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Transportation (Introduction chapter)

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 Part Four
Transportation
Dimitrios Buhalis
Roman Egger

Introduction
The achievements in the field of transportation and the establishment of a new
social middle class in the 19th century created the preconditions for a boom in
tourism. The international development of transport links, an increase in the
professionalism of tourism providers and a rapidly advancing technological
development in both transport capacity and management were accompanied
by a change in consumer behaviour characterized by an increase yearning for
distant places (Egger, 2005, p. 63). The emergence of mass tourism made neces-
sary the development of information and communication technologies (ICTs)
in the field of transportation. This was essential in order to be able to manage
the transport inventory and planning, to coordinate all the stakeholders
involved in the transportation industry and to communicate the corresponding
mass of information to the right person at the right time.
Airlines were among the first companies creating worldwide electronic networks, not only
for the means of selling and distribution, but also for internal management and opera-
tions purposes. Also the other types of transport suppliers, car rentals as well as railways
or the maritime industry fall into this category: they are all technologically advanced
(Werthner & Klein, 1999a, p. 45).
As a result sophisticated computer reservation systems (CRS) were developed
to match the capacity with the customer demand (Sheldon, 1997).

The Airline Industry

The airline industry is characterized by some dominant carriers and a large
number of smaller airlines. It is one of the most sophisticated industries, as

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 264 Transportation

there are several stakeholders involved in both the strategic and

the operational management of the industry. It was deregulated
in the USA in 1978 and in Europe between 1987 and 1997. This
led to increased competition and an increase in the need to oper-
ate cost-efficiently. Specifically, deregulation led to a structural
change in the market, increased productivity, improved customer
service and lowest prices (Egger, 2005).
The Global Distribution Systems, (GDSs), a development from
the computer reservation systems (CRSs), were for a long time the
most important distribution channel for the airlines. They were
effectively developed as travel supermarkets in the pre-Internet
era and their primary objective was to connect travel agencies
with airlines (Buhalis, 2004). GDSs are still a vital element in the
light of the huge variety of tariffs to be administered. GDSs are
the main link between airlines and intermediaries, such as tour
operators and travel agents. They are also empowering Internet
transactions by providing the background link between electronic
travel agencies and airlines. The e-business W@tch 2006 identified
a list of broad field of applications of ICTs in the airline industry,
as presented in Table PIV.1.
However the cost of distributing through GDSs is one of the
major issues in the airline industry. Around 25–30% of the airlines’
turnover is estimated to be taken up by distribution costs (Davison,
2002). In order to escape the pressure of GDSs, airlines are making
every effort to maximize their direct distribution via the airline’s
own website. According to the results of the most recent Annual
Airline ICT Trends Survey, 90% of the airlines currently use their
websites as a distribution channel (SITA, 2007). The British Airways
case study (Case 26) shows how the airline’s distribution channels
have changed dramatically from CRSs, through to GDSs to eAirline
solutions and how innovatory ICT solutions and the Internet have
helped to advance competitiveness.
In recent years, airlines have increased the direct sale of their tickets
by means of e-ticketing in order to save commission and other
marketing costs, since the latter amount to up to 30% of the price
of a ticket (Buhalis, 2003). While before the turn of the millennium
it was practically impossible to buy tickets via the Internet, today,
in at least the business models of the low-cost carriers, it is the only
way for customers, both B2C and B2B, to obtain tickets. The case
study of the South African LCC Kulula.com (Case 27) shows in
this connection the importance that the Internet has for the direct
marketing of innovatory airlines, how it is used as a tool for customer
relationship management (CRM) and how it supports the procure-
ment function of airlines.

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 Transportation 265

Table PIV.1 ICT applications in the airline industry

Strategic issues
– Developing a unified architecture or Internet protocol platform
– Developing an alliance ICT hub (for global alliances)
– How much to outsource

Business to consumer
– Implementing effective distribution strategies
䊊 online selling

䊊 use of joint airline portals or online travel agents

䊊 role of traditional travel agents

– Effective customer relationship management

– Simplifying passenger travel
䊊 emphasis on self-service

䊊 electronic ticketing and/or ticketless travel

䊊 automatic check-in, including baggage

䊊 common use of self-service check-in kiosks

䊊 streamlining repetitive checks

䊊 radio frequency identification baggage tags (RFID)

䊊 communication through mobile devices

– Use of biometric technology for security

䊊 pre-screening passengers

䊊 effective biometric security

Business to business
– Implementing e-business in
䊊 maintenance planning and control

䊊 supply chain management

䊊 procurement and supplier relationship

Source: e-Business W@tch (2006), p. 132

Other electronic applications are easily linkable with e-ticketing.

Web e-Check-in allows frequent flyers to check in via the Internet.
In addition, passenger notification services via text messages,
email or paging increase service quality, as do mobile phone check-
in, lost baggage self-services and on board broadband (SITA, 2007).
Finnair (Case 28) for instance acts as an innovator in the use of
customer-oriented ICT solutions and at the same time it is increasing
the efficiency of internal and external processes by means of
sophisticated e-business solutions.

