ELECTRONIC COMMERCE AND TOURISM
Has e-commerce past its prime or just resting? Business and stock market expectations have not been fulfilled. However, in some sectors such as the travel and tourism industry online transactions are continuously increasing, despite its tough economic problems and fewer travelers. This industry is the leading application in the B2C (business-to-consumer) arena. Whereas in other industries there is a stronger hold to traditional processes, the tourism industry is witnessing an acceptance of e-commerce to the extent that the structure of the industry is changing. The net is used not only for information gathering; there is an acceptance of ordering services over the Internet. A new type of user is emerging, who seems to accept to become his own travel agent and to build his travel package.
In 2002 the US online travel market increased by 45% up to 27 Bn. U$, accounting for 14.4% of the total travel market; and in Europe the online travel increased by 67%, making up 3.6 % of the total market (according to the Danish Center for Regional and Tourism Research, www.crt.dk). In the same year 32 % of US travelers have used the Internet to book travel arrangements (see www.nua.com/surveys/). And [9] forecasts that by 2007 30% of all B2C transaction in the European German speaking countries will be done via the Internet. However, other market research institutes publish other, both higher and lower, numbers. These statistics have the problem that they are based on varying, either broad or narrow, definitions: either distinguishing between e-business and e-commerce (seeing the latter as part of the first) or not, and using different variables and measurement methods. But even when following different definitions, all the statistics given for the travel domain point upwards. However, all those definitions fall short in one important aspect as we can see in the tourism case: they are all transaction and business oriented and ignore the fact that the Web is also a medium of curiosity, of creating communities or having just fun, all of which may or may not result into business. Especially the tourism product has to do with emotional experiences, with fun; it is not just business.
1 The Industry
The travel amp; tourism industry as a global (and a globalization) industry shows very specific features:
Travel and tourism represents approx. 11% of the world wide GDP (following the tourism satellite account method of the World Travel amp; Tourism Council).
There will be one Billion international arrivals in the year 2010 (following the World Tourism Organization), and on average tourism grows faster than the other economic sectors.
As an umbrella industry it relates to many sectors such as culture or sport, over 30 different industrial components have been identified that serve travelers.
This explains the industryrsquo;s heterogeneity, and due to its SME structure (especially when taking a destination point of view) it has a huge importance for regional development. For example, in the EU the hotel and restaurants sector accounts for more than 1.3 million enterprises, these are 8.5 % ofball European enterprises. 95.5 % of these enterprises are very small, e.g., 1-9 employees.
The supply and the demand side form a worldwide network, where both production and distribution are based on cooperation.
The product is perishable and complex: i) a hotel bed not sold for one night represent a lost income. Suppliers are in a risky situation, which can be reduced if access to information is available; ii) the tourism product itself is a bundle of basic products. To support the rather complex bundling products must have well defined interfaces with respect to consumer needs, prices or also distribution channels.
Tourism is an information based business, the product is a “confidence good“; an a priori comprehensive assessment of its qualities is impossible. Tourists have to leave their daily environment for consuming the product. At the moment of decision-making, only an abstract model of the product is available, which is based on a range of information acquired through a multiple set of channels (Web, TV, brochures or friends). This characteristic of tourism products requires information on both, the consumersrsquo; and suppliersrsquo; sides, entailing high information search costs and causing informational market imperfections. These, in turn, led to the establishment of comparably long information and value chains.
Figure 1. Structural view of the market [12].
Figure 1 differentiates between the supply and demand side and the respective intermediaries. Links mark the relationships as well as the flow of information. It only shows the most relevant links, the nodes indicate the relevant types of players in the field.
On the supply side we denote with “primary” suppliers enterprises like hotels or restaurants, mostly SMEs. With respect to a functional differentiation these companies are on the same level as the “big“ players like airlines. Tour operators can be seen as product aggregators, travel agents act as information brokers, providing the final consumer with the relevant information and booking facilities. CRS/GDS (Central Reservation Systems / Global Distribution Systems), stemming from the airline reservation systems already developed in the 60s, include also other products such as packaged holidays, or other means of transport. Whereas the intermediaries on the right side can be seen as the “professional“ connection between supply and demand (mainly based on the electronic infrastructure and functionality of CRS/GDS), the left side is relevant for the management, planning and branding of a destination. These national, regional and local tourism organizations are normally publicly funded, act on behalf of all suppliers within a destination
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ELECTRONIC COMMERCE AND TOURISM
Has e-commerce past its prime or just resting? Business and stock market expectations have not been fulfilled. However, in some sectors such as the travel and tourism industry online transactions are continuously increasing, despite its tough economic problems and fewer travelers. This industry is the leading application in the B2C (business-to-consumer) arena. Whereas in other industries there is a stronger hold to traditional processes, the tourism industry is witnessing an acceptance of e-commerce to the extent that the structure of the industry is changing. The net is used not only for information gathering; there is an acceptance of ordering services over the Internet. A new type of user is emerging, who seems to accept to become his own travel agent and to build his travel package.
