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Strategic use of information technologies in the tourism industry
Dr Dimitrios Buhalis
Senior Lecturer in Tourism
University of Westminster
35 Marylebone Road
London, NW1 5LS, England
Tel : +44 (0) 171 9115000 ext 3112
Fax: +44 (0) 171 9115171
Home Tel/Fax: +44 (0) 1483 574463
STRATEGIC USE OF INFORMATION TECHNOLOGIES
IN THE TOURISM INDUSTRY
Information technologies (ITs) prevail all functions of strategic and operational management. As
information is the lifeblood of tourism, ITs provide both opportunities and challenges for the industry.
Despite the uncertainty experienced in the developments of ITs in tourism, the "only constant will
be change".Increasingly, organisations and destinations, which need to compete will be forced to
compute. Unless the current tourism industry improves its competitiveness, by utilising the emerging
ITs and innovative management methods, there is a danger for exogenous players to enter the
marketplace, jeopardising the position of the existing ones. Only creative and innovative suppliers will
be able to survive the competition in the new millennium. This paper provides a framework for the
utilisation of technology in tourism by adopting a strategic perspective. A continuous business
process re-engineering is proposed in order to ensure that a wide range of prerequisites such as
vision, rational organisation, commitment and training are in place, so they can enable destinations
and principals to capitalise on the unprecedented opportunities emerging through ITs.
The author would like to acknowledge Professors Chris Cooper and John Fletcher, University of
Bournemouth, for their invaluable contribution to this research. Financial support by the Surrey
Research Group, ConTours Consultants, as well as field research sponsorships by the University of
Surrey, the Greek National Tourism Organisation and the University of the Aegean are gratefully
INFORMATION TECHNOLOGIES AS A BUSINESS TOOL
Developments in ITs revolutionise both economies and enterprises. ITs are defined as the “collective
term given to the most recent developments in the mode (electronic) and the mechanisms computers
and communication technologies) used for the acquisition, processing analysis, storage, retrieval,
dissemination and application of information1.At the macroeconomic level, ITs become instrumental
in the development and prosperity of regions, as they determine their competitiveness in the global
marketplace. At the microeconomic level, ITs prevail all functions of strategic and operational
management and impel the competitiveness of enterprises.
The enhancements in ITs' processing power in the last decade revolutionise their capabilities as they
constantly increase computing speed; decrease equipment size; reduce hardware and software
costs; and improve the reliability, compatibility and inter-connectivity of numerous terminals and
applications. A great degree of innovation is incorporated in hardware, software and network
developments, whilst intellect becomes a critical asset in ITs’ management. Paradoxically, the more
powerful and complicated ITs become, the more user-friendly and inexpensive they are, enabling
more people and organisations to take advantage. Hence, Hopper2proposes that "in the
not-so-distant future, computers will be as familiar part of the business environment as telephones
are today. They will also be as simple to use as telephones or at least nearly so". The emergent
information society and the knowledge-based economic powers will therefore redefine the ability of
regions and enterprises to prosper in the new millennium.3
Inevitably the tourism industry is also affected by the technological revolution. Both tourism
destinations and enterprises increasingly need to adopt innovative methods and to enhance their
competitiveness. On the demand side, the new, sophisticated, knowledgeable and demanding
consumer increasingly becomes familiar with the emergent ITs and requires flexible, specialised,
accessible, interactive products and communication with principals. Hence, new best management
practices emerge, taking advantage of the ITs revolution and re-engineering the entire business
processes of the industry. This paper aims to analyse some of the most critical IT developments and
to demonstrate how they influence the tourism industry. It blends the theoretical background of ITs
with the strategic functions of the industry and proposes a multi-dimensional framework for the
incorporation of ITs in tourism.
Information Technologiess As A Major Contributor To Competitiveness And Competitive
The fusion of ITs provides unprecedented tools, which facilitate the creation of new industries,
restructure existing industries and radically change the way firms and regions compete. ITs reshape
the nature of competition in most economic activities, whilst they link consumers and suppliers,
adding value to organisations' products. Hence, ITs change the competitive game for almost all
organisations, regardless the industry they operate in, their location or size.4-6 In particular,
technology affects competitive advantage as it determines the relative cost position or differentiation
of organisations.7Afirm can achieve several strategic benefits by using ITs, namely: establishing
entry barriers; affecting switching costs; differentiating products/services; limiting access to
distribution channels; ensuring competitive pricing; decreasing supply costs and easing supply;
increasing cost efficiency; using information as a product itself; and building closer relationships with
suppliers and customers.8
Table 1 illustrates the results of the latest annual Manufacturing Attitudes Survey. Manufacturers not
only regard investments on ITs as crucial in enabling them to outperform competitors, but also their
expectations from IT systems go far beyond their operational management and focus primarily on
the strategic management of enterprises. As information is a source of power in negotiations with
partners, the adoption of ITs often redefines the power balance between partners, and changes their
bargaining relationships.9Perhaps, small and medium sized enterprises gain more advantages by
using ITs, as bargaining power is gradually relocated from institutional buyers and wholesalers to
suppliers, due to the more effective and interactive communication they can achieve with their target
markets. Small size in combination with innovation and effective networking by using ITs also
enables them to develop “virtual size” and empowers their competitiveness. Smaller firms can
therefore develop and deliver the right product, to the right customer, at the right price and place,
without over-depending on intermediaries. This would enable small firms to enhance their position
and increase their profit margin.
