Ecommerce in Tourism Industry
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2.1. Introduction to e-Commerce
‘Electronic commerce (e-Commerce) is such a service offering people the opportunity to do their shopping via modern information and communication technologies at home’ (Schultz, 2007). It enables everyone to conduct business via the Internet. The only precondition is a computer and a connection to the Internet.
The term e-Commerce is becoming increasingly important in the dictionary of today’s tourism managers all around the world. This is reflected in the development of the overall online travel market turnover in Europe reaching a total of EUR 70 billion in the year 2008 (V-I-R, Verband Internet Reisevertrieb, 2009). The introduction of the internet represented both, major opportunities as well as threats, for the tourism industry.
The internet erased physical borders and enables everyone to participate in a global marketplace. The only requisite is a computer and an internet access. This section explores the current dynamics within the broader area of e-Commerce and provides definitions for the incorporating aspects of business transactions via the Internet.
The worldwide proliferation of the internet led to the birth of electronic transfer of transactional information. ‘E-Commerce flourished because of the openness, speed, anonymity, digitization, and global accessibility characteristics of the internet, which facilitated real-time business’ (Yu et al., 2002).
One can of course argue, whether the anonymity of the Internet is still valid today. Maya Gadzheva (2008) for example, suggests that the ‘achievement of unobservability and anonymity in the Internet is going to be much more difficult in the future, due to the possibility of unlimited collection of data’.
Through the aide of the internet tourism companies are able to market and sell their products to a far greater mass which represents substantial growth opportunities for them. According to Porter (2001), the ‘Internet technology provides better opportunities for companies to establish distinctive, strategic positioning than did previous generations of information technology’. However, those opportunities can also represent burdens for companies participating in transactions via the Internet.
Those companies are now more than ever forced to keep their web sites up-to-date and to provide reliable information. Since the Internet is a very fast changing medium, it requires their participants, in this case the e-merchants, to keep up with this pace. In case the companies cannot fulfil these requirements, they will probably face a shift of customers to the competition. Especially the area of tourism, being labelled as largely information driven (Morgan et al., 2001) requires constantly updated and reliable information. Customers need to find every information they require on the web. They need to know where to search and they need to be convinced of the trustworthiness and reliability of this information.
The ability to inform clients and to sell and market products in the virtual marketplace is a critical success factor for economic triumph of tourism companies nowadays and in the future. The website is thus a digital business card of tourism companies and one of their most effective sales persons at the same time.
‘Internet technology provides buyers with easier access to information about products and suppliers, thus bolstering buyer bargaining power’ (Porter, 2001). This will also decrease the costs of switching suppliers (or tourism companies). That is the downturn of the Internet. Competitors are only a few mouse clicks away (Porter, 2001) and the whole industry becomes more transparent. Just about every company participating in e-Commerce is obviously forced to list prices of their holiday components. This facilitates the comparability of tourism services.
Customers do now have access to all kinds of information that facilitate as well as influence their holiday choice. Since tourism companies can no longer differentiate themselves from the competition by pricing means, the corporate website, and the online booking process of a holiday becomes progressively more important. This involves the appearance of the website, including usability and content related features, but also everything concerning the actual booking process and transaction handling.
The tourism company (the seller) and the customer (the buyer) conducting business over the internet have usually never seen each other face-to-face, nor do they exchange currency or hard copies of documents hand-to-hand. When payments are to be made over a telecommunications network such as the internet, accuracy and security become critical (Yu et al., 2002).
In other words this would mean that customers need to transfer extremely private information like credit card details to a complete stranger.
Summarizing this section it can be said that Internet and e-Commerce present various advantages for tourism customers, since companies and offers are more transparent and easier to compare. Furthermore, improvements in IT technology will enhance the search for relevant information and facilitate the navigation in the World Wide Web.
However, there are also threatening factors for tourism companies. Competition will become stronger, since competitors are only a few mouse clicks away, switching costs for customers are much longer and due to their access to nearly unlimited information the customers’ bargaining power will increase. Nonetheless, tourism companies who can keep up with the fast pace of the Internet and who are able to convince customers of the reliability, trustworthiness and timeliness of their displayed offers and information will benefit from the Internet.
