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Impact of Internet on Travel Agencies

Impact of Internet on Travel Agencies

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The impact of theInternet on travelagencies
Rob Law Kenith Leung and  James Wong 
Introduction
The rapid growth of the travel industry requiressophisticated information technologies (ITs) formanaging the increasing volume and quality of tourism traffic. Prior studies have indicated thatmodern travellers demand more high qualitytravel services, products, information, and valuefor their money (Christian, 2001; Lubetkin,1999; Samenfink, 1999). The emergence of new tourism services and products, coupledwith a rapid increase in tourism demand, havedriven the wide-scale adoption of ITs ingeneral, and in particular, the Internet as anelectronic intermediary. In other words, theInternet serves as a new communication anddistribution channel for e-travellers andsuppliers of travel services and products. Thisnew channel also enables tourism businesses toimprove their competitiveness andperformance.Tourism researchers have emphasized theimportance of the Internet on travel andtourism. For tourism suppliers, the Internetprovides a way for them to sell their productsglobally to potential travellers at any time.These suppliers can remotely control theirservers to display information onservices/products at an electronic speed(Inkpen, 1998; Law, 2000). The successfulfactors for a travel Web site, from a supplier'sperspective, are lower distribution costs, higherrevenues, and a larger market share. Fortravellers, the Internet allows them tocommunicate directly with tourism suppliers torequest information, and to purchaseproducts/services at any time and any place(Olmeda and Sheldon, 2001).To the extent that the Internet enablese-travellers to easily arrange and purchase theirown services/products, the future of travelagencies ± the traditional intermediary ± becomes uncertain. In the travel and tourismcontext, the topic of disintermediation, i.e. the
The authorsRob Law
,
Kenith Leung
and
James Wong
are all FacultyMembers in the School of Hotel and Tourism Management,The Hong Kong Polytechnic University, Hung Hom, Kowloon,Hong Kong.
Keywords
Leisure activities, International travel, Tourism, Internet,Online databases, Hong Kong
Abstract
This paper examines tourist perceptions of the potential forthe elimination of travel agencies in the presence of theInternet. The opinions of 413 tourists on making transactionsthrough both Internet-based (hereafter, online) andtraditional distribution channels were analysed.Experimental results illustrated that tourists still usedprofessional services and advice offered by travel agencies.Tourists also agreed that more information could be foundthrough the Internet. Following the findings, the papersuggests that both online and traditional distributionalchannels can coexist in the future.
Electronic access
The Emerald Research Register for this journal is available at
www.emeraldinsight.com/researchregister
The current issue and full text archive of this journal isavailable at
www.emeraldinsight.com/0959-6119.htm
All of the authors are faculty members at the Schoolof Hotel and Tourism Management, The HongKong Polytechnic University. This project was partof the School of Hotel and Tourism Management'sInternational Visitor Survey in 2001. An abridgedversion of this paper was published in the
Proceedingsof the Fifth Biennial Conference on Tourism in Asia
inMay 2002.
100
International Journal of Contemporary Hospitality ManagementVolume 16.Number 2.2004.pp. 100-107
#
Emerald Group Publishing Limited.ISSN 0959-6119DOI 10.1108/09596110410519982
 
elimination of the middleman by using theInternet in the traveller-agent-destination/supplier network in the travel industry, has beendebated by different tourism researchers. Tosome researchers, the accessibility of onlinetravel Web sites reduces the importance of travel agencies, and might ultimately result intravellers bypassing travel agencies altogether(Buhalis, 1998; Barnett and Standing, 2001).However, Palmer and McCole (1999) andWalle (1996) argue that a key strength of travelagencies is their ability to provide personalinformation and advice to travellerscontinuously. The role of travel agencies wouldconsequently remain secure if theiradvice-offering capability were strengthened bythe presence of the Internet, rather than if theyfunctioned according to the more negativeimage of being simply a ``booking agency''.While some tourism researchers haveinvestigated the views of suppliers and travelagencies (Fong, 2001; Law
et al 
., 2001) andacademics and consultants (Buhalis and Licata,2002) on the issue of disintermediation, theviews of travellers have largely not beeninvestigated. In other words, it is generallyunclear whether travellers judge travel agenciesbe less valuable with the presence of onlinetravel Web sites. The absence of prior studieson travellers' views on the disintermediation of the traditional travel distribution channel isparticularly true in the context of Hong Kong, amajor travel destination in Asia.In view of this, this study is an attempt toexamine the views of travellers in general andthose of short-haul and long-haul travellers inparticular, on the potential for thedisintermediation of travel agencies. That is,this research aims to get the opinions of travellers who have experience in using travelWeb sites about the elimination of themiddleman in making transactions for travelproducts and services. In addition, differentstudies have shown that tourist behaviourdiffers in terms of length of haul (Crouch, 1994;Murphy and Williams, 1999; Tideswell andFaulkner, 1999). The systematic differencewhich exists between long-haul and short-haultourism also applies to the local tourismindustry in Hong Kong. According to theannual
Statistical Review of Tourism
(HongKong Tourism Board, 2002), travellers fromlong-haul market regions exhibit differentpatterns of purchasing behaviours. The mainobjective of this research is, therefore, toinvestigate the question of how travellersperceive the impact of the Internet on travelagencies. Research outcomes should shed lighton the understanding of the potentialdisintermediation of the traditional tourismdistribution channel.
The growth of the Internet anddisintermediation in the travel industry
The Internet originated from the militarynetwork ARPANet, which was introduced bythe US Department of Defense in 1969 (Law,2000). Ever since the removal in 1990 of therequirement that official support be obtained tojoin the Internet, the number of computerservers and users from private firms andindividuals has been growing at an exponentialrate. The Angus Reid Group (2000) forecastedthat, at the current rate of growth, there wouldbe 1 billion Internet users by the year 2005.Similarly, Poon (2001) stated that the amountof online direct sales by travel suppliers willgrow from 22 per cent in 1997 to 30 per cent in2002.Various studies have shown the direct fit of the Internet and travel and tourism products(Buhalis and Licata, 2002; Christian, 2001;Poon, 2001). With the emergence of theInternet, the process of fast informationtransmission can be addressed effectively at alow cost. In other words, tourists can nowreceive comprehensive, timely and relevantinformation in a virtual environment to assisttheir decision-making process. This, in turn,necessitates the balancing of perishable tourismproducts and changeable tourist demand.Furthermore, the tourism industry isdiversified, with a plethora of different suppliersthat operate independently, even as touristsexpect travelling to be a complete experience.To resolve this mismatch, the Internet offers aneffective means for developing a single andsustainable electronic infrastructure forinformation gathering and business transactionsfor both travellers and suppliers. A naturaloutcome of this is that the suppliers can carryout one-to-one marketing and mass
101
The impact of the Internet on travel agencies
Rob Law, Kenith Leung and James Wong 
International Journal of Contemporary Hospitality ManagementVolume 16.Number 2.2004.100-107
 