Table 1 Impact of information technologies on businesses
Significantly enhance competitive edge 79%
Improves information 77%
Better external communications 65%
Manage computers expectations better 63%
Improve decision making process 61%
Source: (10) Conspectus, August 1996, p.42.
Hence, ITs offer new management and business opportunities and can be applied strategically in at
least four different ways: gain a competitive advantage; improve productivity and performance;
facilitate new ways of managing and organising; and develop new businesses.8Ultimately, firms
investing in ITs attempt to gain a competitive advantage by lowering their cost or by improving
customers' perception about the quality of their products and services, and hence differentiating their
Prerequisites For Achieving Competitive Advantages Through Information Technologies
Despite the potential benefits, ITs do not guarantee profitability and they may even worsen the
competitive position of firms and the attractiveness of an industry.7There is also a debate on whether
ITs-originated competitive advantage can be sustained, as investments in technology are often
matched by competitors. Strassmann11 suggests that there is no significant correlation between
spending on ITs and profitability. There is also criticism that ITs often fail to add value in an
organisation's operation, whilst the costs associated (capital, training, staff) sometimes exceed the
benefits generated.12-13 This is often attributed to the lack of long term ITs vision, which deters
enterprises from capitalising on opportunities and gaining benefits. ITs are not a panacea and in fact
incorporate several risks as well as considerable costs. Organisations should therefore realise that
ITs contribute to both sides of the general business equation, since they add to both revenue and
However, ignoring and under-utilising ITs could be disastrous as it would create strategic vulnerability
and competitive disadvantage.4Thus, no action is not an option. ITs can be fruitful, only if certain
prerequisites are satisfied, namely: long term planning and strategy; innovative business processes
re-engineering; top management commitment; and training throughout the hierarchy. Using ITs as a
stand-alone initiative is inappropriate. Their usage has to be coupled with the re-engineering of all
business processes as well as with a redesign of organisational structures and control systems.
Perhaps the greatest challenge is to identify and train managers who will be effective and innovative
users of ITs and would lead technology-based decision making towards quantifiable gains and
advantages. Intellect, therefore, becomes one of the major assets of organisations, while continuous
education and training are the only methods to develop and maintain this asset. Provided that
rational and innovative planning and management is exercised constantly and consistently, ITs can
support the success of organisations.14-16
TOURISM AND INFORMATION TECHNOLOGIES
Tourism is inevitably influenced by the business process re-engineering experienced due to the
technological revolution. As information is the life-blood of the travel industry, effective use of ITs is
pivotal. Hence, "a whole system of ITs is being rapidly diffused throughout the tourism industry and
no player will escape its impacts".1Unlike durable goods, intangible tourism services cannot be
physically displayed or inspected at the point of sale before purchasing. They are bought before the
time of their use and away from the place of consumption. Hence they depend exclusively upon
representations and descriptions, provided by the travel trade, (e.g. information in brochures), for
their ability to attract consumers. Timely and accurate information, relevant to consumers' needs, is
often the key to satisfaction of tourist demand. Therefore, ITs provide the information backbone that
facilitates tourism .17
The revolution of ITs has profound implications for the management of the tourism industry, mainly
by enabling efficient co-operation within the industry and by offering tools for globalisation. In few
other economic activities are the generation, gathering, processing, application and communication
of information as important for day-to-day operations. The rapid development of both supply and
demand makes ITs an imperative partner and thus they increasingly play a more critical role in
tourism marketing, distribution, promotion and co-ordination. The re-engineering of these processes
generates a paradigm-shift altering the structure of the entire industry.18-24 Thus, ITs have a dramatic
impact on the travel industry, because they force the sector to rethink the way in which it organises
its business, its values or norms of behaviour and the way in which it educates its workforce. 25
Information Technologies And Tourism Demand
WTO argues that "the key to success lies in the quick identification of consumer needs and in
reaching potential clients with comprehensive, personalised and up-to-date information".26 The rapid
growth of both the volume and the quality requirements of contemporary travellers, require powerful
ITs for the administration of the expanding traffic. Tourists become sophisticated and more
demanding, requesting high quality products and value for their money. Thus, destinations and
principals need new methods to serve the new types of demand. The usage of ITs in the industry is
driven by both the development of the size and complexity of tourism demand, as well as by the rapid
expansion and sophistication of new tourism products, which address mini-market segments.