2.2. Online Trust or eTrust
What is (online) trust? A first step towards the answer of this question can be made by looking at various definitions of the term trust. Trust is defined as ‘the trait of believing in the honesty and reliability of others’ (Wordnet, Princeton University, 2006). According to this definition, buyers conducting transactions via the Internet will have to rely on a person or institution they may have never seen or even heard of.
This would certainly be not sufficient as an assurance for most of us. Another definition defines trust as ‘to hope or wish’ (Wordnet, Princeton University, 2006). Summarizing this would mean that we need to rely on the goodwill of the other party and hope or wish that it will act as it was promised. Those definitions might be a good starting point in explaining the meaning of trust, but they certainly do not seem to be convenient for most of us.
Böhle et al. (2000) argue that trust is a precondition for flourishing e-Commerce. Shankar et al. (2002) advance a different view, although they classify ‘(online) trust as being important in both business-to-business and business-to-consumer e-business’. Koufaris and Hampton-Sosa (2004) pursue a similar way of argumentation. They suggest that ‘lack of trust in online companies is a primary reason why many users do not shop online’. Another author, Peter Landrock (2002), founder and managing director of Cryptomathic UK Ltd., one of the world’s leading providers of security solutions to businesses, points out that ‘without such trust, neither businesses nor consumers will conduct transactions or sensitive communications across this medium (the Internet)’.
This argument is being supported by a recently conducted study by Ernst & Young and the Information Technology Association of America who concluded ‘that trust represents one of the most fundamental issues impacting the growth of e-Commerce’ (Talwatte, 2000). Strader and Shaw (Chadwick, 2001) point out that ‘consumers are more likely to buy from an online company they trust, when price differences are small’. Thos would in turn imply that whenever price differences are significant, customers are willing to accept a higher level of uncertainty and perceived risk in transactions with companies they do not know or trust.
According to those argumentations one can say that trust is the major precondition for both, businesses as well as consumers to conduct transactions via the Internet. ‘Trust is a key challenge to the customer acceptance of e-Commerce: the lack of trust is an important reason for the hesitant growth in e-Commerce and for the reluctance of consumers to engage in online buying transactions’ (Schultz, 2007).
A Forrester Survey from 2000 stated that ‘51% of companies would not do business with parties they do not trust over the web’ (Shankar et al., 2002). However, this would also mean that 49% of companies would do business with companies they do not trust. Trust needs to be strongly combined with uncertainty and ambiguity. The more information a buyer has about the seller, the better can he or she estimates whether the seller will act as it was promised. Thus, the better the information about a seller the better can he or she be trusted. Good examples for this assumption are online marketplaces like eBay or Amazon.
Those two providers offer nearly everyone the possibility to participate in e-Business. Since they recognized the increased need from customers for information about sellers, they introduced up-to-date ratings. Every seller can be rated after transactions whether buyers have been satisfied with the transaction process or not. The higher and better the rating, the more trustworthy is the seller (in a simplified way).
These ratings are good indications for (unexperienced) buyers, since they equip them with information about the seller’s past performance in transactions. Other ways in creating trustworthiness are so-called trust seals. ‘Those seals are issued by third parties to verify the commitment of an e-vendor’ (Cook and Luo, 2003; Hu et al., 2003; Kaplan and Nieschwitz, 2003; Koufaris and Hampton-Sosa, 2004; Loebbecke, 2003; Patton and Jøsang, 2004; Urban et al., 2000; Yang et al., 2006; in Schultz, 2007).
Trust seals are generally indicated via symbols on the web site of the seller. Those seals are a sign that the seller conducts business according to the standards of the third party, the trust seal provider, and/or that the seller conducts business as promised by the statements and policies on the web site (Schultz, 2007).
‘Further measures to increase trust are security features, the availability of alternative payment methods, privacy, security and return policies and feedback mechanisms and consumer communities’ (Schultz, 2007). ‘Security is the main concern of consumers before engaging in e-business with a seller’ (Schultz, 2007; Hinde 1998). ‘Sellers need to incorporate certain security features into the design of their web sites in order to ensure the safety of the whole transaction process’ (see Credit Card) (Schultz, 2007). Offering alternative methods of payment is another approach of the seller to signal the willingness to adapt to the customers’ needs. Being able to choose a method of payment equips the customer with the perceived power over a part of the transaction process.