In 2002 the US online travel market increased by 45% up to 27 Bn. U$, accounting for 14.4% of the total travel market; and in Europe the online travel increased by 67%, making up 3.6 % of the total market (according to the Danish Center for Regional and Tourism Research, www.crt.dk). In the same year 32 % of US travelers have used the Internet to book travel arrangements (see www.nua.com/surveys/). And [9] forecasts that by 2007 30% of all B2C transaction in the European German speaking countries will be done via the Internet. However, other market research institutes publish other, both higher and lower, numbers. These statistics have the problem that they are based on varying, either broad or narrow, definitions: either distinguishing between e-business and e-commerce (seeing the latter as part of the first) or not, and using different variables and measurement methods. But even when following different definitions, all the statistics given for the travel domain point upwards. However, all those definitions fall short in one important aspect as we can see in the tourism case: they are all transaction and business oriented and ignore the fact that the Web is also a medium of curiosity, of creating communities or having just fun, all of which may or may not result into business. Especially the tourism product has to do with emotional experiences, with fun; it is not just business.
1 The Industry
The travel amp; tourism industry as a global (and a globalization) industry shows very specific features:
Travel and tourism represents approx. 11% of the world wide GDP (following the tourism satellite account method of the World Travel amp; Tourism Council).
There will be one Billion international arrivals in the year 2010 (following the World Tourism Organization), and on average tourism grows faster than the other economic sectors.
As an umbrella industry it relates to many sectors such as culture or sport, over 30 different industrial components have been identified that serve travelers.
This explains the industryrsquo;s heterogeneity, and due to its SME structure (especially when taking a destination point of view) it has a huge importance for regional development. For example, in the EU the hotel and restaurants sector accounts for more than 1.3 million enterprises, these are 8.5 % ofball European enterprises. 95.5 % of these enterprises are very small, e.g., 1-9 employees.
The supply and the demand side form a worldwide network, where both production and distribution are based on cooperation.
The product is perishable and complex: i) a hotel bed not sold for one night represent a lost income. Suppliers are in a risky situation, which can be reduced if access to information is available; ii) the tourism product itself is a bundle of basic products. To support the rather complex bundling products must have well defined interfaces with respect to consumer needs, prices or also distribution channels.
Tourism is an information based business, the product is a “confidence good“; an a priori comprehensive assessment of its qualities is impossible. Tourists have to leave their daily environment for consuming the product. At the moment of decision-making, only an abstract model of the product is available, which is based on a range of information acquired through a multiple set of channels (Web, TV, brochures or friends). This characteristic of tourism products requires information on both, the consumersrsquo; and suppliersrsquo; sides, entailing high information search costs and causing informational market imperfections. These, in turn, led to the establishment of comparably long information and value chains.
Figure 1. Structural view of the market [12].
Figure 1 differentiates between the supply and demand side and the respective intermediaries. Links mark the relationships as well as the flow of information. It only shows the most relevant links, the nodes indicate the relevant types of players in the field.
On the supply side we denote with “primary” suppliers enterprises like hotels or restaurants, mostly SMEs. With respect to a functional differentiation these companies are on the same level as the “big“ players like airlines. Tour operators can be seen as product aggregators, travel agents act as information brokers, providing the final consumer with the relevant information and booking facilities. CRS/GDS (Central Reservation Systems / Global Distribution Systems), stemming from the airline reservation systems already developed in the 60s, include also other products such as packaged holidays, or other means of transport. Whereas the intermediaries on the right side can be seen as the “professional“ connection between supply and demand (mainly based on the electronic infrastructure and functionality of CRS/GDS), the left side is relevant for the management, planning and branding of a destination. These national, regional and local tourism organizations are normally publicly funded, act on behalf of all suppliers within a destination
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