Increasingly, new, experienced, sophisticated, demanding travellers seek information about more
exotic destinations and authentic experiences, as well as require to interact with suppliers in order to
satisfy their specific needs and wishes. The contemporary/connected consumer "is far less willing to
wait or put up with delays, to the point where patience is a disappearing virtue".27
In order to satisfy tourism demand and survive in the long term there is no choice but to incorporate
technology and enhance the interactivity with the marketplace.23, 26-27 Increasingly, ITs enable
travellers to access reliable and accurate information as well as to undertake reservations in a
fraction of time, cost and inconvenience required by conventional methods. ITs improve the service
quality and contribute to higher guest/traveller satisfaction. Customer satisfaction depends highly on
the accuracy and comprehensiveness of specific information on destinations' accessibility, facilities,
attractions and activities.28-30 This is because the gap between consumers’ expectations and
perceived experiences is smaller and thus, unpleasant surprises from the destination or principals
are minimised.21 In addition, several other ITs facilitated factors enhance consumer satisfaction,
namely: consumers have more information and enjoy a greater choice; a reduction of the
bureaucracy and paper-work effectively frees time for customer service; customising the product and
establishing “one-to-one” marketing by using intelligence collected by loyalty schemes (e.g. dietary
requirements, product preferences); providing new services, (e.g. as in-flight or in-room
entertainment and information channels); facilitating operational tasks (e.g. in-room TV checkout) ;
personalised services (e.g. telephone operator acknowledges guest by his name); and finally better
integration of departments and functions of organisations towards better service.
Computer Reservation Systems (CRSs) and increasingly Internet providers satisfy the needs of
consumer for convenient access to transparent and easy to compare information. They cover the
entire variety of choices of travel, lodging and leisure services, destinations, holiday packages, as
well as display the actual prices and availability of such services. These services also provide
immediate confirmation and speedy documentation of reservations, allowing a greater degree of
flexibility and enabling prospective travellers to book at the "last minute". Experienced travellers are
therefore empowered by information and booking systems and increase their personal efficiency by
creating tailor-made products independently. ITs also assist principals to understand consumer
needs through marketing research and loyalty/partnership schemes. Improved access to information
covering all aspects of tourist activities provides the framework for offering personalised services at
price levels comparable to those of standard packages.31-33
The revolutionary developments in ITs, which have been experienced through the proliferation of the
Internet and the World Wide Web since 1995, illustrate that consumers increasingly rely on the
Internet for travel information. They utilise commercial and non-commercial Internet sites for
planning, searching, purchasing and amending their travel. Non-tourism organisations tend to seize
the emergent opportunity by utilising the ITs tools. This is already the case with major ITs providers,
(e.g. Microsoft developed Expedia, an electronic travel agency) to satisfy tourism demand.
The Re-Engineering Of The Tourism Production And Distribution
The impacts of ITs are evident in the tourism production, marketing, distribution and operational
functions of both the private and public sectors.34 ITs can also boost staff morale, managerial
effectiveness, productivity and ultimately profitability of tourism organisations, provided that
managerial attitude is adapted to the new business environment and takes advantage of the
emergent opportunities.35 In particular, ITs have pivotal implications for the distribution channel, as
they introduce unprecedented and innovative methods. Distribution is one of the few elements of the
marketing mix, which can still enable tourism enterprises to improve their competitiveness and
performance. Distributing the right marketing mix, to the right segments, through the right
intermediaries, will be instrumental for the long-term success of principals. ITs not only facilitate
distribution, but they also enable differentiation and/or cost advantage, as well as empower
interactive communication between principals and target markets. This is accomplished by re-
engineering the entire processes of producing and delivering products, in order to optimise efficiency
and productivity, and to maximise the value-added provided to consumers.20
The evolution of ITs demonstrated that destinations and principals will be unable to compete
effectively, unless they were able to promote themselves in the emergent electronic distribution
channels. ITs transformed distribution to an electronic marketplace, where access to information and
ubiquity is achieved, while interactivity between principals and consumers is empowered. Three main
waves of technological developments established ITs in tourism enterprises, namely Computer
Reservations Systems (CRSs) in the 1970s; Global Distribution Systems (GDSs) in the 1980s and
the Internet in the 1990s. Although these technologies emerged with gaps of about 10 years from
each other, they currently operate both separately and jointly, controlling different functions and
Computer Reservation Systems (CRSs)
Computerised networks and electronic distribution in tourism emerged in the early 1970s, through
internal CRSs. They became central to the distribution mix and strategy of airlines. CRSs are widely
regarded as the critical initiators of the electronic age, as they formulated a new travel marketing and
distribution system. A CRS is essentially a database which manages the inventory of a tourism
enterprise, whilst it distributes it electronically to remote sales offices and external partners.
Intermediaries and consumers can access the inventory and they can make and confirm
reservations. The rapid growth of both demand and supply, as well as the deregulation of the
American air transportation demonstrated that the tourism inventory could only be managed by
powerful computerised systems. Airlines pioneered this technology, although hotel chains and tour
operators followed by developing CRSs.2, 33
CRSs enable principals to control, promote and sell their products globally, while facilitating their yield
management. In addition, they integrate the entire range of business functions, and thus can
contribute to principals’ profitability and long term prosperity. CRSs often charge competitive
commission rates in comparison with other distribution options, whilst enabling flexible pricing and
capacity alterations in order to adjust supply to demand fluctuations. CRSs also reduce
communication costs, while providing intelligence information on demand patterns or the position of
partners and competitors. Hence, CRSs contribute enormously to both the operational and strategic
management of the industry.36-38
Global Distribution Systems (GDSs)
Since the mid 1980s, airline CRSs have emerged into Global Distribution Systems (GDSs), by
gradually expanding their geographical coverage, as well as by integrating both horizontally (with
other airline systems) and vertically (by incorporating the entire range of tourism products and
services, such as accommodation, car rentals, train and ferry ticketing, entertainment and other
provisions). To avoid unnecessary over-lappings principals integrated their CRSs with GDSs, by
developing interfaces. Several "switch" companies, such as THISCO and WIZCOM, emerged to
facilitate interconnectivity.17 This enabled the display and purchasing of the majority of tourism
products on-line. As GDSs connect most tourism organisations with intermediaries around the world,
they lead the standardisation processes and control a considerable market share.
