Monday, August 5, 2019

Effects of Internet Online Booking in Travel Agencies

Effects of Internet Online Booking in Travel Agencies Can High Street Travel Agencies Survive  With Online Travel Agencies? Contents (Jump to) Chapter 2 Literature Review Chapter 3 – Methodology Chapter 4 Findings and Analysis 4.1 UK Travel Industry, Current Analysis 4.2 Composition of Travel The travel industry represents the classic example of firms operating as agents between the seller and buyers as represented by the multitude of offers that are present in the industry. The foundation for this process was established in the pre-computer era that utilized direct reservation systems. This mode inculcated the industry and became the accepted operational norm as airlines had an exterior sales force as represented by these independent operations, and customers had a means to wade through the difficult maze of airline flight possibilities. The advent of the internet brought a new variable into the scenario whereby it provided consumers with a choice as a result of the capabilities of this medium to collect and display flight availability, schedules and pricing through search engine compiling. Transaction costs were lowered as a result of economies of scale and 24 hour availability, with the heart of the process fueled by utilizing consumers to conduct the work in finding b argains. This examination will seek to equate whether the traditional travel agencies known as High Street, representing brick and mortar operations in the industry parlance, can survive the onslaught to their business as represented by online travel agencies. The travel industry represents a phenomenon that we are all familiar with in terms of verbiage, however, the definitive meanings as represented by specific words may not be as clear as one would think. In order to provide the necessary verbal underpinnings for this analysis of ‘if High Street Travel Agencies can survive with online Travel Agencies’, a definition of terms seems in order. Travel represents a word that emanates from ‘travailen’ in Middle English, which means to toil, and has its roots in the French word ‘travailler (Wikipedia, 2007). It, travel, is defined as (American Heritage Dictionary, 2007) 1. being transported â€Å"†¦ from one place to another †¦Ã¢â‚¬  as represented by either a trip or journey, and, 2. the process and or time entailed in moving a person from a particular location to another. Travel can be further explained as tourism, which is the visiting of family and or friends, the process of commuting as represent ed by traveling to either work or other functions, the act of migration in moving one’s local or as a constant series of moves as illustrated by nomadic peoples, and as pilgrimages for religious reasons (Wikipedia, 2007). In the context of this examination, travel shall be defined by the transport of individuals for pleasure, tourism, business and personal reasons. A travel agency â€Å"†¦offers its services in the capacity of an agent †¦Ã¢â‚¬  and provides â€Å"†¦ travel and tourism related services to the public †¦Ã¢â‚¬  as achieved through the agency’s arrangements and agreements with â€Å"†¦ airlines, cruise lines, hotels and other suppliers of travel related services† (Department of the Treasury, 2002). Travel agencies â€Å"†¦ may contract directly †¦Ã¢â‚¬  with the aforementioned companies or through what is termed a â€Å"†¦ coordinating body such as the Airlines Reporting Corporation †¦Ã¢â‚¬  as well as other such agencies or bodies (Department of the Treasury, 2002). In addition to the aforementioned services, travel agencies may offer varied financial related services such as traveler’s checks and trip insurance. An important segment of the travel industry is represented by tourism, which Hermann Von Schullard, Austrian economist, stated is the â€Å" †¦ sum total of operators †¦ which directly relate to the entry †¦ stay and movement of foreigners †¦Ã¢â‚¬  (, 2007). The introduction of internet based online travel information, booking and ticketing systems introduced a new variable into the market which allows consumers to research ticket prices, schedules and related aspects at discounted prices as a result of the lower commissioning fees online services charge airlines for acting in their capacity as middlemen. This phenomenon caught on with the public and market share increasingly shifted in favor of online travel services as lower prices, instant access and no frill airlines captured their imagination. High Street travel agencies are thus caught in a battle for survival as a result, however there are market variables that indicate the penetration rates of online travel agencies has been slowing, but massive damage has already been done. If High Street travel agencies are to survive, they will have to capitalize upon inherent facets of customer attitudes and preferences as well as what their service type offers that can not be duplicated by c omputerized access that does not offer human problem solving skills for complex travel related problems that exist in varied circumstances. Chapter 2 Literature Review The rapid pace of changes and