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Buhalis, D., 1998, Strategic use of


information technologies in the
tourism industry, Tourism
Management, Vol.19...
Dimitrios Buhalis

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Tourism Management, Vol. 19, No. 5, pp. 409-421, 1998
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Strategic use of information


technologies in the tourism
industry
Dimitrios Buhalis*
Dept of Tourism, University of Westminster, 35 Marylebone Road, London, NW1 5LS, UK

Information technologies (ITs) prevail in all functions of strategic and operational manage-
ment. As information is the lifeblood of tourism, ITs provide both opportunities and
challenges for the industry. Despite the uncertainty experienced in the development of ITs in
tourism, the 'only constant will be change'. Increasingly, organizations and destinations,
which need to compete will be forced to compute. Unless the current tourism industry
improves its competitiveness, by utilizing the emerging ITs and innovative management
methods, there is a danger for exogenous players to enter the marketplace, jeopardizing 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 utilization 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 organization, commitment and training are in place, so they can enable
destinations and principals to capitalize on the unprecedented opportunities emerging
through ITs. © 1998 Elsevier Science Ltd. All rights reserved.
Keywords: Information technology, tourism industry distribution channels, strategic management and marketing

I n f o r m a t i o n t e c h n o l o g i e s as a b u s i n e s s t o o l hardware, software and network developments,


whilst intellect becomes a critical asset in ITs'
Developments in ITs revolutionize both economies
management. Paradoxically, the more powerful and
and enterprises. ITs are defined as the 'collective complicated ITs become, the more user-friendly and
term given to the most recent developments in the inexpensive they are, enabling more people and
mode (electronic) and the mechanisms computers organizations to take advantage. Hence, Hopper 2
and communication technologies) used for the proposes that 'in the not-so-distant future,
acquisition, processing analysis, storage, retrieval, computers will be as familiar a part of the business
dissemination and application of information'.' At environment as telephones are today. They will also
the macroeconomic level, ITs become instrumental be as simple to use as telephones or at least nearly
in the development and prosperity of regions, as so'. The emergent information society and the
they determine their competitiveness in the global knowledge-based economic powers will therefore
marketplace. At the microeconomic level, ITs redefine the ability of regions and enterprises to
permeate all functions of strategic and operational prosper in the new millennium?
management and impel the competitiveness of Inevitably the tourism industry is also affected by
enterprises. the technological revolution. Both tourism destina-
The enhancements in ITs' processing power in the tions and enterprises increasingly need to adopt
last decade have revolutionized their capabilities as innovative mcthods and to enhance their compet-
they constantly increase computing speed; decrease itiveness. On the demand side, the new, sophisti-
equipment size; reduce hardware and software costs; cated, knowledgeable and demanding consumer
and improve the reliability, compatibility and inter- increasingly becomes familiar with the emergent ITs
connectivity of numerous terminals and applications. and requires flexible, specialized, accessible, inter-
A great degree of innovation is incorporated in active products and communication with principals.
Hence, new best management practices emerge,
*E-mail: buhalis@wmin.ac.uk taking advantage of the ITs revolution and

