorporating attractive features in their web for the sake of potential clients The other concern evident in the internet tools is payment. This is the most vital aspect in ecommerce; hence, customers are forever worried on security of their payment. Such concerns are the potential result of computer offences. The crimes are one of the key factors that put off buyers from giving out credit card details. Some of these crimes include frauds and identity theft. Because of these, industry players ought to guard themselves and their clientele from losses emanating from cyber offences; factors that travel agents may not be in a position to consider given the task and risks involved. Another issue of concern relates to privacy of consumers. This has brought out the situation where many travellers search through the web for products and rates but will make their purchase offline. This issue is augmented by some research findings that privacy issue stalls online product purchase. In this regard therefore, site owners should be focused on making customers feel cosy and safe to do their reservation and to amplify confidence in the online setting. Travel agents are comfortable doing this one on one with the clients rather than in a media where they have no emotional influence over the customer. However, the Tom Bruce (2009, p. 12) indicated in the travel guide that globally, consumers are disposed to supply important personal details in return for acknowledgment and enhanced services. Based on this, travel agents ought to gather customer details at each point of service prior to, during, and following a visit so that they can comprehend behaviour, preferences, disquiets and determinants. In the tourism industry, customer contentment relies extremely on the exactness and entirety of definite travel information and capability of organisations to respond with immediacy to customer unease (Longhi 2008). This is founded on the fact that consumers need value for their time in addition to requiring value for their money. Players in the industry particularly the travel need to make out these changes in order to come up custom-made services to deal with individual needs. Pragmatic services may be provided based on the probable needs ensuing from identified customer profiles. Steady improvement in appliance of hardware, software and network expansion imply that only vibrant businesses, which can weigh up the needs of their stakeholders and act in response resourcefully and in point of fact, will be able to better their opponents and uphold their everlasting affluence. Brisk technological progress ironically implies that the more authoritative and multifarious ICTs become the more inexpensive user friendly they become. In the pre-internet period, traders within the tourism sector had no other option but to use middle men like travel agents for their distribution roles and this was made possible by GDS. The web has made it easy for organizations to be in a position to allocate their products through wide series distribution paths in addition to express distribution. In conclusion, the importance of the internet in the travel and tourism industry cannot be over-stated and while there are a variety of advantages and disadvantages to the provider, the impact for consumer appears to be more beneficial than otherwise as the new technologies have given the tourist more control. Despite this positive attributes, travel agents will not flow with changes in technology and continue to survive in their business operations. This is because of the complexity and the high rate of constant advancements in technology and particularly the internet that they are not able to pace up with. Bibliography Agarwal, S. et al. (2000).The Geography of Tourism Production: uneven disciplinary development?[Electronic version].Tourism Geographies2(3), 241–263. Bakos, J. Y 1997, “Reducing Buyer Search Cost. Implications for Electronic Market Place.” Management Science, 4(3), 1676-1692. 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