Class 20 mar2015
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Networking infrastructure and the emergence of the internet enabled direct communication between tourism providers, intermediaries, and consumers. This led to the rise of online travel agencies and marketplaces. The document discusses how information and communication technologies (ICTs) can help tourism organizations improve efficiency, reduce costs, customize offerings, and maintain a competitive advantage. However, small and medium tourism enterprises often lack the expertise and resources to fully benefit from ICTs.
Class 20 mar2015
- 1. 20.Mar.2015 Travel e22 1 • Networking provided infrastructure for both intra and inter-organizational cooperation. • Electronic marketplace emerged and most tourism providers developed Internet Interfaces to communucate directly and efficiently with their clients & partners. Dimitrios BUHALIS - Information Technology for strategic tourism management • Supply side concentrates on the use of ICTs in private sector and eloborates on how ICTs can support the profitability and competitiveness of organization • Development of Internet revolutionized the usage of ICTs in the tourism industry and enhanced tourism distribution. Tourism Dynamic interaction of ICTs and tourism. SUPPLY-DRIVEN eTourism
- 2. 20.Mar.2015 Travel e22 2 Supply driven Dimitrios BUHALIS - Information Technology for strategic tourism management • Combining loyalty clubs, guest histories and all other information held in operation databases provided airlines & hotel chains with powerful information that enabled them to interact with their existing and prospect clients. • Networking era enabled easy access to information and thus enhanced interactivity between tourism providers (e.g.: airlines, hotels) intermediaries (e.g.: tour operators, travel agencies) and consumers. In addition, new breed of intermediaries eg.: travel portals (eg: Expedia.com) and auction specialists (eg.: Priceline.com) who concentrate on selling distressed capacity.
- 3. 20.Mar.2015 Travel e22 3 Dimitrios BUHALIS - Information Technology for strategic tourism management Key STRATEGIC functions • Enhance organizational efficiency & effectiveness, improve quality of services. • Follow up competition; diversify new products & services for new markets.. • Easy penetrate existing & new markets; easy product differenciation • Personolize products and add value at all stages • Reduce costs • Create value for time • Constantly re-invent new innovative business practices • Develop easy partnerships
- 4. 20.Mar.2015 Travel e22 4 Dimitrios BUHALIS - Information Technology for strategic tourism management Key OPERATIONAL functions • Front office (reservations, check in, payment, etc.) and Back Office (accounting, billing, payroll, etc.) integration & administration • Communucate with customers and partners. • Easy organization, management and control • Dynamic adjustment of price & capacity • Reduce costs • Dynamic yield management ; adjust price & capacity • Monitor performance and build feedback mechanisms • Operational profit: eg: hotels need to maximize Revenue per Available Room; achievece highest possible average
- 5. 20.Mar.2015 Travel e22 5 Dimitrios BUHALIS - Information Technology for strategic tourism management • SMTEs (Small & Medium sized Tourism Enterprise) are defined by European Commission as all enterprises with; – fewer than 250 employees (0-50 small and 51-250 medium) – less than 40 million Euro turnover • SMTEs are independent, flexible, often family-owned and managed. • It is estimated that 90 % of hotels are SMTEs and are run by families. • Despite their sizes, SMTEs are extremely important for offering great benefits for regional developments and local economies. • SMTEs also give tourists direct contact with the character of the destination • Rapid development of ICTs intoduce both opportunities and threats for traditional SMTEs. ICTs for Small Organizations (SMTE)
- 6. 20.Mar.2015 Travel e22 6 Dimitrios BUHALIS - Information Technology for strategic tourism management • SMTEs often lack expertise to take advantage of ICT opportunities. This is often due to ICT illeteracy of their entrepreneurs which increases their dependence on trained staff! • However, many innovative SMTEs fast adapted the technology and and enhanced their positions by using ICT tools. • Regardless of their size and location, they started to use Internet to increase their interactivity with the clients and other stake-holders. ICTs for Small Organizations (SMTE) • Consequently, SMTEs have started investing heavily on ICTs for online presence as major reason.