409
lnlbrmation technology' in the tourist industry: D Buhalis

re-engineering the entire business processes of the therefore develop and deliver the right product, to
industry. This paper aims to analyse some of the the right customer, at the right price and place,
most critical IT developments and to demonstrate without over-dependence on intermediaries. This
how they influence the tourism industry. It blends would enable small firms to enhance their position
the theoretical background of ITs with the strategic and increase their profit margin.
functions of the industry and proposes a multi- Hence, ITs offer new management and business
dimensional framework for the incorporation of ITs opportunities and can be applied strategically in at
in tourism. least four different ways: gain a competitive advan-
tage; improve productivity and performance; facili-
Information technologies as a major contributor to tate new ways of managing and organizing; and
competitiveness and competitive advantage develop new businesses. ~ Ultimately, firms investing
The fusion of ITs provides unprecedented tools, in ITs attempt to gain a competitive advantage by
which facilitate the creation of new industries, lowering their cost or by improving customers'
restructure existing industries and radically change perception of the quality of their products and
the way firms and regions compete. ITs reshape the services, and hence differentiating their offering£ ~'
nature of competition in most economic activities,
whilst they link consumers and suppliers, adding Prerequisites .for achieving competitive advantages
value to organizations' products. Hence, ITs change through information technologies
the competitive game for almost all organizations,
regardless of the industry they operate in, their Despite the potential benefits, ITs do not guarantee
location or size? ~' In particular, technology affects profitability and they may even worsen the competi-
competitive advantage as it determines the relative tive position of firms and the attractiveness of an
cost position or differentiation of organizations. 7 A industry. 7 There is also a debate as to whether
firm can achieve several strategic benefits by using ITs-originated competitive advantage can be
ITs, namely: establishing entry barriers; affecting sustained, as investments in technology are often
switching costs; differentiating products/services; matched by competitors. Strassmann" suggests that
limiting access to distribution channels; ensuring there is no significant correlation between spending
competitive pricing; decreasing supply costs and on ITs and profitability. There is also criticism that
easing supply; increasing cost efficiency; using infor- ITs often fail to add value in an organization's
mation as a product itself; and building closer operation, whilst the costs associated (capital,
relationships with suppliers and customers. ~ training, staff) sometimes exceed the benefits gener-
Table 1 illustrates the results of the latest annual ated. '2,'~ This is often attributed to the lack of long
Manufacturing Attitudes Survey. Manufacturers not term ITs vision, which deters enterprises from
only regard investment in ITs as crucial in enabling capitalizing on opportunities and gaining benefits.
them to outperform competitors, but also their ITs are not a panacea and in fact incorporate
expectations from IT systems go far beyond their several risks as well as considerable costs. Organiza-
operational management and focus primarily on the tions should therefore realize that ITs contribute to
strategic management of enterprises. As information both sides of the general business equation, since
is a source of power in negotiations with partners, they add to both revenue and cost streams.
the adoption of ITs often redefines the power However, ignoring and under-utilizing ITs could
balance between partners, and changes their be disastrous as it would create strategic vulnera-
bargaining relationships2 Perhaps, small and bility and competitive disadvantage? Thus, no action
medium sized enterprises can gain more advantages is not an option. ITs can be fruitful, only if certain
by using ITs, as bargaining power is gradually prerequisites are satisfied, namely: long term
relocated from institutional buyers and wholesalers planning and strategy; innovative business processes
to suppliers, due to the more effective and inter- re-engineering; top management commitment; and
active communication they can achieve with their training throughout the hierarchy. Using ITs as a
target markets. Small size in combination with stand-alonc initiative is inappropriate. Their usage
innovation and effective networking by using ITs has to be coupled with the re-engineering of all
also enable them to develop 'virtual size' and business processes as well as with a redesign of
empower their competitiveness. Smaller firms can organizational structures and control systems.
Perhaps the greatest challenge is to identify and
train managers who will be effective and innovative
Table 1 Impact of information technologies on businesses users of ITs and would lead technology-based
SignificantLy enhance competitive edge 79% decision making towards quantifiable gains and
Improves information 77% advantages. Intellect, therefore, becomes one of the
Better external communications 65% major assets of organizations, while continuous
Manage computers expectations better 63% education and training are the only methods to
Improve decision making process 61%
develop and maintain this asset. Provided that
Source: Conspectus, August 1996, p. 42.'" rational and innovative planning and management is