GDSs emerged as the "circulation system" or the "backbone" of the industry by establishing a global
communication standard and a new tourism electronic distribution channel. Evidently GDSs became
businesses in their own right, as they changed their nature from tools for vendor airlines and
accommodation corporations, to "electronic travel supermarkets" and strategic business units for
their corporations.2,33,30 However, fierce competition forced a number of mergers and acquisitions in
the GDS industry. It is predicted that only two or three of the major ten GDSs will survive and
therefore, further concentration and integration is anticipated. Currently four systems, namely
Galileo, Amadeus, Sabre and Worldspan, dominate the global market. Since GDSs are connected
with most major principals, they offer similar services. In June 1996, for example, Amadeus
displayed availability for 432 airlines, 29,000 hotels and 55 car rental companies through 162,329
terminals in 106,394 travel agencies around the world.39 However, each GDS has a stronger market
share at the region where its parent airlines operate, as traditional links with travel agencies have
been utilised for the penetration of GDSs. Table 2 illustrates the number of GDSs' locations and
terminals in Europe, where each of the major GDSs are used.36-41
GDSs increasingly offer both leisure and business products, by providing information and allowing
reservations for theatre tickets, holiday packages and tourism destinations. Eventually core GDSs
are expected to be based on a network of smaller, regional and specialised computerised systems
for their leisure products. The development of Destination Management Systems will enable small
and medium sized tourism enterprises to be represented.30, 42 Diverting into the leisure market
responds to demand trends, while enabling GDSs to diversify their portfolio in order to take
advantage of their technological infrastructure and network as well as economies of scale. This will
assist them to deliver diversified services to broader markets and therefore suffer less from their
business market saturation.43-47
GDSs' efficiency and reliability enable principals to distribute and manage their reservations globally,
by bridging consumer needs with the tourism supply. Hence, great synergies are achieved, where
globalisation drivers stimulate GDS developments and vice versa. Go48 identifies four major sets of
conditions, namely, cost, market, government and competitive drivers (Table 3), and demonstrates
why the globalisation of the tourism industry is closely interrelated with its ability to use computerised
systems. Ultimately GDSs should aim to increase the satisfaction of their stakeholders, (i.e.
consumers, principals, travel agencies and shareholders), offer superior products and enable
partners to maximise their profitability.
Table 2 Penetration and market shares of Global Distribution Systems in European travel agencies
France Spain Denmar
UK Italy Hollan
Greece Ireland Luxembourg Total
Amadeus 11000 3150 2291 188 20 0 0 100 11 0 0 0 16760
Galileo 200 124 101 22 2185 2384 403 158 350 84 47 0 6058
Sabre 600 358 91 21 624 518 79 96 1 178 17 13 2596
Worldspan 300 150 100 90 500 180 200 150 160 120 30 0 1980
Total outlets 12100 3782 2583 321 3329 3082 682 504 522 382 94 13 27394
Amadeus 23000 7200 3661 1275 60 0 0 388 11 0 0 0 35595
Galileo 400 250 111 115 9421 5267 2100 438 554 88 211 0 18955
Sabre 1300 774 167 77 2251 960 167 280 1 224 45 26 6272
Worldspan 1000 700 110 180 950 280 600 500 200 150 40 0 4710
Total terminals 25700 8924 4049 1647 12682 6507 2867 1606 766 462 296 26 65532
2.12 2.36 1.57 5.13 3.81 2.11 4.20 3.18 1.46 1.21 3.15 2.00 2.39
Source: Adapted from (49) Smith and Jenner, 1994,p.62 and (39) Hyde,1992, p.26-27.
Note: [Terminals per outlet = Total terminals/Total outlets]
As travel agencies might operate more than one Global Distribution Systems,
the "terminals per outlet" ratio is provided only for comparison reasons between countries.
Table 3 Computer Reservation Systems and Global Distribution Systems
as drivers for tourism and hospitality globalisation
• Low distribution cost
• Low communication cost
• Low labour cost
• Minimisation of waste factor
• Facilitator of flexible pricing
•Satisfy sophisticated demand
• Flexibility in time of operation
• Support specialisation and differentiation
• Provide last minute deals
• Accurate information
• Support relationship marketing
strategies for frequent flyers/guests
• Quick reaction to demand fluctuation
• Multiple/integrated products
• Yield management
• Corporate intelligence
• Marketing research
Government and regulatory drivers
• Government supported
•Managing networks of enterprises
• Value-added skill building
• Knowledge acquisition
• Strategic tool
• Barrier to entry
Source: Adapted from (48) Go, 1992, p.23-24.