developments in the travel industry as a result of travel packages, consumer attitudes, economic variables, utilization histories with varied forms of booking methodologies and related aspects rendered the examination of the subject matter as contemporary. The research methodology deemed best suited to this study was ‘descriptive’ in that it is based upon the use of data, information, facts and associated resources to reveal the way things are. To this end, this examination relied heavily on Internet sources to provide the aforementioned. The definitions utilized herein to provide a basis for understanding of travel agencies as represented by the statement provided by United States Department of the Treasury was used as it represented a definition honed from a governmental classification of an industry sector which represented the culmination of intensive study to arrive at its meaning in a universal sense that is applicable. This same approach was utilized to conduct data and survey research which entailed the collection of information from the Tourism Society of England, the International Air Transport Association, ITB Berlin and IPK International, Internet World Stats and other sources. In conducting the research on the question as to whether High Street travel agencies can survive with online travel agencies, the first aspect that was noted is that the various travel and tourism books offered information on each sector from a dated perspective that did not take into account new developments, many of which appeared in 2005 through 2006 as new travel packages and the a new travel sector, cruises, emerged as an industry force. The preceding contention is supported by the data uncovered by surveys conducted by Travel Weekly in the United Kingdom that asked respondents in the travel agency sector direct questions regarding their impression and view of their industry. Such a source represents more viable research that was conducted during 2006, offers a more comprehensive base of industry information on how things actually are as it asked the experts in the field of study, travel agents themselves. Their responses on what they viewed as the emerging segment of most importance, cruises, which also represents their most viable revenue stream is data which was not found in the numerous research studies conducted by the World Trade Organization, PricewaterHouseCoopers, Accenture and World Stats. These sources were extremely valuable in providing supporting data on trends, patterns and other facets of the travel and tourism sector, however, information from industry insiders in the High Street sector represented t he foundation for the question being examined. ITB Berlin and IPK International offered invaluable information concerning the breakdown of consumer utilization of travel agency sectors, as did PriceWaterHouseCoopers and Internet World Stats. Accenture’s research gave depth to the previous information as it provided data on how and what consumers do in the process of seeking travel services. Michael Porter’s Five Forces Model provided the means to correlate all of the indicated data and survey information into a concise summary of High Street and online travel agency competitive points to hone in on the variables and factors that the prior sources offered. Chapter 3 Methodology In examining the context of whether High Street travel agencies can survive with online travel agencies it was determined that the research would have to delve into the nuances of the travel and tourism sector to determine the following: Components of the industry from an historical perspective Key aspects of varied consumer attitudes, preferences, trends and views Travel industry product components, trends, developments and projections Trend of High Street and online travel agency market share progressions Relationships and importance of differing travel segment components in both sectors in relationship to their inherent strengths and weaknesses as applied against each service model Variables and factors at work, along with developing trends that might have a bearing on the examination To accomplish the foregoing the methodology selected entailed the utilization of secondary research of a limited historical nature to provide background information to understand the context of the industry sectors and their changing relationships. The preceding was accomplished through the use of books and journals along with statistical information. Since changes in any industry occur quickly the reliance upon books and journals for contemporary developments was deemed as inappropriate and inconclusive. Therefore, to determine the present status of both sectors, the research and operative methodology centered upon the analysis of data as well as trends and inherent characteristics. To accomplish the preceding quantitative research was determined as the methodology as it â€Å"†¦ generates new information about the world †¦Ã¢â‚¬  by virtue of (University of North Carolina, 2007): Objectivity, whereby the potential for bias that could potentially affect and or influence the outcome is kept to a minimum through the