410
Information technology in the tourist industo~: D Buhalis

exercised constantly and consistently, ITs can which address mini-market segments. Increasingly,
support the success of organizations. '~ '" new, experienced, sophisticated, demanding travel-
lers seek information about more exotic destinations
and authentic experiences, as well as the require-
Tourism and information technologies ment to interact with suppliers in order to satisfy
Tourism is inevitably influenced by the business their specific needs and wishes. The contemporary/
process re-engineering experienced due to the connected consumer 'is far less willing to wait or put
technological revolution. As information is the life- up with delays, to the point where patience is a
blood of the travel industry, effective use of ITs is disappearing virtue'. 27
pivotal. Hence, 'a whole system of ITs is being In order to satisfy tourism demand and survive in
rapidly diffused throughout the tourism industry and the long term there is no choice but to incorporate
no player will escape its impacts'.' Unlike durable technology and enhance the interactivity with the
goods, intangible tourism services cannot be physic- marketplace. 2~2~'27 Increasingly, ITs enable travellers
ally displayed or inspected at the point of sale to access reliable and accurate information as well
before purchasing. They are bought before the time as to undertake reservations in a fraction of the
of their use and away from the place of consump- time, cost and inconvenience required by conven-
tion. Hence they depend exclusively upon represen- tional methods. ITs improve the service quality and
tations and descriptions, provided by the travel contribute to higher guest/traveller satisfaction.
trade, (e.g. information in brochures), for their Customer satisfaction depends highly on the
ability to attract consumers. Timely and accurate accuracy and comprehensiveness of specific informa-
information, relevant to consumers' needs, is often tion on destinations' accessibility, facilities, attrac-
the key to satisfaction of tourist demand. Therefore, tions and activities5~ 3, This is because the gap
ITs provide the information backbone that facili- between consumers' expectations and perceived
tates tourism.' 7 experiences is smaller and thus, unpleasant surprises
The revolution of ITs has profound implications from the destination or principals are minimized. 2'
for the management of the tourism industry, mainly In addition, several other ITs facilitated factors
by enabling efficient co-operation within the enhance consumer satisfaction, namely: consumers
industry and by offering tools for globalization. In have more information and enjoy a greater choice; a
few other economic activities are the generation, reduction of bureaucracy and paperwork effectively
gathering, processing, application and communica- frees time for customer service; customizing the
tion of information as important for day-to-day product and establishing 'one-to-one' marketing by
operations. The rapid development of both supply using intclligcnce collected by loyalty schemes (e.g.
and demand makes ITs an imperative partner and dietary requirements, product preferences);
thus they increasingly play a more critical role in providing new services, (e.g. as in-flight or in-room
tourism marketing, distribution, promotion and entertainment, office facilities and information
co-ordination. The re-engineering of these processes channels); facilitating operational tasks (e.g. in-room
generates a paradigm-shift altering the structure of TV checkout); personalized services (e.g. telephone
the entire industry. '~ 24 Thus, ITs have a dramatic operator acknowledges guest by name); and finally,
impact on the travel industry, because they force the better integration of departments and functions of
sector to rethink the way in which it organizes its organizations towards better service.
business, its values or norms of behaviour and the Computer Reservation Systems (CRSs), Global
way in which it educates its workforce. -'~ Distribution Systems (GDSs) and, increasingly,
Internet providers, satisfy the needs of consumers
Information technologies and tourism demand for convenient access to transparent and easy to
WTO argues that 'the key to success lies in the compare information. They cover the entire variety
quick identification of consumer needs and in of choices of travel, lodging and leisure services,
reaching potential clients with comprehensive, destinations, holiday packages, as well as displaying
personalized and up-to-date information'Y' The the actual prices and availability of such services.
rapid growth of both the volume and the quality These services also provide immediate confirmation
requirements of contemporary travellers, require and speedy documentation of reservations, allowing
powerful ITs for the administration of the expanding a greater degree of flexibility and enabling
traffic. Tourists become sophisticated and more prospective travellers to book at the 'last minute'.
demanding, requesting high quality products and Experienced travellers are therefore empowered by
value for their money. Thus, destinations and princi- information and booking systems and increase their
pals need new methods to serve the new types of personal efficiency by creating tailor-made products
demand. The usage of ITs in the industry is driven independently. ITs also assist principals to under-
by both the development of the size and complexity stand consumer needs through market research and
of tourism demand, as well as by the rapid expan- loyalty/partnership schemes. Improved access to
sion and sophistication of new tourism products, information covering all aspects of tourist activities