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 266 Transportation

Alongside distribution, ICTs in particular assist the efficient

arrangement of internal and external processes. The short life of
the product also requires highly flexible pricing strategies, the
calculation of which is supported by complex yield management
systems. The Lufthansa Systems case study (Case 30) examines
in detail the challenges faced by revenue management and in this
context emphasizes the strategic importance of dynamic pricing
solutions.
It is becoming increasingly evident that ICTs will be more criti-
cal to the operations and strategy of airlines. It can therefore be
predicted that technology will facilitate and support the successful
airlines of the future as ICTs will not only formulate all elements
of the marketing mix of airlines in the future, but they will also
determine their strategic directions, partnerships and ownership
(Buhalis, 2003).

Car Hire Industry

In terms of turnover, the second largest trade sector in the field of
tourism transport is car hire. The industry is also dominated by a
few international players that operate substantial fleets of cars as
well as a very large number of smaller players that tend to operate
as few as a handful of cars. Similarly to the airlines, larger
companies such as Avis and Hertz have long developed and
operated comprehensive ICT systems in order to manage their
inventory and match demand and supply. Traditionally bookable
online via GDS, the car hire industry also uses the possibility of
disintermediation as primary service provider. Hence they increas-
ingly push for more electronic sales via direct online marketing.
ICTs support the effectiveness of operational processes. The
decentralized marketing systems of rent-a-car branches, which
are often located at airports, necessitates high-capacity systems
to support internal processes. In particular, a number of
functions are critical for the rent-a-car operations. Those include
fleet management and the associated logistics processes, central
reservation system, claims handling and the module for
preparing leasing offers. The Enterprise Rent-A-Car case study
(Case 29) shows amongst other things that the internal admin-
istration of claims notifications alone would be inconceivable

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 Transportation 267

without a high-capacity database structure. It also demonstrates

a B2B application where ICTs can streamline the transactions
between insurance companies that provide courtesy cars and the
Enterprise car hire company to increase the efficiency of both.
In addition, the car hire companies benefit from synergy effects
with the airline companies by means of e-collaboration. Thus, for
instance, there is the possibility of using the bonus points acquired
through the airline customer loyalty programmes (Miles and More)
to hire a vehicle from a partner in the car hire sector. Conversely,
airlines include a hire car in their packages in order to be able to
offer an additional service.

Railways Industry
The railways have always been seen as the backbone of a function-
ing national economy by providing long-distance and local traffic,
passenger and goods traffic across the country. The opening up
of the railway networks and the creation of competition between
transport enterprises has led to considerable changes in the railway
sector over the last few years. Transport enterprises will in future
have to work together to establish the continuity of the travel chain,
which will require the ICT-assisted networking of existing systems.
This is already evident with the formation of the Railteam Alliance
that represents most fast trains in Europe. The information intensity
of the railway system requires optimum preparation, processing
and presentation of information along the entire value added chain.
Operational control systems make a major contribution to increas-
ing transport safety, while logistics and fleet management systems
lead to a reduction of empty journeys, resulting in cost savings.
However, it is still only a minority of consumers who pre-purchase
train tickets, and those are primarily for long distance, overnight
or fast trains such as the Eurostar or TGV. As a result there is little
research on the ICTs in the railway industry. However this is gradually
changing, as a number of online platforms are emerging for railways.
For example, bahn.de, the German railways website, is becoming one
of the few pan-European sources for train itineraries and often for
bookings. Bahn.de is one of the most visited travel portals on the
Internet. Information and booking systems are available to the traveller
not only via the web but increasingly also via mobile end devices.

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 268 Transportation

References
Buhalis, D. (2003). eTourism: Information technologies for strategic
tourism management. Harlow: Pearson Higher Education.
Buhalis, D. (2004). eAirlines: Strategic and tactical use of ICTs
in the airline industry. Information and Management, 41 (7),
805–825.
Davison, R. (2002). Distribution channel analysis for business
travel. In D. Buhalis, & L. Eric (Eds.), Tourism distribution
channels. Practices, issues and transformations (pp. 73–86).
New York: Continuum.
e-Business W@tch (2006). ICT and e-Business in the Tourism
Industry. ICT adoption and e-business activity in 2006. [http://
www.ebusiness-watch.org/resources/tourism/SR08-2006_
Tourism.pdf].
Egger, R. (2005). Grundlagen des eTourism; Informations- und Kom-
munikationstechnologien im Tourismus. Aachen: Shaker Verlag.
Egger, R. (2006). Online Forschung in der Tourismuswissenschaft.
In R. Bachleitner, R. Egger, & T. Herdin (Eds.), Innovationen in
der Tourismusforschung. Münster: LIT.
Sheldon, P. (1997). Information technologies for Tourism. Oxford:
CAB.
SITA (2007). Airline ICT Trends Survey 2007 Executive Summary
[http://www.sita.aero/NR/rdonlyres/2C464901-6574-4AA0-
B4E3-17199B9B8D45/0/AirlineIT07Booklet.pdf].
Werthner, H., & Klein, S. (1999). Information technology and
tourism – a challenging relationship. Wien, New York: Springer
Verlag.

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