An Overview of Information Technology in the Tourism

Tourism is an important sector in the economy contributing around 10% to worldwide GDP, projected to rise to nearly 11% by 2014 (World Tourism Council (2004). Tourism was one of the first sectors to embrace Information Technology (IT). IT is crucial to the tourism industry and its success. IT has bought with it a number of changes and challenges that affect business and tourism. IT developments that have taken place with respect to the tourism industry are overviewed in this paper. Challenges they pose for the sector and tourism operators generally are also identified. Introduction Tourism has a significant economic impact at an international, domestic and regional level. This impact is underlined by statistical evidence (World Travel and Tourism Council, 2004; World Tourism Organisation, 1999) demonstrating the significance of tourism in terms of GDP, employment and economic development. The tourism industry can be seen as one of the first business sectors where business functions are almost exclusively using information and communications technologies (ICT) (Garzotto et al. 2004). Information Technology (IT) and ICT has played an important role in the development of tourism. Computerised reservations Systems (CRS) were among the first applications of IT worldwide. The industry is one of the more successful areas of e-commerce because it is largely consumer oriented and since services and the provision of information is at its centre. Werthner & Klein (1999) suggest tourism is a hybrid industry since even though it is dominated by the provision of information, essentially it is about a physical product. This requires the ‘seamless integration of information and physical service, with flexible configurations of the physical and the informational parts” (Werthner & Klein, 1999, p. 257). ICT facilitates this integration and enables customisation of tourism products to suit the needs of individuals. Due to changes in consumer behaviour of the tourist the market is becoming more segmented with each potential consumer belonging to a number of market segments simultaneously. Tourist operators need to be aware of these changes and be equipped to respond, or better still, take a proactive approach. The challenge for the tourism operator is the provision of accurate, localised data, increasingly via IT, whilst maintaining a relationship with the tourist. Rather than being just transaction based longer term relationships need to be fostered and IT can play a role in this relationship building. This paper overviews ICT/IT developments in the industry and considers the response of various players to the challenges that these developments bring. An overview of the industry The Australian tourist industry is characterised, as is the case in most other economies, by two tiers. Tier 1 players dominate, for example, the hotel sector. They are few in number, being global players well versed in strategy, management practices and information management systems which tends to be centralised. Tier 2 players on the other hand tend to be small and medium tourism enterprises (SMTEs). SMTEs are characterised by lower levels of resources generally, including financial resources as well as technical expertise and tend to focus on operational issues rather than taking a strategic view. In Australia, they also tend to be located in regional and rural areas (Sharma, Carson & DeLacy 2000, p. 159). The following diagram depicts the groups of players involved in the industry. Figure 1 – Overview of players involved in tourist industry. (Werthner & Klein, 1999, p. 257). (note – NTO, RTO and LTO represent tourist organisations on a national, regional and local level) INFORMATION TECHNOLOGY (IT) AND THE TOURISM SECTOR Traditional technologies Inter-organisational systems (IOS) represent one use of IT and allow the transfer of information across organization boundaries. In the past electronic data interchange (EDI) and electronic funds transfer (EFT) have been the technologies to enter into IOS. The standards required for EDI and the high set up costs have tended to act as a barrier for Small and Medium Enterprises (SMEs) to enter into IOS. Tourism is dominated by the need to provide fast and accurate information to the consumer. The first step to achieve this goal of a one-stop service is via global distribution systems (GDS), a form of IOS. GDS evolved from computer reservation systems and enable the aggregation of information from airlines which enables travel agents (as information brokers) and tourists to ‘make reservations and order other services in a single marketplace’ (Joo, 2002, p. 60). Examples of GDS are Sabre, Galileo, Amadeus and Worldspan. There is increasing debate concerning the long term viability of the large GDSs (Squires 2005). The systems themselves are dated, based on 1960s architecture and code, never intended for use with the Internet and as proprietary legacy systems are difficult to interface with existing