4ll
lnJbrmation technology in the tourist industry: D Buhalis

provides the framework for offering personalized Computer reservation systems (CRSs)
services at price levels comparable to those of Computerized networks and electronic distribution
standard packages? ~~3 in tourism emerged in the early 1970s, through
The revolutionary developments in ITs, which internal CRSs. They became central to the distribu-
have been experienced through the proliferation of tion mix and strategy of airlines. CRSs are widely
the lnternet and the World Wide Web since 1995, regarded as the critical initiators of the electronic
illustrate that consumers increasingly rely on the age, as they formulated a new travel marketing and
Internet for travel information. They utilize distribution system. A CRS is essentially a database
commercial and non-commercial Internet sites for which manages the inventory of a tourism enter-
planning, searching, purchasing and amending their prise, whilst it distributes it electronically to remote
travel. Non-tourism organizations tend to seize the sales offices and external partners. Intermediaries
emergent opportunity by utilizing the new lTs tools. and consumers can access the inventory and they
This is already the case with major ITs providers, can make and confirm reservations. The rapid
(e.g. Microsoft developed Expedia, an electronic growth of both demand and supply, as well as the
travel agency) to satisfy tourism demand. deregulation of the American air transportation
demonstrated that the tourism inventory could only
The re-engineering of the tourism production and be managed by powerful computerized systems.
distribution Airlines pioneered this technology, although hotel
The impacts of ITs are evident in the tourism chains and tour operators followed by developing
C R S s . 2 , t T,24,3-~
production, marketing, distribution and operational
functions of both the private and public sectors?~ CRSs enable principals to control, promote and
ITs can also boost staff morale, managerial effec- sell their products globally, while facilitating their
tiveness, productivity and ultimately profitability of yield management. In addition, they integrate the
tourism organizations, provided that managerial entire range of business functions, and thus can
attitude is adapted to the new business environment contribute to principals' profitability and long term
and takes advantage of the emergent opportuni- prosperity. CRSs often charge competitive commis-
ties? 5 In particular, ITs have pivotal implications for sion rates in comparison with other distribution
the distribution channel, as they introduce unprece- options, whilst enabling flexible pricing and capacity
dented and innovative methods. Distribution is one alterations in order to adjust supply to demand
of the few elements of the marketing mix which can fluctuations. CRSs also reduce communication costs,
still enable tourism enterprises to improve their while providing intelligence information on demand
competitiveness and performance. Distributing the patterns or the position of partners and competitors.
right marketing mix, to the right segments, through Hence, CRSs contribute enormously to both the
the right intermediaries, will be instrumental in the operational and strategic management of the
long-term success of principals. ITs not only facili- industry?" ~
tate distribution, but they also enable differentiation
and/or cost advantage, as well as empower inter- Global distribution systems (GDSs)
active communication between principals and target Since the mid 1980s, airline CRSs have emerged
markets. This is accomplished by re-engineering the into Global Distribution Systems (GDSs), by
entire processes of producing and delivering gradually expanding their geographical coverage, as
products, in order to optimize efficiency and produc- well as by integrating both horizontally (with other
tivity, and to maximize the value-added provided to airline systems) and vertically (by incorporating the
consumers. TM entire range of tourism products and services, such
The evolution of ITs demonstrated that destina- as accommodation, car rentals, train and ferry
tions and principals will be unable to compete ticketing, entertainment and other provisions). To
effectively, unless they were able to promote avoid unnecessary overlappings principals integrated
themselves in the emergent electronic distribution their CRSs with GDSs, by developing interfaces.
channels. ITs transformed distribution to an Several 'switch' companies, such as THISCO and
electronic marketplace, where access to information WIZCOM, emerged to facilitate interconnectivity.'7
and ubiquity is achieved, while interactivity between This enabled the display and purchasing of the
principals and consumers is empowered. Three main majority of tourism products on-line. As GDSs
waves of technological developments established ITs connect most tourism organizations with intermedi-
in tourism enterprises, namely Computer Reserva- aries around the world, they lead the standardiza-
tions Systems (CRSs) in the 1970s; Global Distribu- tion processes and control a considerable market
tion Systems (GDSs) in the 1980s and the Internet share.
in the 1990s. Although these technologies emerged GDSs emerged as the 'circulation system' or the
with gaps of about 10years from each other, they 'backbone' of the industry by establishing a global
currently operate both separately and jointly, communication standard and a new tourism
controlling different functions and target markets. electronic distribution channel. Evidently GDSs