The emerging super highway - the Internet and the World Wide Web
The Internet (or the "Information Superhighway") convergence media, telecommunications, and
information technology, increases the interactivity between consumers and suppliers50.Since the
early 1990s, the World Wide Web (WWW) has emerged as the fastest growing area of the Internet,
enabling distribution of multimedia information. As textual data, graphics, pictures, video, and sounds
are easily accessible through the WWW, it soon became the flagship of the ITs' revolution and
instituted an innovative platform for efficient, live and timely exchange of both ideas and products.
Consequently, unprecedented and unforeseen implications are drawn for the future of tourism
marketing and consumer behaviour. Although there is no accurate estimate of Internet users or sites,
the pace of the Web development demonstrates the role it will play in peoples' lives.
New practices such as home shopping, tele-entertainment, tele-working, tele-learning and tele-
banking are expected to change everyday activities. Eventually consumers will live in "electronic
houses" or "intelligent homes" and will be served by "virtual enterprises" through a very interactive
communication framework. The Internet also influences political life, as it introduces a democratic,
transparent, uncontrollable and difficult to dominate way of communication, where everyone is more
or less able to broadcast their views regardless of hierarchical rankings and political power.
Hawkins51 suggests that "business and organisations world-wide are realising that marketing on the
Web is multi-dimensional content marketing that requires the following paradigm shifts: from
traditional advertising to interactive marketing; and from developing and managing one way
information flows to computer-mediated empowerment of users, consumers, and entrepreneurs who
will be engaged in electronic commerce in the information age".
Encouragingly, the tourism industry launched several services to take advantage of the information
superhighway. Table 4 illustrates a number of tourism organisations represented on the Internet. The
Internet and the WWW provide unprecedented opportunities for the industry as they bridge the gap
between consumers and suppliers and empower closer interaction. The WWW provides an
extremely vital service by incorporating similarly structured information and enabling the packaging of
awide range of diverse products and services. ITs also provide the infrastructure for inexpensive
delivery of multimedia information, promotion and distribution for both principals and destinations.52-54
ITs also assist the provision of tailored made products in order to meet the needs of individual
consumers, and as a consequence, they are expected to become instrumental in differentiating
tourism supply. The Internet can also strengthen the marketing and communication functions of
remote, peripheral and insular destinations as well as small and medium-sized enterprises, by
empowering their direct communication with prospective customers as well as by assisting the
distribution process.21,30,55 Hence, the rapid development of the Internet and the WWW provide
unprecedented and affordable opportunities for the global representation and marketing of tourism.
Nevertheless, the information currently available on the Internet is often chaotic and misleading,
mainly due to its immaturity and lack of any type of standardisation. Several issues need to be
addressed, namely: security of transmissions; credibility of information; intellectual property and
copyrights; bandwidth and speed limitations; user confusion and dissatisfaction; lack of adequate
trained specialists; equal access and pricing.56-60
Table 4 Representation Of Tourism Enterprises And Organisations On The Internet
Airlines Uniform Resource Locator Hotels Uniform Resource Locator
www.aerlingus.ie/ Best Western www.travelweb.com/best.html
Choice Hotels www.hotelchoice.com
www.aircanada.ca/ Consort Hotels www.u-net.com/hotelnet/
www.airfrance.fr/ Embassy Suites www.promus.com/embassy.ht
www.airuk.co.uk Flag International www.hilink.com.au/flag/flagho
Forte & Le Meridienwww.forte-hotels.com
www.aua.co.at/aua/ Forte Travelodge www.fortetravelodge/com/inde
British Airways www.british-airways.com/ Grand Heritage www.grandheritage.com/
British Midland www.iflybritishmidland.com Hilton Hotels
www.CdnAir.ca/ Holiday Inn
Cathay Pacific www.cathay-usa.com/ Hong Kong Hotels www.hk.super.net/~rlowe/bizh
www.flycontinental.com Hyatt Hotels &
Delta Airlines www.delta-air.com/.htm Inter-Continental www.interconti.com/
EasyJet www.easyjet.com/ Kempinski hotels www.travelwiz.com/HOTELS/K
Leading Hotels of
Finnair www.finair.fi/ Luxury Hotels of
Iberia Airlines www.civeng.carleton.ca/SiSpai
Mandarin Oriental www.travelweb.com/this-
Japan Airlines www.jal.co.jp/ Novotel www.novotel.com/welcome/
KLM www.klm.html Pan Pacific Hotels
Lauda Air www.lauraair.com/engl/indexe.