collection of varying points of view from a number of differing sources. Rigorous, in that the researcch process utilizes data to uncover obvious as well as obsure information, with attention to accuracy and detail as underlying precepts. Systematic, in that the conduct of research seeks coherent data and information in order to equate the true undercurrents of what is the case as opposed to what appears to be the case in the study and analysis. The subject under examination represents a puzzle that is ruled by the governing question (International Research Network, 2007). The preceding helped to determine the reseach process, the identification of the sources of data as well as information, and the methodologies to be utilized. Kravitz (2006) states that there are differing types of research which can be used in a study. The one selected for this examination included descriptive along with quantitative as it entails the collection of information and trends through the review of data, surveys and examination of varied sources. Kravitz (2006) indicates that this research type is best at describing the way things are, and that the review of prior research aids in the process, along with contempory information. Chapter 4 Findings and Analysis 4.1 UK Travel Industry, Current Analysis As of 2002 there were 3,181 travel agencies in the United Kingdom, representing a growth rate of minus 17.2% that generated $11, 659 billion in sales (International Air Transport Association, 2002). Globally, the travel industry generates in excess of one trillion USD annually and is the largest industrial sector (Vogel, 2006, pp. 50-59). The Tourism Society of England indicates that domestically this segment of the industry generates 75 billion pounds in a highly fragmented industry (Tourism Society, 2007). In polls conducted by Travel Weekly, the British based industry travel magazine, travel agents were asked their views on a number of areas (Travel Weekly, 2007). 47% indicated that cruises would represent the biggest growth area in travel in 2007, followed by long haul trips at 32%, and domestic breaks at 21% (Travel Weekly, 2007). The implications of the preceding seemingly bode well for travel agencies in that these types of trips consumers seek the aid of professionals to aid them with arrangements, features, pricing and the varied packages that are available, which can be quite extensive. Travel agents indicated that they were worried, however regarding the state of the travel industry entering 2007, registering 61%, with 26% indicating confidence and 13% checking indifference as their response (Travel Weekly, 2007). Travel agent responses provide a valuable insight as to how they feel concerning various aspects and as the most up to date informational source such is being utiliz ed to provide a gauge on the prospects of High Street travel agencies and their battle for market share with online travel agencies. A significant response to the polls in this regard can be found in what travel agents thought about the price wars lowering High Street fares. 36% indicated that they believed that such would end up in lower prices, while 42% replied no, with 21% indicating probably (Travel Weekly, 2007). With respect to the dollar to pound exchange rate that has increased in favor of the pound, travel agents indicated that they felt Christmas shoppers would benefit the most, 51%, followed by New York City retailers at 23%, High Street travel agencies, 15%, and online retailers and airlines at 11% (Travel Weekly, 2007). The preceding represents an indication of travel agent’s attitudes toward High Street travel agencies that mirrors their responses concerning their battle for market share. This view was also confirmed by travel agent responses to if there is any future for independent High Street travel agents. 54% stated that they felt there would always be room for independent agents, with 27% indicating the affirmative but as part of a larger buying group, and 19% stating that they would not be able to compete against the larger companies (Travel Weekly, 2007). When asked about the importance of cruises to their industry, travel agents responded in the following fashion. 53% indicated that this area is growing in importance, with 21% stating that it represents the one area that they make money (Travel Weekly, 2007). 17% indicated that this segment is too complex and that they do not sell cruise packages, and 9% stated that cruise business is vital to their business only if they sell these via self packaging (Travel Weekly, 2007). Given that 47% indicated that the cruise business will enjoy the largest segment of growth in the industry in 2007, that seemingly indicates that High Street travel agencies are factoring in this segment as an important revenue stream. The utilization of the Internet as a booking method has seen high growth in Europe, mostly in flights as well as accommodations (ITB Berlin and IPK International, 2006, p. 13). The foregoing represents an approximated one/third of all outbound trips and also entails online booking for some segments of an individual’s trip as represented by hotel and