412
InJ&mation technology in the tourist industry: D Buhalis

became businesses in their own right, as they of their technological infrastructure and network as
changed their nature from tools for vendor airlines well as economies of scale. This will assist them to
and accommodation corporations, to 'electronic deliver diversified services to broader markets and
travel supermarkets' and strategic business units for therefore suffer less from their business market
their corporations. 2,33,3' However, fierce competition saturation?~ ~v
forced a number of mergers and acquisitions in the GDSs' efficiency and reliability enable principals
GDS industry. It is predicted that only two or three to distribute and manage their reservations globally,
of the major ten GDSs will survive and therefore, by bridging consumer needs with the tourism supply.
further concentration and integration is anticipated. Hence, great synergies are achieved, where global-
Currently four systems, namely Galileo, Amadeus, ization drivers stimulate GDS developments and
Sabre and Worldspan, dominate the global market. vice versa. Go ~ identifies four major sets of condi-
Since GDSs are connected with most major princi- tions, namely, cost, market, government and
pals, they offer similar services. In June 1996, for competitive drivers (Table 3), and demonstrates why
example, Amadeus displayed availability for 432 the globalization of the tourism industry is closely
airlines, 29000 hotels and 55 car rental companies interrelated with its ability to use computerized
through 162329 terminals in 106394 travel agencies systems. Ultimately GDSs should aim to increase
around the world. However, each GDS has a the satisfaction of their stakeholders, (i.e. consu-
stronger market share at the region where its parent mers, principals, travel agencies and shareholders),
airlines operate, as traditional links with travel offer superior products and enable partners to
agencies have been utilized for the penetration of maximize their profitability.
GDSs. Table 2 illustrates the number of GDSs'
locations and terminals in Europe, where each of The emerging super highway--the Internet and the
the major GDSs are used. e' ~' World Wide Web
GDSs increasingly offer both leisure and business The Internet (or the 'Information Superhighway')
products, by providing information and allowing convergence media, telecommunications, and infor-
reservations for theatre tickets, holiday packages mation technology, increases the interactivity
and tourism destinations. Eventually core GDSs are between consumers and suppliers 5''. Since the early
expected to be based on a network of smaller, 1990s, the World Wide Web (WWW) has emerged
regional and specialized computerized systems for as the fastest growing area of the lnternet, enabling
their leisure products. The development of Destina- distribution of multimedia information. As textual
tion Management Systems will enable small and data, graphics, pictures, video, and sounds are easily
medium sized tourism enterprises to be repre- accessible through the WWW, it soon became the
sentedY ',~ Diverting into the leisure market flagship of the ITs' revolution and instituted an
responds to demand trends, while enabling GDSs to innovative platform for efficient, live and timely
diversify their portfolio in order to take advantage exchange of both ideas and products. Consequently,

Table 2 Penetration and market shares of GDSs in European travel agencies

Germany France Spain Denmark UK Italy Holland Belgium Portugal Greece Ireland Luxem- Total
bourg

Agencies
Amadeus 11000 3150 2291 188 20 0 0 100 11 l) 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
Totaloutlets 12100 3782 2583 321 3329 3082 682 504 522 382 94 13 27394
Tcrminals
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 25 700 8924 4049 1647 12682 6507 2867 1606 766 462 296 26 65 532
terminals
Terminals 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
per outh't
Source: Adapted from Smith and Jenner, 1994, p.62**and Hyde, 1992, p.26-277"
]Terminals per outlet = total terminals/total outlets]
As travel agencies may operate more than one GDS, the 'terminals per outlet' ratio is provided only for comparison reasons between
countries.

413
lnJbrmation technology in the tourist industry." D Buhalis

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415
lnJormation technol~zw in the tourist industo;: D Buhalis