modern computer and network architectures (Dogac et al. 2004; Squires 2005) Chains of hotels (tier 1 players) generally have in place integration of the Property Management System (PMS) with the corporate Central Reservation System (CRS) and GDS. CRS integration allows for individual properties to benefit from the extensive reach of the chains marketing network and to allow for cross selling amongst properties within the chain. GDS integration allows chain properties to extend their reach beyond that of their chain marketing network. This interoperability of systems is an example of collaboration around IT (known as collaborative commerce), especially the CRS which has been the most commonly used Wide Area Network (WAN) application in hotels (Brooks, 1999). This extends insofar as some independent hotels link to a GDS such as Sabre. Interoperable systems already exist in chains, but do not exist amongst independent hotels. Independents appear to resort to subscription to affiliate reservation networks that allow non-chain properties to participate as overflow facilities (Kasavana & Brooks 2001) rather than network amongst themselves. In this way “independents (are able) to maintain their individuality and distinctive methodology, while still benefiting from the economies of scale that an affiliation with a larger group of likeminded properties can offer” (Travel Impact Newswire, edition 81, 1 December 2004, p.3). Softwares that are available to facilitate such sharing of information as well as the Internet and the semantic web are means by which this can be achieved. The Internet and tourism The Internet is especially relevant to tourism since it enables knowledge about the consumer or tourist to be gathered, as well as vice versa. This gives ‘rise both to global visibility of destinations and a global merging of market segments’ (Werthner & Klein, 1999, p. 258). The use of web-based tourist information systems has grown significantly. In 1996, 3.1 million consumers used these systems and this jumped to 33.8 million consumers in 1998. It was predicted that by 2008, 30% of the whole tourism business will be Internet based (Garzotto et al. 2004). Travel revenues on the Internet have consistently ranked highly in comparison with other goods and services (Kadison, et al., 1998). The reasons cited for this prominence relate to the richness and currency of information provided online and the breadth of the audience as well as the intensity of competition and the emergence of new players with countless web sites supported by efficient transaction support. Online technologies within the tourism industry have significantly impacted on communications, transactions and relationships between the various industry operators and with the customer, as well as between regulators and operators (Galloway, Mochrie & Deakins, 2004; Sharma, Carson & DeLacy, 2000; Sheldon, 1998; Werthner & Klein 1999; World Tourism Organisation 1999). Clayton and Criscuolo (2002) argue that technology behind the modern information society, particularly by way of the Internet, has bought about four key changes for the way in which business is conducted. These changes, which apply equally to the tourism sector, are: 1. the ability to turn ideas into marketable innovation for a wide range of customers, with reduced buyer search costs and costs of access to markets; 2. increased speed to market and access to new product offerings via the Internet; 3. changed processes and the sharing of information within and between organisations; and 4. a shift in the balance of power between suppliers and customers due to the increased availability of information. The issues raised above point to the benefits emanating from IT, especially the Internet. The first two factors have been discussed elsewhere. It is the third and fourth that will be considered here. The third point outlined above essentially makes ‘vertical disintegration’ of the value chain easier as the integration of electronic processes within and between firms is easier to achieve. This integration can take many forms, to its full extent collaborative commerce (c-commerce), and mean that ‘it may no longer be necessary for a firm to own a process in order to control it’ (Clayton & Criscuolo 2002, p. 62). This control may rather be achieved via the establishment of relationships between organisations. This is associated with various forms of collaboration or business networks that may emerge. The fourth point demonstrates the extra choice available to the buyer – therefore shifting the ‘balance of power’ to them since they can research their purchase and compare the offerings of competitors. The tourist has more choice when buying travel products also because of the options provided by on-line travel agents and direct marketing by airlines. Increasingly tourists are becoming more computer savvy and are expecting to be able to experience the destination ‘virtually’. The advent of intermediaries such as distressed web sites online means that