Radisson Hotels www2.pcy.mci.net/marketplac
www.lot.com Red Lion Hotels www.teleport.com/~peekra/RL
Lufthansa www.lufthansa.com/ Relais & Chateaux www.calvacom.fr/relais/accueil
Virgin Ultimate www.virgin.com/ultimate/ultima
Mexicana www.mexicana.com/index.html Westin Hotels and
Hotel Directories Uniform Resource Locator
Hotel Net www.demon.co.uk/hotel-net/
www.singaporeair.com/ Travel Web www.travelweb.com/
www.saa.co.za/saa/ Worldwide Hotel
www.iflyswa.com/ First Option Hotel www.expotel.co.uk/expotel
United Airlines www.ual.com/ Paris Hotels www.wfi.fr/parishotels/
Uniform Resource Locator Rail Travel Uniform Resource Locator
Deutsche Bahn AG www.bahn.de/index_e.html
www.traveler.net/two European Rail
Rough Guides www.hotwired.com/rough/ Eurostar Oworld.avonibp.co.uk/eurostar
Lonely Planet lonelyplanet.com/ Rail Timetables www-
www.moon.com Rail Server rail.rz.unikarlsruhe.de/retail/en
Fodor www.fodors.com/ Railway Schedules www.wku.edu/~campbjw/sche
Uniform Resource Locator
world in 80
www.coolsite.com/arworld.html World Tourism
www.tourist-offices.org.uk/ Tourism Research
Uniform Resource Locator World Tourism
Travelocity www.travelocity.com Destinations Uniform Resource Locator
www.itn.net/ Ireland www.Ireland.travel.ie
Travel Web www.travelweb.com/ Scotland www.scotland.net
Car Rental Uniform Resource Locator Great Britain www.visitbritain.com/
Hertz www.travelweb.com Spain www/ozemail.com.au/~spain
www.freeways.com/ Singapore On-Line www.travel.com.sg/sog
Eurodollar www.eurodollar.co.uk/ Japan www.jnto.go.jp
Source: Adapted from (61) Genesys Consultants, Executive Traveller, August 1996.
It is anticipated that GDSs will eventually take advantage of the openness of the Internet and develop
suitable interfaces for consumers and the industry. Sabre has already launched Travelocity while
other GDSs have announced similar actions.62 The Internet will empower GDSs to attract both
institutional and individual consumers, whilst it will increase their productivity and efficiency.
Distributed multimedia technologies in combination with the reservation capabilities would also
provide a powerful selling tool for the industry, while they would contribute to the training of travel
consultants. GDSs are also expected to become user-friendly, despite their concern that an easily
operated system will make them easily replaceable. As a result, GDSs or third party providers are
expected to use the Internet in order to offer innovative interfaces for direct communication with
consumers, enhancing the home travel shopping opportunities.52-54
The re-engineering of travel intermediation: theats and opportunities
The Internet is also anticipated to change the role of tourism intermediaries, and travel agencies in
particular. Hitherto, travel agencies have been the major brokers of tourism services and the
interface of the industry with consumers. However, to the degree that the Internet empowers
consumers to develop and purchase their own itineraries, travel agencies’ future becomes
questionable. This is also reinforced by the recent commission capping by airlines around the
world. Table 5 demonstrates the most prominent arguments for and against disintermediation of
the tourism distribution channel. Future intermediation of the tourism distribution channel will
therefore be quite different from the current situation. There are several trends evident already:
•Traditional intermediaries reengineer their processes in order to up-date their offering, improve
customer satisfaction and remain competitive 24
•New electronic intermediaries emerge (e.g. Expedia, ITN) to take advantage of the ITs’ revolution
•Tourism destinations develop regional systems to enhance their representation, boost their
image and attract direct bookings 20,30
•Principals develop Internet-based interfaces with consumers52
In reality different market segments will use dissimilar distribution channels for selecting and
purchasing their tourism products. For example, older generations and people who travel infrequently
will probably continue purchasing tourism products from traditional travel agencies. However,
business and frequent travellers may use on-line providers to arrange their itineraries and eventually
purchase their tickets. This will depend on the security of Internet transactions; the reliability and
quality of information available on the Internet; and the convenience of the entire process.
Table 5 Arguments for and against the disintermediation of the tourism distribution channel
Arguments for the disintermediation of the tourism distribution channel
•Travel agencies add little value to the tourism product, as they primarily act as
•Travel agencies merely manage information and undertake reservations
•Travel agencies are biased, in favour of principals who offer override commissions
and in-house partners
•Experienced travellers are much more knowledgeable that travel agencies
•Visiting travel agencies is inconvenient, time consuming and restricted to office hours
•Commissions to travel agencies increase the total price of travel products ultimately
•Personnel in travel agencies are often inadequately trained and experienced
•There is an increase of independent holidays and a decrease of package holidays
•Technology enables consumers to undertake most functions from the convenience of
•Electronic travel intermediaries offer a great flexibility and more choice
•The re-engineering of the tourism industry (e.g. electronic ticketing; now frills airlines;
airline commission capping; loyalty schemes) facilitates disintermediation
Arguments against the disintermediation of the tourism distribution channel
•Travel agencies are professional travel advisers and they offer valuable services and
•Travel agencies use expertise to save time for consumers
•Technology is difficult to use and expensive to acquire for individuals
•Alarge part of the market is computer illiterate
•The more complex computers and the Internet become, the more people need
experts to use them
•Travel agencies offer free counselling services and add value by giving advice
•Electronic intermediaries primarily serve the business market and are more
•Travel agencies can achieve better prices through the right channels and deals
•Travel agencies offer a human touch and a human interface with the industry
•Travel agencies reduce the insecurity of travel, as they are responsible for all
•Travel agencies can offer better prices by buying in bulk or through consolidators
•Internet transactions are not secured and reliable yet
Traditional travel agencies, therefore, will need to re-assess the situation and decide which market
segment they would like to concentrate on. Adequate equipment, training and service will be of
paramount importance in order to maintain their competitiveness in the long term. Travel agencies
will need to transform from booking offices to travel managers and advisers, as well as to add value
to the travelling experience. Two strategic directions can therefore be followed: Travel agencies can
either offer differentiation value, by designing high quality personalised travel arrangements which
consumers will be willing to pay a premium for, or they can offer cost value by delivering less
expensive products than competitors, through standardisation, high volume and consolidators. These
two strategies will probably dominate the travel industry in the future years.