of the industry with consumers. However, to the improve customer satisfaction and remain
degree that the Internet empowers consumers to competitive e4
develop and purchase their own itineraries, travel • New electronic intermediaries emerge (e.g.
agencies' future becomes questionable. This is also Expedia, ITN) to take advantage of the ITs'
reinforced by the recent commission capping as well revolution
as by the introduction of electronic ticketing by • Tourism destinations develop regional systems to
airlines around the world. Table 5 demonstrates the enhance their representation, boost their image
most prominent arguments for and against disinter- and attract direct bookings 2,,.2s.3,,.4~
mediation of the tourism distribution channel. • Principals develop Internet-based interfaces with
Future intermediation of the tourism distribution consumers s=
channel will therefore be quite different from the
In reality different market segments will use
current situation. There are several trends evident
dissimilar distribution channels for selecting and
already:
purchasing their tourism products. For example, the
• Traditional intermediaries re-engineer their older generation and people who travel infrequently
processes in order to update their offering, will probably continue purchasing tourism products
from traditional travel agencies. However, business
Table 5 Arguments for and against the disintermediation of the and frequent travellers may use on-line providers to
tourism distribution channel arrange their itineraries and eventually purchase
Arguments for the disintermediation of the tourism distribution
their tickets. This will depend on the security of
channel Internet transactions; the reliability and quality of
Travel agencies add little value to the tourism product, as they information available on the Internet; and the
primarily act as booking offices convenience of the entire process.
Travel agencies merely manage information and undertake Traditional travel agencies, therefore, will need to
reservations
Travel agencies are biased, in favour of principals who offer re-assess the situation and decide which market
override commissions and in-house partners segment they would like to concentrate on.
Experienced travellers are much more knowledgeable than travel Adequate equipment, training and service will be of
agencies, especially for specialised markets, e.g. ski paramount importance in order to maintain their
Visiting travel agencies is inconvenient, time consuming and
competitiveness in the long term. Travel agencies
restricted to office hours
Commissions to travel agencies increase the total price of travel will need to transform from booking offices to travel
products ultimately managers and advisers, as well as to add value to the
Personnel in travel agencies are often inadequately trained and travelling experience. Two strategic directions can
experienced therefore be followed: Travel agencies can either
There is an increase of independent holidays and a decrease of
package holidays
offer differentiation value, by designing high quality
Technology enables consumers to undertake most functions from personalized travel arrangements which consumers
the convenience of their armchair will be willing to pay a premium for, or they can
Electronic travel intermediaries offer a great flexibility and more offer cost value by delivering less expensive products
choice than competitors, through standardization, high
The re-engineering of the tourism industry (e.g. electronic
ticketing; now frills airlines; airline commission capping; loyalty volume and consolidators. These two strategies will
schemes) facilitates disintermediation probably dominate the travel industry in the future
years.
Arguments against the disintermediation of the tourism distribu-
tion channel
Travel agencies are professional travel advisers and they offer A multi-dimensional strategic framework
valuable services and advice
Travel agencies use expertise to save time for consumers for ITs in tourism
Technology is difficult to use and expensive to acquire for
A conceptual synthesis of the usage of ITs in
individuals
A large part of the market is computer illiterate business strategy, and in tourism demand and supply
The more complex computers and the lnternet become, the more in particular, yields a strategic ITs framework. This
people need experts to use them framework attempts to systematize our under-
Travel agencies offer free counselling services and add value by standing of the use of ITs in tourism and to
giving advice
Electronic intermediaries primarily serve the business market and
illustrate all strategic implications for the industry.
are more expensive Figure 1 demonstrates the multi-dimensional
Travel agencies can achieve better prices through the right character of the framework, as well as the technolo-
channels and deals gies it utilizes in order to perform its business
Travel agencies offer a human touch and a human interface with functions. Table 6 also illustrates several examples of
the industry
Travel agencies reduce the insecurity of travel, as they are the tourism industry functions undertaken within
responsible for all arrangements this framework. The ability of principals and desti-
Travel agencies can offer better prices by buying in bulk or nations to use this framework effectively will
through consolidators increasingly determine their future competitiveness.
lnternet transactions are not secured and reliable yet
The framework incorporates the paradigm shift and

416
h~[brrnation technology in the tourist industry': D Buhalis

the business process re-engineering experienced, production technology; inventory control for tour
which effectively reshape the tourism industry. ITs operators, transportation companies and other
propel changes in several directions between the principals. Intranet technology facilitates an internal
three main axes. The combinations originated network by deploying the same technology and
illustrate how strategic marketing and management presentation tools as the Internet, but restricting
can be utilized in order to achieve mutual benefits access to authorized personnel only. The future
for all stakeholders in a tourism value-added growth of intranets will be rapid. It is estimated that
production chain. An ITs-led integration of industry two-thirds of all large companies either have or soon
members is therefore inevitable and is expected to will have an intranet. Sun ~'-~ estimates that world-
dominate the industry in the near future. wide server spend in 1997 on Intranets was around
$6bn, compared with $3bn on the Internet, while
Intra-organizational functions they expect it to reach $8bn by 1998. For years
ITs enhance a number of intra-organizational 'managers have been looking for a better way to
processes, by supporting a certain level of integra- deliver information within the organization; now
tion between various functions within organizations; almost overnight the web has opened the door'. "~
typically the 'front' and 'back' office. The aim is to
increase efficiency and productivity, as well as to Inter-organizational functions
enhance the strategic and operational management Networking supports the communication and facili-
of the enterprise. Examples from the tourism tates interconnectivity between individual organiza-
industry include property management systems or tions. Hence a number of systems and applications
information systems in hotels; integrated points of emerge to assist communications between tourism
sales systems; management and strategic informa- enterprises. Electronic Data Interchange enables the
tion systems; accounting and payroll systems; food transfer of structured data from computer to