- 7. 20.Mar.2015 Travel e22 7 ICTs for Small Organizations (SMTE) Dimitrios BUHALIS - Information Technology for strategic tourism management • SMTEs (Small & Medium sized Tourism Enterprise) are extremely important for world economy. • In compare to larger org. with expertise & resources, SMTEs are slow in adopting technology. Push & Pull factors of ICTs for small tourism org. marketing alliancesStrategic Partners Consortia and Enterprises Global Competition Travel trade Tourism ICT suppliers Intranets, extranets Medium sized worldwide regulations need for using Internet Small and Government and Consumer DemandConsumer Demand PULL FACTORSPUSH FACTORS (SMTE) Education and Training shift Accounting Systems
- 8. 20.Mar.2015 Travel e22 8 Dimitrios BUHALIS - Information Technology for strategic tourism management IT and Strategic Management • Early adopters incld. well-established and newly founded travel enterprises, indentified a clear opportunity. They invested highly in order to develop their online brand name and capture a significant market share. • Pioneers such as American Airlines, Raynair, EasyJet, which adopted internet from the early stages and even painted their aircrafts with their website addresses. • Hotel chains such as Mariott, Hilton, etc. launched their websites before most other competitors. • Major tour opeartors came later but not the least, enhanced their distribution mechanism and electronic presence. Eg: TUI, Thomas Cook, etc. • However, a lot of suppliers particularly small & medium sized, often have failed to follow developments. As a result they are left our of current growth...
- 9. 20.Mar.2015 Travel e22 9 Dimitrios BUHALIS - Information Technology for strategic tourism management Maintaining Competitive Advantage • ICTs enable organizations to differenciate theri products or reduce their costs. • In the past gaining higher profit with lower transactions, but today lower profits with higher volume of trasnactions. Internet is a perfecto distribuiton channel for that. • Besides, SHOPPING BASKETS make it easier to differenciate products and services • In order to achieve cost advantage using ICTs, a comprehensive feasibility study based on rational cost-and-benefits analaysis should be done. • Besides, ICTS have encouraged mass tourism by enabling and handling large amounts of information that support large-scale operations.
- 10. Dimitrios BUHALIS - Information Technology for strategic tourism management • ICTs enable organizations to differenciate theri products or reduce their costs • ICTs enable organizations to differenciate their products or reduce their costs. • In the past gaining higher profit with lower transactions, but today lower profits with higher volume of trasnactions. Internet is a perfecto distribuiton channel for that. • Besides, SHOPPING BASKETS make it easier to differenciate products and services
- 11. 20.Mar.2015 Travel e22 11 It has been highlighted longstanding difficulties in achieving SMTE representationIt has been highlighted longstanding difficulties in achieving SMTE representation in DMS including the reluctance of small firms to use ICT, their lack of training,in DMS including the reluctance of small firms to use ICT, their lack of training, poor strategic management and marketing skills and the short term operationalpoor strategic management and marketing skills and the short term operational focus of managers.focus of managers. Lack of basic ICT infrastructure such as Property Management Systems (PMS)Lack of basic ICT infrastructure such as Property Management Systems (PMS) has further translated in substantial connectivity problems for DMS operatorshas further translated in substantial connectivity problems for DMS operators which often have to revert to costly and time consuming manual procedures towhich often have to revert to costly and time consuming manual procedures to finalise a booking or to update/maintain inventory on behalf of the accommodationfinalise a booking or to update/maintain inventory on behalf of the accommodation provider. SMTEs reluctance to allocate and or maintain adequate and up-to-dateprovider. SMTEs reluctance to allocate and or maintain adequate and up-to-date room inventory to the system have also negatively impacted on the performanceroom inventory to the system have also negatively impacted on the performance of DMS often presenting a distorted and incomplete picture of accommodationof DMS often presenting a distorted and incomplete picture of accommodation availability at the destination. SMTEs reluctance to pay commission has also beenavailability at the destination. SMTEs reluctance to pay commission has also been a constant chronic problem. These factors combined with the relative low value ofa constant chronic problem. These factors combined with the relative low value of transactions exchanged in the system has made it very difficult to achieve viabletransactions exchanged in the system has made it very difficult to achieve viable business models and revenue streams which would guarantee a DMS survival.business models and revenue streams which would guarantee a DMS survival. VisitScotland.comVisitScotland.com