It is essential to display the ‘rules of the game’. Privacy, security and return policies need to present on every seller’s web site in order to inform the customer properly. This will not only increase trust but will also facilitate processes in case of complaints or other problems. The provision of customer feedback mechanism (ratings, reply forms, forums, etc.) is another way for customers to increase knowledge and gather information about a seller.
The advantage is that customers can exchange with previous customers of the seller. This way they can obtain an objective evaluation of the seller. However, sellers can also manipulate those forums by uploading faked ratings or deleting negative ratings or feedbacks. Again, the customer needs to develop trust in these kinds of information.
Furthermore, customers do also need to develop trust in the IT infrastructure they are using, since this will be the mean of communicating the transactional data between the seller and the buyer. In other words, consumers not trusting the technology they are using for an intended transaction via the Internet will not participate in any e-Business transaction unless they feel confident with the security.
When considering security issues, a public key infrastructure (PKI) that can provide secure authentication on the Internet is an important step towards secure Internet transactions. It can help to build trust, reduce the potential for fraud, ensure privacy and provide merchants with non-repudiation (Böhle et al., 2000).
It is essential for the merchant that the customer can trust him, his connection and Website and the payment system used. Otherwise there will not be any transactions between the two parties.
Summarizing this section it can be said that information is the key to (nearly) everything. A higher level of information about the other transactional party will increase the level of trust, since uncertainty and ambiguity can be erased at least to a certain extent. Furthermore, it is essential to create awareness for technologies and tools needed for security improvements and the development of trust. These tools and technologies can involve ‘soft’ components like trust seals and customer feedback forums. The ‘harder’ components are embedded in the aspect of IT infrastructure. This includes improvements in the encryption and network and database security.
2.3. Electronic Payment Systems
Monetary transactions via the Internet do always involve risks and uncertainty. In most of the cases, there is no personal interaction involved.
That means that the customer has to put a considerable amount of trust in the seller’s promise to fulfil everything that has been agreed upon during the confirmation of the purchase (e.g. the delivery of the ordered products or services on time, in the right quality and that the agreed amount of money is charged) (Schultz, 2007; Chadwick, 2001).
According to Lammer (2006) ‘Electronic Payment Systems or e-Payment Systems may be defined as all payments that are initiated, processed and received electronically’.
The main concern with electronic payment systems is the level of security in each step of the transaction, because money and merchandise are transferred while there is no direct contact between the two sides involved in the transaction. If there is even the slightest possibility that the payment system may not be secure, trust and confidence in this system will begin to erode, destroying the infrastructure needed for electronic commerce (Yu et al., 2002).
The customer is concerned right from the point he is connected to the website of the seller. The risk of losing private information like contact details, credit card or bank account information is a primary concern of the customer. Therefore, it is necessary that both, the seller as well as the customer take care for the security of their own network as well as with the data exchanged during the transaction.
In Germany, there are currently up to ten different electronic payment methods used with varying frequency and success. The author will only refer to those payment systems which are applicable for intangible goods, such as holidays.
The definitions below are based on the work of Stroborn et al. (2004), who were arguing that one way to ‘classify different payment instruments is by the point of time when the liquidity effect sets in from the payer’s point of view that means the exact point in time when the customer’s account is charged with the payment’. ‘Following this premise, one can distinguish between “prepaid”, “pay-now” and “pay-later” systems’ (Stroborn et.al, 2004).
Other authors (Yu et al., 2002, Dannenberg & Ulrich, 2004) categorized payment systems with regard to the following variables. ‘The first variable is the ‘size or the amount of the payment’ (e.g. micro-payments). The second variable depends on the ‘type of transaction’, e.g. credit card, paying via e-mail (PayPal)’, etc. It can be argued which of these two different approaches in classifying e-payment systems is the most appropriate. However, the author decides to use the classification of Stroborn et al. (2004) for the reason that this type of classification can be best applied to the underlying topic of this work, due to the following facts.
The ability to differentiate e-Payment systems by the time, the liquidity effect sets in is important within the industry of tourism. Holiday components, especially cruises are oftentimes financed using prepayments of customers. Therefore, it is particularly important for cruise lines to know which of the offered payment systems allow them to use prepayments as financing means. On the other hand, customers do always want a certain level of security, especially when they purchase a holiday, which is certainly not an everyday expense with regard to the amount charged.