tourists are willing to delay making their reservations online and are more price conscious. Other changes in the way they consumers behave – preferring to take shorter holidays with decisions made more spontaneously – have the effect of placing more pressure on tourist operators who need to be more flexible in their offerings and in the way they relate to the market. Benefits of the Internet Benefits from IT, particularly the Internet for tourism, are substantial. These benefits are no longer dependent on proprietary information systems as has been the past experience, since the Internet is a commonly available technology. Dogac, et al, (2004) considers the Internet provides many advantages to players in the tourism industry. Some of these benefits are: • enhanced level of collaboration between tourism operators, for example, between travel agencies and service providers; • pre-arrangements with respective suppliers no longer necessary; • web service discovery will identify alternatives, enabling holiday packages to be constructed; • greater negotiation of service to be purchased and customization of services/activities; and • generally greater levels of interoperability with internal and external applications. Whether these benefits have come to pass remains to be seen. Their realisation requires a new approach to be adopted by operators in the industry, particularly for SMTEs. The question is whether they recognise these potential spin-offs and are able to take advantage of them. They all point to the need for greater levels of IT adoption to be more flexible and responsive to the market, or collaboration with other players to achieve a ‘one-stop’ planning and booking experience desired by the tourist. Figure 2 – Framework depicting tourist operators and potential interplay of IT between operators (Joo, 2002, p. 61) As the above diagram indicates (Figure 2), many businesses or tourism operators are loosely connected over the internet so as to endeavour to serve the tourist’s needs, providing the seamless integration of information necessary to plan and book a travel experience. Potentially the Internet overcomes the barriers SMTEs especially have experienced re accessing GDS and CRM, yet it is considered more progress is needed in this regard. This is because it enables individual tourist operators to link their web sites and present a complete ‘virtual tourism experience’ (Palmer & McCole, 2000, p. 200). Gonzalez et al., (2004) suggests a coming together of or cooperation amongst small players is required to generate ‘coherent heterogeneity’ – differentiation amongst the players in the midst of providing an integrated tourist offering. Issues raised by the Internet The internet has resulted in a proliferation of many ineffective html document based web sites (Palmer & McCole, 2000) with small and medium tourist enterprises (SMTEs) possessing inadequate skills and insufficient resources to conduct web site effectively. A Yahoo search reveals in excess of 250,000 tourist oriented websites. This exponential growth in the number of tourist related web sites means a ‘lack of notoriety in a saturated market’ (Gonzalez et. al., 2004, p.2). The internet reduces distribution costs as intermediaries commissions are eliminated, however this is frustrated by the emergence of intermediaries, the squeeze on price, yield and revenue and the homogeneity of web sites. It is not clear that individual SMTEs are able to use this business intelligence, or recognise its value. If so, information may be lost and not acted upon. A sharing of information, either in a centralised or in a more collaborative manner would assist in the use this ‘asset’ of information and knowledge. The internet is a commonly available technology, however awareness of its functionality and resources and expertise to take advantage of this functionality is required. It is observed that many SMTEs either are not aware of this or do not possess or have ready access to resources need to make the most of the opportunities potentially available. For these benefits and others to be achieved however, and so full exploitation of web services, ‘it is necessary to introduce semantics to web services’(Dogac et al. 2004, p. 22). The semantic web which is an extension of the World Wide Web, is designed to bring structure and meaning to the vast array of information available on the World Wide Web. In bringing this structure, the web creates knowledge which is readily accessible by both humans and machines (eg software agents, artificial intelligence) (Berners-Lee, Hendler & Lassila 2001). The structure imposed by semantic webs is achieved through the imposition of an ontology to give meaning to information. The ontologies created by semantic web users allow machines to process and “understand” this information by specifying ‘standard terms and machine readable definitions’ (Heflin & Huhns 2003, p. 30) which allows the automation of web document processing. These issues however go beyond the scope of this paper.