Intra-organisation
l Intranet Systems supporting
Property ManagementSystems
PointsOf System horizontal
Managementlaform~ion Systems vertical and
StrategicInformationSystems diagonal integration
D~isi~mSupportSystems
Accounting
Relationship and Partnership marketing Food ProductionTechnology
InventoryControl

internet
WorldWideWeb
File TransferProtocol
ElectronicMail
Electa'~nicData Interchange
Interact BankingSystems
CD-ROMs Global DistributionSystems
HomeComputing ~ . Interact ComputerReservationSystems
Electronicbrochm'es WorldWideWeb DestinationManagementSystems
Dh'ectDial in systems Fila TramferProtocol
ElectronicMall
DestinationIntegratedComputerL'aformation
ReservationManagementSystems
ElectronicData Interchange
BankingSystems
Global DistributionSystems
ComputerReservationSystems
DestinationManagementSystems
DestinationImegta~d ComputerInformal
ReservationManagementSystems
Consumers Packagecreadon and distribution

Tailor m a d e Jroducts and Inter-organisation


special interests holldays
Destination based products
Figure 1 Tourism and information technologies strategic framework.

417
Information technology in the tourist industry: D Buhalis

computer (often hosted by different and remote communication between organizations and
organizations) using agreed communication stand- individuals. Moreover, Extranets emerge to provide
ards. This has been extensively utilized between tour a secured interface for networked enterprises. Using
operators and handling agencies at destinations to Internet technology Extranets facilitate a restricted
transfer passenger lists, invoices and other paper access and interconnectivity to authorized organiza-
work. Computer Reservations Systems and Global tions only, and thus, they facilitate the networking of
Distribution Systems are also applications which tourism enterprises.
empower communication between travel agencies
and principals such as airlines, hotels and car rental Consumers
firms. In addition, Destination Management Systems The development of electronic commerce, defined
and Destination Integrated Computer Information as 'the secure trading of goods, information and
Reservation Management Systems attempt to services using Internet technologies'/'5 enables
integrate the management and marketing of consumers to communicate directly with tourism
independent tourism enterprises at the destination organizations in order to request information and
area and thus facilitate interconnectivity.2' In purchase products, as well as to interact with princi-
particular, small and medium sized tourism enter- pals. Consumers empowered by home computing
prises will benefit from ITs-supported networking as can access information about tourism products and
they will be able to pool their resources and organizations instantly, inexpensively, interactively,
compete with their larger counterparts. 2",43 almost regardless of the physical location of both
Electronic Mail, the World Wide Web, the File service providers and themselves. They can also
Transfer Protocol are some of the most popular uses make and alter reservations and purchase tourism
of the Internet which empower interconnectivity and products through electronic shopping and banking

Table 6 Tourism industry communication patterns and functions facilitated by ITs

lntra-organizational communications and functions Inter-nrganizational eommunicati~ms and functions

Within a tourism organization Tourist product suppliers and intermediaries

Management Pre-travel arrangements


strategic planning general information
competition analysis availability/prices inquiries
financial planning and control negotiations and bargaining
marketing research reservations and confirmations
marketing strategy and implementation ancillary services
pricing decision and tactics
middle term planning and feedback Travel related documentation
management statistics/reports lists of groups/visitors
operational control receipts/doeumcnts
management functions vouchers and tickets production

Communication between departments Post-travel arrangements


networking and information exchange payments and commissions
co-ordination of staff feedback and suggestions
operational planning complaint handling
accounting/billing
payroll
supplies management

Communication and function with branches


co-ordination of operations
availability/prices/information
orders from headquarters/administration
share of common resource databases for customer
and operational information

Consumer communication with tourism industry Tourism enterprise communication with non-tourism enterprises
Electronic commerce Other suppliers and ancillary services
Travel advice vaccinations
Request availability/prices/information travel formalities and visa
Reservation and confirmation Insurance companies
Amendments for a reservation Weather forecasting
Deposits and full settlements Entertainment and communications
Specific requests/enquiries Banking/financial services
Feedback/complaints Credit cards
Other business services
Source: Adapted from Buhalis, 1996, p.133. "~