Therefore, equipping customers with the perceived power of determining the point of time when the actual payment will be processed will result in a beneficial feeling on the side of the customer. This equipment of perceived power is another way of demonstrating willingness to adapt to customer needs. Customers seem to have all under control, since they receive the product before they have to pay for it. So the seller has already delivered the agreed upon product or service.
2.3.1 Pre-Paid-payment systems
The different Pre-Paid-payment systems currently in use in Germany will not be further explained. Systems like GeldKarte, MicroMoney or WEB.Cent are being used to settle small-or micro-payments up to usually € 100. In this respect an application within the tourism industry is of no relevance. According to the DRV (Deutscher Reiseverband, 2008), the majority of holidays booked via the Internet was between € 500 -€ 1.500 (55, 1% of all holidays).
2.3.2 Pay-Now-payment systems
‘So called pay-now systems debit the account of the customer at the exact time the customer purchases something. Cash-on-Delivery (COD) and debit entry are well established examples today’ (Stroborn et al., 2004).
According to Monika E. Hartmann (Lammer, 2006) online transfer can be defined as follows:
These services are embedded in the online shopping process, e.g. via an automatic popup window connecting to the service provider and already containing all necessary transaction details. The customer is invited to choose a payment option and provide his account details. The completed transaction data set will be routed to the relevant payment service provider for authorization. After successful payment authorization the bank (or the payment service provider) confirms the payment to the merchant so that the purchase transaction can be completed (Lammer, 2006).
COD is usually used for the settlement of amounts for physical goods. Customers order their desired articles over the website of an online merchant. The goods are then delivered by a mail service. In addition to the price of the delivered goods, the customer pays also COD charges to the delivery service. The mail delivery service then mails a money order to the internet merchant.
Due to the simultaneous exchange of physical goods and money, COD is said to protect consumer and merchant at the same time. Nevertheless, it is considered not to be cost-effective and awkward for the consumer, who needs to be present for the delivery. Additionally, this payment method cannot be used for goods delivered electronically (Stroborn et al., 2004).
M-Payments (Mobile Payments)
M-Payment is such a service, where the mobile phone of the customer in combination with a PIN number deals as authentication device. Whenever the customer wants to purchase goods or transfer money, he or she is called by a third party, e.g. Paybox (www.paybox.net), on his or her mobile phone. He needs to confirm the transaction with a PIN. The sum of the transaction is then debited from the customer’s bank account (Stroborn et al., 2004).
According to a recent study conducted by the Verband Internet Reisevertrieb, v-i-r (2007), only two percent of all holiday purchases have been settled using mpayments. However, this payment method is expected to grow tremendously in the future. This is already indicated by the awareness level of m-payments. Although only two percent had used m-payments to settle their online purchases, more than 23% of all respondents are aware of the possibility of using mobile payments.
‘The process of a debit entry requires the receiver of the payment, the seller, to inform his banking institution to charge the account of the buyer with a certain amount. This amount is in turn booked on the account of the seller’ (www.wikipedia.org).
With over 150 million registered accounts worldwide (PayPal, 2009), PayPal is one of the most successful internet-based payment schemes.
Authentication is done via the personal e-mail address of the customer in addition to the entry of a password. The amount is then debited from the customer’s PayPal account. Customers using PayPal will benefit since they will no longer have to reveal their debit or credit card number. Furthermore, the whole transaction process is speeded up due to the fact that customers no longer need to enter their address details. PayPal also promotes its product as being more secure in comparison with other e-payment schemes.
2.3.3 Pay-Later-payment systems
‘In terms of pay-later-systems (e.g. credit cards), the customer actually receives the goods before being debited’ (Stroborn et al., 2004). However, this depends upon the point in time when the customers’ bank account is being debited. It is also possible, particularly within the area of tourism that the bank account is debited before the holiday is ‘consumed’. Within the tourism industry it is a common practice to book and purchase holidays long time in advance.
Especially in terms of family holidays, customers like to book in advance, since they do only have a small time frame (namely the school holidays) where they can go on holiday. So, holidays in these periods are strongly demanded. Thus there is an incentive for customers to book as early in advance as possible. In this case, the classification of Stroborn et al. (2004) is not valid anymore. The holiday is purchased long before it is consumed and thus the bank account will also be debited before the consumption.