AMULTI-DIMENSIONAL STRATEGIC FRAMEWORK FOR ITs IN TOURISM
Aconceptual synthesis of the usage of ITs in business strategy and in tourism demand and supply in
particular yields a strategic ITs framework. This framework attempts to systematise our
understanding of the use of ITs in tourism and to illustrate all strategic implications for the industry.
Figure 1 demonstrates the multi-dimensional character of the framework, as well as the technologies
it utilises in order to perform its business functions. Table 6 also illustrates several examples of the
tourism industry functions undertaken within this framework. The ability of principals and destinations
to use this framework effectively will increasingly determine their future competitiveness. The
framework incorporates the paradigm shift and the business process re-engineering experienced,
which effectively reshape the tourism industry. ITs propel changes in several directions between the
three main axes. The combinations originated illustrate how strategic marketing and management
can be utilised in order to achieve mutual benefits for all stakeholders in a tourism value-added
production chain. An ITs-led integration of industry members is therefore evident and is expected to
dominate the industry in the near future.
ITs enhance a number of intra-organisational processes, by supporting a certain level of integration
between various functions within organisations; typically the "front" and "back" office. The aim is to
increase efficiency and productivity, as well as to enhance the strategic and operational management
of the enterprise. Examples from the tourism industry include Property Management Systems or
Hotel Information Systems in hotels; integrated Points Of Sales systems; Management and Strategic
Information Systems; accounting and payroll systems; food production technology; inventory control
for tour operators, transportation companies and other principals. Intranet technology facilitates an
internal network by deploying the same technology and presentation tools as the Internet, but
restricting access to authorised personnel only. The future growth of Intranets will be rapid. It is
estimated that two-thirds of all large companies either have or soon will have an Intranet. Sun63
estimates that world-wide server spend in 1997 on Intranets was around $6bn, compared with $3bn
on the Internet, while they expect it to reach $8bn by 1998. For years "ITs managers have been
looking for a better way to deliver information within the organisation; now almost overnight the Web
has opened the door".
Figure 1: Tourism and information technologies strategic framework
Table 6 Tourism industry communication patterns and functions facilitated by ITs
Intra-organisational communications &
•Within a tourism organisation
financial planning and control
marketing strategy &
pricing decision and tactics
middle term planning &
networking & information
co-ordination of staff
•Communication and function with branches
co-ordination of operations
share of common resource
for customer and operational
Inter-organisational communications &
•Tourist product suppliers and
negotiations and bargaining
reservations & confirmations
•Travel related documentation
lists of groups/visitors
vouchers & tickets production
•Post travel arrangements
payments & commissions
feedback & suggestions
Consumer communication with tourism
• Travel advice
• Reservation & confirmation
• Amendments for a reservation
• Deposits and full settlements
• Specific requests/enquiries
Tourism enterprise communication with
•Other suppliers and ancillary
travel formalities & visa
• Insurance companies
• Weather forecasting
• Entertainment and communications
• Banking/financial services
• Other business services
Source: Adapted from (64) Buhalis, 1996, p.133
Networking supports the communication and facilitates interconnectivity between individual
organisations. Hence a number of systems and applications emerge to assist communications
between tourism enterprises. Electronic Data Interchange enables the transfer of structured data
from computer to computer (often hosted by different and remote organisations) using agreed
communication standards. This has been extensively utilised between tour operators and handling
agencies at destinations to transfer passenger lists, invoices and other paper work. Computer
Reservations Systems and Global Distribution Systems are also applications which empower
communication between travel agencies and principals such as airlines, hotels and car rental firms.
In addition, Destination Management Systems and Destination Integrated Computer Information
Reservation Management Systems attempt to integrate the management and marketing of
independent tourism enterprises at the destination area and thus facilitate interconnectivity21.In
particular, small and medium sized tourism enterprises will benefit from ITs-supported networking as
they will be able to pool their resources and compete with their larger counterparts.20,43 Electronic
Mail, the World Wide Web, the File Transfer Protocol are some of the most popular uses of the
Internet which empower interconnectivity and communication between organisations and individuals.
Moreover, Extranets emerge to provide a secured interface for networked enterprises. Using Internet
technology Extranets facilitate a restricted access and interconnectivity to authorised organisations
only, and thus, they facilitate the networking of tourism enterprises.
The development of electronic commerce, defined as “the secure trading of goods, information and
services using Internet technologies”,65 enables consumers to communicate directly with tourism
organisations in order to request information and purchase products, as well as to interact with
principals. Consumers empowered by home computing can access information about tourism
products and organisations instantly, inexpensively, interactively, almost regardless of the physical
location of both service providers and themselves. They can also make and alter reservations and
purchase tourism products through electronic shopping and banking systems. The proliferation of
CD-ROMs also allows the storage and distribution of memory-consuming multimedia presentations
to both individual and institutional customers, improving the promotional function of organisations.
