How Travel Agency Survive in E-Business World? 85

How Travel Agency Survive in e-Business World? 85 How Travel Agency Survive in e-Business World? Ronnie Cheung, Hong Kong Polytechnic University, Hong Kong, People’s Republic of China, [email protected] Pamela Lam, University of South Australia, Adelaide, SA5001, Australia, [email protected] Abstract Travel is an extremely diverse and complex industry. This paper provides certain degree of analysis on The travel industry is comprised of over a dozen the benefits that leverage from the use of new related industries: airlines, restaurants, hotels/motels, technologies in the Travel Industry. Besides the travel agencies, gift shops, auto rentals, and a host of concerns about what technology can do for other businesses that may not be even recognized their travelers, we also address the pressures for dependence on travel and tourism since travelers are changes, the potential impacts on different category usually indistinguishable from local customers. of travel agencies and also the implications on leisure and corporate market segments. The paper Travel industry is a service-oriented industry. It also explains the three phases– intermediation, provides people with services such as transportation, disintermediation and reintermediation that travel lodging, dining, amusements, recreation, travel agencies may be facing when serving as the planning and retail. According to the Travel Industry middleman between the product providers and the Association of America [11], the travel and tourism customers. In response to the electronic business industry is the nation’s third largest retail sales impulse, travel agencies may react differently; the industry and one of the largest employers in US. The paper also elaborates on how the industry players travel industry is the world's largest industry which reengineer their business in order to maintain the has gross output at US$4.2 trillion, and it is still competitive position or at least to survive. growing. Travel industry provides employment for 192.2 million people worldwide. Approximately one Keywords: Intermediation, Disintermediation, in every 9 workers engaged in the industry and Reintermediation, Electronic Commerce, Travel constituted 10.6% of the world's work force. In terms Industry of the world's gross national product (GNP), tourism is the world's leading economic contributor producing 1. Introduction an incredible 10.8% of GNP. In the late 19th century, a British entrepreneur, Thomas Cook, began offering package tours to 2. Travel Agency seaside resorts for middle class and working class 2.1 Role of Travel Agency citizens. Improvements in the comfort and price of Travel agencies exist primarily as intermediaries train travel, and the development of large luxury between suppliers of travel services [5], such as liners and hotels offering a wide range of prices airlines and hotels, and customers. Unlike distributors helped fuel the demand for pleasure travel. The in many industries, travel agencies do not deal with invention of automobiles and airplanes in the early physical products but with information. 20th century eventually brought more opportunities for personal travel. Travel agent is defined as a person who undertakes a job for another person, who is the 'principal'. The During the Second World War, millions of young principal in such a relationship not only sets the goals Americans were sent to Europe, Hawaii, Alaska, the of the job, such as selling tickets, but may also control Philippines, China, India, Australia, and the Islands the means and manner in which the job is done [12]. of the Pacific. These young people were fascinated with what they saw and did in other lands. After the The fundamental role of a travel agency can be War, troop transport aircrafts were converted to broadly summarized as: information, distribution, serve the public as passenger aircrafts. Americans reservation and services. For a typical business day, a had an opportunity to travel abroad for a vacation. travel agency’s functions include: [13] The demand for personal travel virtually exploded. 1. Arranging transportation - air, sea cruises, bus, rail, Some scholars called this period as the “Golden car rentals locally and abroad; Age” of travel [6]. 2. Preparing individual itineraries, personally- escorted tours, group tours and selling prepared There is a high potential for Electronic Commerce in package tours; the travel industry [7, 8, 9]. The travel industry, 3. Arranging hotels, motels, resort accommodations, already one of the world’s strongest electronic meals, sightseeing, transfers of passengers and commerce markets, looks only exploiting the luggage between terminals and hotels, as well as cost-saving convenience of the existing relationship special events such as music festivals and theatre between travel and the Internet. The importance of tickets; designing sites that mirror customers’ need is cited 4. Handling and advising on the details pertaining to as the primary factor that will stimulate online travel travel and baggage insurances, travelers' cheques, sales [8]. foreign currency exchanges, documentation requirements (visas, health certificates etc.); Communications of the IBIMA Volume 10, 2009 ISSN: 1943-7765 86 Ronnie Cheung and Pamela Lam 5. Using professional know-how and experience in the technical abilities, the agencies should not see an the provision of air, train and other increase in overhead due to their new online business. transportation schedules, hotel rates and their standards as well as qualities; 2.2.2 The Internet and the Travel Industry 6. Arranging reservations for special-interest Traditionally, the travel industry focused on the travel activities such as religious pilgrimages, agency sales channel. Customers used to visit their conventions and business travels, incentive and local travel agencies, and purchase travel tickets or educational tours, eco-tourist and gourmet tours, gather vacation information through the agencies. The sporting/adventure trips etc. birth of the Internet and electronic commerce has caused this to change. Customers discovered that they 2.2 Changing Role of Travel Agency can search travel destinations and even purchase Changes in the industry over the past ten years have airline, train, and cruise ship tickets online. When one dramatically altered the nature and value of realizes just how easy it is to use the Internet for travel information in the travel industry and, consequently, arrangements, it’s hard to justify using a traditional the role of travel agency. agency. Popular sites such as Expedia, Travelocity, and Preview Travel offer point and click results to the 2.2.1 Commission Caps and Cuts customer’s home or office. The travel agency business has experienced a transformation over the past years as a result of a Traditional travel agencies appear to be losing the drastic reduction in their income. The airline fare battle against its online counterpart and the airlines. In commissions have been on the decline since 1995 addition, many traditional travel agencies are afraid to when the airlines imposed a cap of $50 or 10% enter the online market because the commissions are (whichever is lower) on commissions for round trip nearly obsolete and they are so far behind the curve at domestic flights. The previous rate of commission this point in time. The airlines also appear to be was 10% with no cap. Commission on international winning out over traditional channels by cutting, and flights remained unchanged at 10%. However, in some cases, eliminating commissions. Several travel agencies took another hit in the Fall of 1998, airline sites even offer reduced costs and extra the airlines imposed yet another cap. This one was incentives for customers ordering tickets online. $100 on round-trip international flights that had not had a limit on commission in the past. The Agencies that are focused on major corporate clients commissions dropped to 8% for both domestic and are emerging as they have the power to negotiate international flights [14]. compensation structures with airlines. Agencies are becoming specialized in certain types of travel, To make matters worse for the travel agencies, most offering expertise on senior citizen services, family large airlines began to encourage travelers to bypass packages, adventure programs and disabled facilities. travel agencies and book their flights with the Travel agencies that leverage information technology airlines directly. The airlines claimed that they are are also providing services such as travel cost not trying to run out travel agencies, but they have to management for corporations while ensuring cut costs. They also saw a potential to cut cost compliance with corporate policies for employee dramatically by selling tickets over the web. There travel. are currently many campaigns underway to sell super-discounted tickets over the web with the sole For example, Rosenbluth Travel [10], a large interest of drawing customers to the airline’s Philadelphia based agency, provides Wal-Mart webpage. employees with desktop access through the Wal-Mart Local Area Network (LAN) to arrange air, hotel, and Historically, travel agencies made their profits by car rental reservations. The Rosenbluth system is selling tickets. However, due to the reduction in the programmed to ensure compliance with Wal-Mart commissions that airlines are willing to pay for travel policies, and links directly to the Wal-Mart ticket sales, many agencies have resorted to financial system. Smaller

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