‘Settling payments via the use of the credit card is the most commonly used payment method worldwide. Nearly 90 % of all items and goods purchased via the Internet are paid by credit card’ (Dannenberg & Ulrich, 2004). Stroborn et al. differentiate between three basic ways of credit card payments via the Internet:
- An unsecured transaction
- ‘A transaction via Secure Socket Layer (SSL), which is a sort of digital envelope. SSL is the de facto standard for secure online transactions, preventing eavesdroppers from learning customers’ account details’ (Ashrafi & Ng, 2009). The SSL technology establishes a secure communication channel between the participants of an online transaction.
- ‘a transaction employing Secure Electronic Transaction Protocol (SET), which is currently considered as the safest credit-card-based payment systems on the Internet’ (Stroborn et al., 2004).
Recapitulating this section again highlights the importance of awareness. According to Monika Hartmann (Lammer, 2006) ‘many payment solutions did not succeed in reaching a critical mass of users’. This can be seen in within the example of Mpayments. Payment methods may be very useful, however if they do not manage to reach a critical mass of users, they will not succeed in the market. So customers need to be enlightened about the different payment methods available and the advantages and disadvantages involved. In addition the aspect of trust reappears in this section. Customers need to trust the security of their Internet connection in the first place before they are conducting any business transactions.
3.1 Factors favouring the growth of e-Commerce in tourism
The introduction of the internet as well as the ability to pay for goods and services via electronic payment systems created potential advantages for customers as well as for tourism companies. ‘The marketing of an intangible product such as tourism largely depends upon visual presentation’ (Morgan et al., 2001). With the Internet, marketers finally found the perfect tool. The capability of combining the presentation of facts and figures, emotional pictures and the whole booking process is a huge asset for tourism companies. Buhalis (Morgan et al., 2001) stated that ‘organizations and destinations which need to compete will be forced to compute’. Thereby, he assigns companies participating in e-Commerce a significant competitive advantage.
According to a recent study of the VIR (Verband Internet Reisevertrieb, 2007) customers value the easy and fast way of booking trips via the internet. Furthermore, they appreciate the possibility to customize their trips, to see if their desired holiday is still available and the extensive range of offerings. The possibility to pay per credit card and the savings in terms of time they need to invest are also big advantages for German customers booking their trips and holidays via the Internet.
Cheyne et al. (2006) suggested that ‘the Internet is providing the means for suppliers and consumers to bypass the travel agent and interact directly’. Furthermore, many writers propose that ‘the Internet furnishes travel consumers with more information, quicker responses and often lower prices than they can achieve when making travel arrangements through a traditional travel agent’ (Cheyne et al., 2006).
Tania Lang, a senior consultant at Cap Gemini Ernst & Young, stated in her work in 2000 that ‘there are a variety of factors providing advantages and benefits for the users of the Internet’. Amongst those factors is the access for availability enquiries and bookings when consumers want to research and purchase travel. Customers are no longer restricted to the opening times of their local travel agency.
According to Buhalis (Lang, 2000), ‘the ability to access information which is detailed and up to date assists the travel consumer by making the product more tangible in their mind’. Another important advantage of e-Commerce in tourism is the bypass of travel agent fees and the access to online discounts. Lang (2000) stated that there is a ‘cost advantage in purchasing travel online as a result of the market becoming more competitive. These cost advantages can also be explained by decreasing distribution costs’.
Concluding this section it can be suggested that customers will benefit tremendously from e-Commerce in the tourism industry. They will be faced with lower prices, since no intermediaries are involved any more so that potential cost savings can be achieved. In addition to this, the authors cited above implied that the visual representation of holidays will improve due the recent and upcoming developments in technology. According to this, there should not be any disadvantages for customers and conducting bookings via the Internet are the best solution for the future.
However customers will also have to sacrifice in certain aspects as well as they will have to experience that bookings holidays via the Internet might not be that advantageous as the following section will point out.
3.2 Factors for the hesitant growth of e-Commerce in tourism
In 2009, Prashant Palvia argues that ‘the Internet is far from achieving its potential due to the reluctance of consumers to engage in its use’. Palvia (2009) stresses this assumption by a recent study, indicating that sales of online retailers were only 2, 2% of total goods sold in the U.S. in 2005. Moreover, analysts have predicted that even by 2011, e-Commerce sales would only account for only 7%. According to Tania Lang (2000), there are certain barriers or disadvantages of the Internet and the World Wide Web (WWW) for consumers.