Serving consumers electronically also contributes to the cost reduction of enterprises. Sun65
estimates that face-to-face banking costs $1 per transaction; call centres cost $0.5, whilst Internet
banking cost merely $0.15 per transaction. Similarly tourism organisations can reduce their cost and
improve their competitiveness by serving consumers through the Internet.
Tourism organisations can enhance their performance by empowering their strategic marketing and
management efforts through undertaking all their functions by advanced ITs. This will enable them to
improve their networking and ultimately to improve their “virtuality”.66 The following examples
demonstrate the benefits generated by advanced integration of all management and marketing
efforts for organisations.
Inter-organisational - Intra-organisational functions
Anumber of useful applications are available in the tourism industry, supporting both inter- and intra-
organisational functions. These often empower joint marketing efforts as well as horizontal, vertical
or diagonal integration. Tourism enterprises can exchange customer information either to facilitate
the formulation of total tourism product or to undertake joint marketing campaigns. For example
airlines co-operate with hotel chains and car rental companies in issuing frequent flyer miles or
providing rewards and privileges to consumers. Airlines also formulate alliances (e.g. Star Alliance) in
order to enhance their globalisation and to take advantage of code-sharing agreements. This
enables the provision of seamless products and the development of comprehensive marketing
Intra-organisational - Consumers functions
Enterprises utilise ITs for addressing individual needs and wants of their consumers. Partnership or
relationship marketing attempt to maximise customer loyalty by building bonds between consumer
and organisations. Mutual benefits can be achieved in this way, as consumers gain extra benefits,
special treatment or discounts while enterprises increase the satisfaction and loyalty of their regular
consumers. They also gain a wealth of marketing information about their needs and spending habits,
without commissioning expensive marketing research. Direct and database marketing, frequent flyer
programmes and guest histories are often utilised in this sense. Experienced consumers may also
have access to some electronic facilities, which enable them to achieve a higher flexibility and
interactivity with the organisation. Eventually the development of “one-to-one” marketing, where
tourism bundles will be packaged for the individual needs of consumers can only be facilitated by ITs.
Inter-organisational - Consumers function
Consumers increasingly utilise inter-organisational functions in order to identify and purchase
suitable products and services for their needs. As the vast majority of tourism products is offered by
small and medium-sized tourism enterprises, consumers often need to have access to information,
programmes, schedules, tariffs and availability of a wide range of tourism providers in order to be
able to amalgamate their tourism products. Thus, Computer Reservations Systems, Destination
Management Systems and the World Wide Web are utilised to access data from different
enterprises, either by individual consumers themselves or by travel agencies acting as brokers on
their behalf. The trend towards independently arranged trips effectively demonstrates that more
consumers will rely on technology for selecting, amalgamating and purchasing their tourism
The multi-dimensional strategic framework for ITs in tourism not only does demonstrate the
dependence of both demand and supply on ITs, but it also illustrates that networking and interactivity
will increasingly dominate the production and consumption functions. 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.
SYNTHESIS - THE CONTRIBUTION OF ITs TO THE FUTURE TOURISM INDUSTRY
Information technologies influence the strategic management and marketing of contemporary
organisations, as a paradigm-shift is experienced, transforming the "best" business practices
globally. ITs transform the strategic position of organisations by altering their efficiency,
differentiation, operational cost and response time. In particular, ITs have stimulated radical changes
in the operation and distribution of the tourism industry. Perhaps the most apparent example in
tourism is the re-engineering of the booking process, which gradually becomes rationalised and
enables both consumers and the industry to save considerable time in identifying, amalgamating,
reserving and purchasing tourism products. Ultimately, prospective tourists will be able to browse
through the Internet and identify a rich variety of offers in order to make travel choices suited to their
personal requirements. The focus is thus shifting towards individual travel and dynamic packages,
targeting mini-segments. The visibility of principals in the marketplace will be a function of the
technologies and networks utilised to interact with individual and institutional customers. A closer co-
operation is also required throughout the tourism industry, as well as a certain degree of
standardisation and interconnectivity. This will improve service and provide a seamless travel
experience, whilst it will enable tourism organisations to manage their competitiveness within the new
environment imposed by contemporary developments, such as deregulation and globalisation. ITs
provide an unprecedented opportunity for horizontal, vertical and diagonal integration, as well as for
the development of virtual enterprises.66 Training and education of human resources in both
innovation management and ITs will enable the industry to develop an understanding of the
contemporary developments and a vision for the future.
However, ITs are not a panacea and therefore, a thorough revision of all operational and strategic
managerial practices is required in order to achieve the emerging benefits. Should tourism principals
neglect the significance of ITs, they will effectively jeopardise their competitiveness and become
marginalised from the mainstream of the tourism industry. Business processes re-engineering
redesigns the inter- and intra-organisational processes, based on the newly available tools and aims
to improve the entire range of functions. In return, re-engineering gives perspective and empowers
organisations to achieve competitive advantages and overcome long-term threats. As a result,
tourism enterprises need to understand, incorporate and utilise ITs strategically, in order to be able to
serve their target markets, improve their efficiency, maximise profitability, enhance services and
maintain long term prosperity for both themselves and destinations. The future success of tourism
organisations and destinations will be determined by a combination of innovative management and
marketing, intellect and vision, as well as strategic use of advanced ITs.
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