418
lnf'ormation technology in the tourist industo': D Buhalis

systems. The proliferation of CD-ROMs also allows tourism bundles will be packaged for the individual
the storage and distribution of memory-consuming needs of consumers can only be facilitated by ITs.
multimedia presentations to both individual and
institutional customers, improving the promotional Inter-organizational-consumers function
function of organizations. Serving consumers Consumers increasingly utilize inter-organizational
electronically also contributes to the cost reduction functions in order to identify and purchase suitable
of enterprises. Sun ~'~ estimates that face-to-face products and services for their needs. As the vast
banking costs $1 per transaction; call centres cost majority of tourism products is offered by small and
$0.5, whilst Internet banking cost merely $0.15 per medium-sized tourism enterprises, consumers often
transaction. Similarly tourism organizations can need to have access to information, programmes,
reduce their cost and improve their competitiveness schedules, tariffs and availability of a wide range of
by serving consumers through the Internet. tourism providers in order to be able to amalgamate
Tourism organizations can enhance their perform- their tourism products. Thus, Computer Reserva-
ancc by empowering their strategic marketing and tions Systems, Destination Management Systems
management efforts through undertaking all their and the World Wide Web are utilized to access data
functions by advanced ITs. This will enable them to from different enterprises, either by individual
improve their networking and ultimately to improve consumers themselves or by travel agencies acting as
their 'virtuality'/'~' The following examples demon- brokers on their behalf. The trend towards indepen-
strate the benefits generated by advanced integra- dently arranged trips effectively demonstrates that
tion of all management and marketing efforts for more consumers will rely on technology for
organizations. selecting, amalgamating and purchasing their
tourism products.
lnter-organizational-intra-organizational functions The multi-dimensional strategic framework for
A number of useful applications are available in the ITs in tourism not only demonstrates the depend-
tourism industry, supporting both inter- and intra- ence of both demand and supply on ITs, but it also
organizational functions. These often empower joint illustrates that networking and interactivity will
marketing efforts as well as horizontal, vertical or increasingly dominate the production and consump-
diagonal integration. Tourism enterprises can tion functions. Players who fail to participate in the
exchange customer information either to facilitate electronic marketplace therefore, will face severe
the formulation of total tourism product or to competitive disadvantages in the long term and will
undertake joint marketing campaigns. For example probably lose considerable market share.
airlines co-operate with hotel chains and car rental
companies in issuing frequent flyer miles or
providing rewards and privileges to consumers. Synthesismthe contribution of ITs to the
Airlines also formulate alliances (e.g. Star Alliance) future tourism industry
in order to enhance their globalization and to take Information technologies influence the strategic
advantage of code-sharing agreements. This enables management and marketing of contemporary
the provision of seamless products and the develop- organizations, as a paradigm-shift is experienced,
ment of comprehensive marketing campaigns. transforming the 'best' business practices globally.
ITs transform the strategic position of organizations
Intra-organizational-consurnersfunctions by altering their efficiency, differentiation, opera-
Enterprises utilize ITs for addressing individual tional cost and response time. In particular, ITs
needs and wants of their consumers. Partnership or have stimulated radical changes in the operation and
relationship marketing attempt to maximize distribution of the tourism industry. Perhaps the
customer loyalty by building bonds between most apparent example in tourism is the
consumer and organizations. Mutual benefits can be re-engineering of the booking process, which
achieved in this way, as consumers gain extra gradually becomes rationalized and enables both
benefits, special treatment or discounts, while enter- consumers and the industry to save considerable
prises increase the satisfaction and loyalty of their time in identifying, amalgamating, reserving and
regular consumers. They also gain a wealth of purchasing tourism products. Ultimately, prospective
marketing information about their needs and tourists will be able to browse through the Internet
spending habits, without commissioning expensive and identify a rich variety of offers in order to make
marketing research. Direct and database marketing, travel choices suited to their personal requirements.
frequent flyer programmes and guest histories are The focus is thus shifting towards individual travel
often utilized in this sense. Experienced consumers and dynamic packages, and targeting mini-segments.
may also have access to some electronic facilities, The visibility of principals in the marketplace will be
which enable them to achieve a higher flexibility and a function of the technologies and networks utilized
interactivity with the organization. Eventually the to interact with individual and institutional
development of 'one-to-one' marketing, where customers. A closer co-operation is also required

419
ln]brmation technolo,@' in the tourist industry: D Buhalis

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