Amongst those factors, the ‘lacks of a human interface and of confidence in the technology as well as security issues have a high relevance’. There are a lot of situations, where a customer has built a strong relationship to his travel agent. For some travellers, the actual booking process (whether via a travel agency or the Internet) is already part of the holiday itself. The booking process might even be some kind of ritual which is carried out in exactly the same manner every time the customer goes on holiday. Those loyalty or relational factors are hard to be erased or replaced by the Internet which is in fact a major threat to electronic commerce in the tourism industry.
A number of authors maintain that ‘travel agents provide better services, especially when more complex products are to be purchased’ (Cheyne et al., 2006). ‘Those complex travel arrangements are more information intensive and therefore needs consultation of travel agents compared to less complex holiday components such as flights or rail tickets’. Other authors, including Inkpen, Lyle and Paulson (Cheyne et al., 2006) argue that ‘travel agents can offer a more personalized service and provide unbiased advices that add value for the customer’. Concerning the latter assumption one can argue that this is true for inexperienced or first-time users.
Customers, who are familiar with the Internet and know where to find the information they are looking for, will not need the advice of the travel agent no more. First of all, the travel agent might provide them with information they already know or find by themselves. Secondly, travel agents are biased too, regarding the amount of commissions they receive for the sale of products. Another case where customers do not need the advice of the travel agent are repeated holidays, meaning customers who always travel to the same hotel. Those customers will not benefit from a travel agent’s consultancy. Summarizing this, one can say that ‘the service offered by travel agents is value adding for customers, who are inexperienced with the process of online booking and for customers who want to travel to a variety of different destinations’ (comparing Cheyne et al., 2006).
The lack of confidence in the technology as well as the mistrust in security are the two other major disadvantages of the Internet that Tania Lang has determined. She points out that the ‘main barrier stopping consumers from booking travel via the Internet is the perceived lack of a secure payment method’ (Lang, 2000). ‘The main concern with electronic payment is the level of security in each step of the transaction, because money and merchandise are transferred while there is no direct contact between the two sides involved in the transaction’ (Yu et al., 2002).
‘If there is even the slightest possibility that the payment system may not be secure, trust and confidence in this system will begin to erode, destroying the infrastructure needed for electronic commerce’ (Yu et al., 2002). Putting this in other words, tourism companies may have the perfect product in terms of price quality ratio. However, the company will not be able to sell its products to a greater mass if their payment system is lacking security. This will not only erode trust in the payment system itself, but may also affect the customers’ acceptance of the company, thus affecting the company’s reputation, image and profits.
In 1998, Haas surveyed that even though ‘many Internet users go online to find product information, most users prefer to log off and buy their goods through traditional sales channels’. Of course, this trend has increasingly changed over the last years; however, still today customers inform themselves over the Internet without performing the actual purchasing process online. The main message which is included in the statements of both of them is the fact that an ‘increase in the safety and security of electronic commerce will have a tremendous impact on the online purchase behaviour of tourism customers’ (Haas, 1998).
Another important point is that ‘while customers may be happy to purchase small consumer items via the Internet, such as books and CDs, they may not be ready to make larger, pricier and more intimidating purchases online such as travel and tourism services / products’ (Lang, 2000). Lang’s findings are confirmed by a comparable study in Germany performed by the Ifak Institut (Institut für Markt-und Sozialforschung).
Fig 1. Frequency of products / services purchased via the Internet in Germany (Statista.org, 2008)
In this survey, holidays and trips booked over the internet are still ranked lower than books, clothes and CDs.
Summarising this section it becomes clear that trust does again play a crucial role in the formation of successful online transactions. Furthermore, the factor of personal consultation is important to many customers, especially when it comes to complex products. Last but not least, the payment methods offered by a tourism company can affect the customers’ decision of conducting business via the Internet.
The aim of this research is determine the major factors that hinder the growth of e-Commerce in the tourism industry. Furthermore, solutions to these problems should be identified, in order to give recommendations to the industry. Through the aide of statistical analysis, the researcher aims to detect potential characteristics or patterns of e-Commerce hesitators.