vehicle reservations (ITB Berlin and IPK International, 2006, p. 13). ITB Berlin and IPK International (2006, p. 13) reports that the utilization of the internet is primarily the mode used for airline ticket purchases, with accommodations second, however, vehicle reservations leads both categories as a percentage of sales of the total. Table 1- Travel Bookings in Europe, January Through August 2006 (as a percentage of pre-bookings in total travel) (ITB Berlin and IPK International, 2006, p. 13) Total Internet Accommodations 78% 37% Flight 63% 38% Travel insurance 23% 6% Bus/coach 15% 2% Rental car 15% 10% Ferry 9% 7% Train 7% 4% Others 5% 3% Interestingly, travel agents utilize the internet as a source of information and the use of tour operators in placing their rates and packages online represents a key reason for the preceding (ITB Berlin and IPK International, 2006, p. 13). Consumers utilize the Internet for a large percentage of their travel arrangements, especially in the area of airline, accommodation and auto rental, as shown by the following: Table 2 – Information Sources Used by European Outbound Travelers, January through August 2006 (ITB Berlin and IPK International, 2006, p. 14) Source % share Internet 45 Travel agency 20 Friends/relatives 17 Travel guide 8 Travel brochure 7 Newspaper 3 Tourist office 2 TV 2 Others 5 The preceding seemingly indicates that incursions by Internet based booking in the cruise travel segment is going to remain low as a result of the complexities encountered in making selections and wading through the complex data and choices. As the main revenue source and growth area for High Street travel agencies, consolidation of the services offered in this area represents a strong foundation to be built upon. The consumer climate in the United Kingdom exceeds the confidence of travel agencies with respect to their outlooks. Travel Weekly’s (2007) poll in this segment indicated that 26% of them were confident, while ITB Berlin and IPK International (2006, p. 18) found that the United Kingdom and Spain are at the top of its consumer confidence survey as well as percentage of household consumption. Termed as a willingness to buy, said factor represents increased demand in the UK during 2007, and as the United Kingdom’s placement in this category has consistently been at the top, bodes well for the continued growth forecast in the industry. The growth in eCommerce has shifted the manner and way individuals utilize travel services. Originating in a paper on packet switching by Leonard Kleinrock of the Massachusetts Institute of Technology in 1961, the theoretical underpinnings of Klienrocks work set the stage for the ARANET which was the distant forerunning to the internet (Internet Society, 2007). That beginning has reshaped the manner of global commerce, information availabilities, and created an entirely new set of industry classifications. One such manifestation is illustrated in the travel industry. The ability to search large quantities of data easily and instantly through varied online web sites, and travel agencies without any sales or pressure tactics makes the internet a technology that is ideally suited to the travel industry. In this medium consumers can search and explore at their leisure at any time reviewing all manner of destinations, travel times, pricing and comparative offers. This used to be the exclu sive domain of travel agencies, the search for fares, times, routes, seating, destinations and packages, through information networks that were unavailable to the public. Consumers do not have to queue at call centers, telephone or take a trip to High Street travel agencies, they can simply click online and search easy to find categories from their Internet browser. Online travel agents are able to offer 24 hour access to information that consumers can access and compare at any time, representing a boon to locating the best prices, dates, deals, destinations and packages. The online travel industry is just a decade old, however the impact of online agencies has been tremendous (Economist, 2005). The benefit of the Internet to consumers and travel providers such as airlines, hotels, car rentals and associated sectors is that it saves administrative costs enabling them to offer lower fares and rates (Economist, 2005). There are 37,600,000 internet users in the United Kingdom estimated for 2006 against a population of 60,000,000 people representing a 62.5% penetration rate with user growth rising by 144% between the period 2000 and 2006 (Internet World Stats, 2007a). The UK ranks 6th globally in the total number of Internet users (Internet World Stats, 2007b), and ranks 20th on terms of penetration rate (Internet World Stats, 2007c). Table 3 – Top 20 Countries with the Highest Number of Internet Users (Internet World Stats, 2007b) Rank Country Internet Users Population (2006 est.) Internet Penetration 1 United States 209,024,921 299,093,237 69.9% 2 China 123,000,000 1,306,724,067 9.4% 3 Japan 86,300,000 128,389,000 67.2% 4 Germany 50,616,207 82,515,988 61.3% 5 India 40,000,000 1,112,225,812 3.6% 6 United Kingdom 37,600,000 60,139,274 