- 12. 20.Mar.2015 Travel e22 12 • Costs are likely to include the cost of purchasing hardware, software and communucaiton packages as well as training staff. • Softwares and even hardwares need regular updates which increase costs • Designing and construction of webpages as well as hosting the site at a secure server also add up as costs • Developing a brand name needs online and offline advertisement & promotion that costs alot. • Development of online-presence also requires re- engineering of all practices of organization. Eg.: Call centers, 24 hour online support, etc. • Online distribution is needed, therefore commissions or listing fees for intermedieries: eg: Travelocity, etc. COSTS
- 13. 20.Mar.2015 Travel e22 13 • Reduce administrative & labor costs • Reduce mistakes • Maximize efficiency by sharing DATA accross organization• Client spend his OWN TIME, not your employee’s • More facility to get direct bookings • Easy cross marketing & cross sales with other org. BENEFITS • Realtime evaluation of effectiveness of ad & marketing campaigns; establish a global brand name • Ability to differenciate for niche markets • Ability to offer last minute promotions • Targeted mailings (one-to-one marketing) • Interactivity with local partners & clients • Ability to develop communites and coordinating their activities interactively
- 14. 20.Mar.2015 Travel e22 14 • Sustaining competitive advantage over long term is one of the most difficult challenges • By applying mobile technology and interactive interfaces new competitors can communucate constantly with their clientele and become more responsive than traditional firms OBSTACLES • Competitor tactics can increasingly be monitored online & realtime. Needs continous training. • Difficult to decide when to enter into arena? • Tourism organizations will have to constantly re-invent themselves • Ignoring or underestimating power of technology will make them vulnerable and therefore they have to constantly monitor competitors technology and make sure they outperform them. • Needs commitment of top management
- 15. 20.Mar.2015 Travel e22 15 Quest for Travel Portals The new- era giants of Travel & Hospitality Industry
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- 17. 20.Mar.2015 Travel e22 17 Airtickets Hotels Main Components of Travel Portals Rent-a-Car Basically travel portals started by selling budget airline tickets over GDSs. Their interfaces (API) softwares connect to GDSs such as AMADEUS, SABRE, and make possible to check availability online & real- time..And therefore to sell.. Next, the giant hotel database being sold inside the GDSs became their hotels section! And the same for rent-a-car and all other providers, even theater tickets! In a very short time, it was clear that those GDS rates of hotels & ren-a- car companies were NOT SELLABLE.. Now, Travel Portals start to establish their own database of hotels, car rental agencies, bus-train tickets, etc. But this time, it is their OWN database, and their OWN PRICES... Meaning, no longer the AGENT commissions...Now they are giant TOUR OPERATORS on the web... Package Tours Flight-hotel packages
- 18. 20.Mar.2015 Travel e22 18 Travel Portals vs Traditional Giant Tour Operators As Travel Portals get more and more share out of vacations market, giant tour operators of ages start to look for solutions to compete.. DIY (do it yourself) packages. Dynamic Packaging... Basically, lets the internet user to do his/her own packages, by choosing the appropriate air, hotel, transfer, car, etc. for him/her. And putting them all together and pay at once. Just as their new-age rivals Travel Portals... Difference is, tour operators providing DIY Packages on their websites, MAKE THEIR OWN RULES.. Meaning they do not have to get flights from GDSs, they use their own CHARTER seats instead...They don’t have to connect to hotel databases of GDSs or others, they use their own!