The underlying assumption is that especially older people tend to resist using e-Commerce in the tourism industry due to a high level of computer illiteracy. This would be a beneficial finding for the industry, since they would know on which demographic groups they need to focus on as well as to which items or steps in the booking process they need to focus their attention on.
The method used for this kind of research will be of quantitative nature. A structured questionnaire will be used which consists of closed-ended questions for the most part. These closed-ended questions will mainly be ranking questions, where the respondent has to choose the answer which is most appropriate for him from a range of, usually five, possibilities or options. Therefore, a five-point-Likert scale was applied to the greater part of the questions.
The questionnaire will be composed of demographic questions and questions concerning the computer literacy of the respondents and their attitude towards e-Commerce applications within the tourism industry. Additionally, there will be opportunities for respondents to include more qualitative information through the provision of a comments field. Part of the questionnaire will also be a short introductory message that outlines the aims of the research, as well as an assurance that all responses will be kept strictly confidential.
Before the actual survey is carried out, a pre-testing of the questionnaire will be conducted. The outcome or major goal of this pre-testing phase is to clarify whether the questionnaire is clear in terms of wording, layout and comprehensiveness. The testing group will consist of friends, relatives and study colleagues. The size of this group will not exceed ten persons.
The method of pre-testing the questionnaire will guarantee that it will be understood by all respondents. Furthermore, changes can be made beforehand, thus they will not affect the results of the questionnaire.
The actual research will be carried out via an online questionnaire. The link of this questionnaire will be sent out to selected contacts of the researcher (approximately 30). The underlying assumption is that the respondents addressed will forward the questionnaire to their contacts. The result will be some kind of snowballing effect. This would promise a random sample including respondents who belong to a variety of demographic groups.
The researcher aims to achieve a sample size of at least 50 or more respondents. The study population will consist of adult (over 18) internet users, since the questionnaire can only be worked on via the Internet. The questionnaire was started on the first of June 2009 and lasted for 21 days. Within this period, 109 completed questionnaires were collected.
4.1 Research Methodology
The conceptual framework used for this study is the Technology Acceptance Model (TAM) developed by Fred Davis and Richard Bagozzi in 1989. ‘It is one of the most influential extant research models designed to explain user’s technology acceptance behaviour’ (Kim et al., 2009). ‘The TAM is based on the social cognitive theory of reasoned action (TRA) by Fishbein and Ajzen (1980; 1975)’ (Park et al., 2009) and ‘the theory of planned behaviour (Ajzen, 1985)’ (Ha and Stoel, 2009). ‘It aims to predict and explain user acceptance of information systems (IS) or information technology (IT)’ (Shih, 2004).
The TAM is based on two major variables, namely the perceived usefulness and the perceived ease of use of a new technology. Both factors strongly influence a person’s attitude towards a new technology, thus determine the persons’ intention to use the system or technology. Additionally, the ‘TAM also incorporates a causal relationship between the two variables, suggesting that an individual’s perception of how easy or difficult it is to use a system will influence his/her perceptions about the usefulness of the system’ (Vijayasarathy, 2004).
‘By knowing which web site attributes influence consumers’ beliefs about online shopping, e-retailers can improve their e-shopping sites and thus enhance more customers to book or buy via their web sites’ (Ha & Stoel, 2009).
The first variable, perceived usefulness (PU) is described as ‘the degree to which one believes that using a particular system or technology will enhance his or her performance’ (Davies, 1989 in Shih, 2004). Whereas the other variable, perceived ease of use (PEOU), refers to ‘the degree to which one believes that using a particular system would be free from effort’ (Davies, 1989, in Shih, 2004).
After ‘revising Davies’ definition of PU, the PU of e-shopping is defined as the degree to which an individual beliefs that trading on the Web would enhance the effectiveness of his or her shopping’ (Shih, 2004). Shih (2004) also differentiates ‘PEOU into two different parts: PEOU of the Web and PEOU of trading on-line’.
Since the process of purchasing holidays on-line does include both components, namely the information search (PEOU of browsing the web) as well as the aspect of trading or purchasing (PEOU of trading on-line) the author decided to stick to the original PEOU definition of Davies. So there will only be one overall variable, namely PEOU which incorporates the aspects of both, trading and browsing on the Internet.