customization. In other words, travel supplierscan now understand each customer's needs,and therefore target each customer individuallyand deliver tailor-made products. Moreimportantly, travel suppliers can understandhow to deliver information and sell theirproducts and services to customers directlythrough their Web sites.As a consequence of the online traveldevelopments, business competition fortraditional travel agencies has increased. Poon(2001) argues that relying more heavily on theInternet gives suppliers a new independencethat will gradually decrease their dependenceon, and their commission payable to, travelagencies. Similarly, travellers may buy moredirectly from suppliers, thus bypassing travelagencies. Inevitably, the travel agencies'traditional intermediary role as a distributionchannel has changed (Buhalis, 1998), leadingto the possible ultimate disintermediation of travel agencies. As previously discussed, theexisting travel and tourism literature has few, if any, published articles that examine travellers'views on the impact of the Internet on travelagencies and the potential disintermediation of travel agencies in their arrangements. Thispaper makes an attempt to bridge this gap byinvestigating the views of travellers to HongKong on the subject.
Methodology and findings
This research is a major component of alarge-scale Omnibus Survey performed by theSchool of Hotel and Tourism Management of the Hong Kong Polytechnic University in theperiod October to November 2001. The surveyused a convenient sampling method, and 780non-transit international visitors coming fromseven major tourist-generating markets wereinterviewed at the departure lounge of the HongKong International Airport. These marketsincluded Mainland China, Taiwan, Singapore,Malaysia, USA, Australia, and WesternEurope. The questionnaire of this componentcontained ten primary questions, selected basedon background studies, secondary research, andpilot interviews with a number of selectedtravellers. Since only experienced onlinetravellers can offer meaningful insights intoonline travel (Law and Wong, 2003), allcontacted visitors had to answer a qualifyingquestion which related to their experience inusing travel Web sites. A total of 416 qualifiedrespondents who had visited at least one travelWeb site were asked to complete thequestionnaire of this project. Three of thesequalified respondents did not follow theinstructions and their questionnaires werediscarded, leaving 413 usable questionnaires.Among the qualified respondents, 158 hadpreviously purchased travel services/productsonline. Empirical results showed that thenumber of people who had visited at least onetravel Web site (
n
=416) was slightly more thanthe corresponding number of respondents whohad not visited any travel Web site previously(
n
=364). Table I shows an analysis of demographic characteristics of qualifiedrespondents and their online purchasingbehaviour.The propensity to purchase travel productsand services online significantly increases withincreasing income and education levels asindicated in Table I. This finding is consistentwith prior studies on the demographiccharacteristics of e-travellers in the travel andtourism literature (Bonn
et al 
., 1998; Weberand Roehl, 1999). Another important finding isthat the long-haul travellers purchased morethan the short-haul travellers, and travellersfrom Mainland China made the least onlinepurchases. Further analysis on these two typesof travellers will be carried out in order toidentify their opinions towardsdisintermediation. Lastly, those whose purposefor travelling was ``visiting relatives'' purchasedless online than those who travelled forvacation/leisure, business/meeting, and to ``visitfriends''. In an earlier study, Lo
et al 
. (2003)found that the Internet is one of the majorsources of information for Hong Kong'sinbound business and leisure travellers.All respondents agreed that travel agenciesperform better than travel Web sites in terms of the human touch and personal services.Respondents, however, realized that travelagencies are business-oriented, and, therefore,the interests of travel agencies will be placedbefore that of the customers. Furthermore,respondents felt that online travel agencies havea good potential to be a popular channel for
102
The impact of the Internet on travel agencies
Rob Law, Kenith Leung and James Wong 
International Journal of Contemporary Hospitality ManagementVolume 16.Number 2.2004.100-107

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