62.5% 7 Korea (South) 33,900,000 50,633,265 67.0% Table 4 Top 20 Countries with the Highest Number of Internet Users (Internet World Stats, 2007c) Rank Country Penetration (% Population) Internet Users Latest Data Population (2006 Est.) 1 Iceland 86.8% 258,000 297,072 2 New Zealand 76.3% 3,200,000 4,195,729 3 Sweden 74.9% 6,800,000 9,076,757 4 Portugal 74.1% 7,782,760 10,501,051 5 Australia 70.7% 14,663,622 20,750,052 6 Falkland Islands 70.4% 1,900 2,699 7 Denmark 69.4% 3,762,500 5,425,373 8 United States 69.3% 207,161,706 299,093,237 19 Netherlands 65.9% 10,806,328 16,386,216 20 United Kingdom 62.5% 37,600,000 60,139,274 The significance of these figures is that online travel agencies effectively are accessible to 62.5% of the UK population, which becomes more imposing when one considers that 16.7 million United Kingdom residents traveled outside of the country during 2006 (National Statistics, 2007). The utilization of travel outside the UK is utilized as internal country travel represents means generally using short air trips, train, car and coach for brief trips and stays and does not factor into the type of business profile utilized to a high percentage by High Street travel agencies. The impact of the Internet has caused a dramatic decrease in the number of brick and mortar travel agency locations in the United Kingdom as a result of shifting consumer booking patterns. During 2005, the intrusion of the Internet into the brick and mortar travel agency business caused 28 travel agency companies to fail, not to mention the numerous closing of the offices of the larger chains (, 2005). I n 2005, the number of brick and mortar travel agencies totaled 6,124, down considerably from the 7,513 in 1989 (, 2005). The good news is that cruise ship travel is up substantially, and the travel / tourism industry has been experiencing solid growth. However, the cruise ship segment is the sector of the industry that has shown the most dramatic gains. Lines such as Carnival, Princess, Celebrity and Royal Caribbean have either ordered or put into service over 30 ships in a few years representing a tremendous capital investment (Prestige Travel Systems, 2007). The lure of cruise ships lies in their first class accommodations and immersing passengers into a totally contained package of luxury, gourmet meals, on ship shops, athletics, movies, entertainment, restaurants all while cruising to destinations. Carrying in the area of 4,000 passengers, with 10 to 15 decks, the typical cruise ship boosts in the area of 10 restaurants, 250 waiters, and most are the same size or larger than the Queen Mary 2 (Guardian Unlimited, 2006). Industry executives in the cruise ship sector report that projections in cruise ship travel forecast it to increase in 2007 (Cruise Critic, 2006). The growth of this segment is good news to brick and mortar travel agencies as airline travel booking has been and is shifting to the online sector. The airline travel segment as a result of the Internet, and user penetration in the UK, 62.5%, has seen an increase in online bookings to the point where it now registers 53%, according to a survey conducted by Accenture (2005). The Report stated that 63% of respondents have booked hotels online, and that nearly two-thirds of those responding to the survey indicating that they expect to increase their use of low cost airlines where price is the primary consideration (Accenture, 2005). One of the key facets uncovered is that consumers are highly price sensitive and that since the 2003 survey it was noted that there has been a significant shift to online bookings from a live agent (Accenture, 2005). Table 5 – Primary Method of Booking Business Travel (Accenture, 2005) Online 53% Phone with a live agent 27% In person 12% Other 8% Table 6 – Internet Use for Flight Arrangements (Accenture, 2005) Research flight times and availability 79% Purchase airline tickets 66% Update and or change reservations 28% Specify personal flight preferences 26% Airline check in 22% Access account history or receipts online 19% None of the above 12% Other 2% Table 7 – Personal Travel Preferences, Airline Type (Accenture, 2005) Major network carriers 48% Low cost airlines 46% Not applicable 5% Other 1% The foregoing indicates a high do it yourself mode in airline bookings whereby the comparisons are rather straight forward. Features incorporated into online sites such as arranging your own seating has proved to be extremely popular, as has the printing of boarding passes and tickets (Economist, 2005). In fact, many online travel agencies are offering more than simply travel tickets and accommodations. Some have gifts shopping, hotel ranking sites, comments from other travelers, tickets to events and more, all in the effort to make the experience personable and get consumers to either remain on the site longer or return (Economist, 2005). As indicated under Table 6 Internet Use for Flight Arrangements, 79% of Internet users utilize online sites to research flight times and availability, while 66% actually purchase tickets. Naturally the more comfortable one

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