Although the TAM has been applied in various previous studies in related areas of interest before (Ha and Stoel, 2009; Lee, 2009; Shih, 2004; Kim et al., 2009) the author expects it to be the best model in explaining customers’ reluctance to the application of e-Commerce in the tourism industry. Furthermore, there has not been an application of the model to the appliance of e-Commerce within the tourism industry so far.
As previous studies (Vijayasarathy, 2004; Li & Lai, 2005; Shih, 2004) have revealed, ‘perceived ease of use has a positive effect on the perceived usefulness’. That means, that whenever the user has the feeling that the use of a particular system can be done without any hassle, it will have a positive effect on the perceived usefulness of that particular system. In other words, the easier and uncomplicated the usage of a system, the higher will its perceived usefulness be.
Like other researchers (e.g. Kim et al., 2009) the author will extend the existing TAM by a third variable, namely perceived trust (PT). Similar to the fact that perceived ease of use will positively affect the perceived usefulness, the author assumes that perceived trust will also be positively correlated with perceived usefulness. As mentioned before, trust is a major challenge to (tourism) companies conducting business over the Internet. According to Shankar et al. (2002), ‘the lack of trust is one of the greatest barriers inhibiting online trade between buyers and sellers who are unfamiliar with one another’.
4.2. Testing Hypotheses
Perceived Usefulness (PU) positively affects a User’s intention to use a new technology.
Perceived Ease of Use (PEOU) positively affects a user’s intention to use a new technology
Hypotheses 3: Perceived Trust (PT) positively affects a user’s intention to use a new technology
4.2.1 Perceived Ease of Use
Speed positively affects Perceived Ease of Use (PEOU). The variable speed can be best illustrated by the number of mouse clicks a user needs in order to make a booking. It also implicates ‘the speed, with which users can find what they are looking for’ (Flavían et al., 2006). It is advisable for companies to assign a high priority to the aspect of speed. Online sellers have to minimize the number of mouse clicks needed to perform a booking.
Every additional click might cause annoyance on the side of the customer and adds a new level of complication. An increase in the number of steps involved in an online booking does also cause a higher risk of losing potential customers during the process. The more a seller reduces the number of mouse clicks necessary to successfully complete a booking via his web site, the more satisfied will the user be with the whole booking process.
Simplicity positively affects Perceived Ease of Use (PEOU). Simplicity can be defined as the ease with which a user can navigate through the website. An increase in simplicity will automatically lead to an increase in user satisfaction. According to Palmer (Zviran et al., 2006) ‘user satisfaction […] has been found to be significantly associated with usability features unique to the Web, such as download delay, navigation, content, interactivity, and responsiveness’.
Hypotheses 6 a:
Easy and secure payment methods positively affect Perceived Ease of Use (PEOU). ‘Many innovative payment methods never succeeded in the market, since they have not generated a critical mass of users’ (Hartmann, in Lammer, 2006). With regard to a recent study performed by the IWW (Institut für Wirtschaftspublizistik, in Dannenberg & Ulrich, 2004) results indicated that 61,3% of respondents choose among different payment methods on the basis of the criteria’ easy handling’.
Experience in computer-usage (Internet) or computer literacy positively affects the Perceived Ease of Use (PEOU). Users who have already made experiences with computers, the Internet and e-Commerce are believed to have a much lower level of frustration. They are able to cope with problems and tackle potential complications within the booking process. Thus, it will appear to them, that using the system is easier compared to users with no or minor experiences in computer usage.
Experience with online bookings positively affects Perceived Ease of Use (PEOU). Frequented repeating of online booking implies the development of routine and loyalty in using the system and the payment methods offered. Especially in terms of payment methods used, customers develop a strong loyalty to those systems. Having made the experience of a successful transaction will increase the trustworthiness of the system used and will in turn increase the switching costs to other systems.
Hypotheses 9 a:
Access to constantly updated information concerning the availability of products and services positively affects Perceived Ease of Use (PEOU). Having access to realtime data about actual availabilities of holiday components decreases the level of frustration for potential customers. Knowing in beforehand which products are still available will result in time savings, since customers will not have to repeat the whole booking process again.
Hypotheses 10 a:
Ability to conduct bookings without time restrictions positively affects Perceived Ease of Use (PEOU). The ability to book without being timely restricted by opening times
(e.g. travel agencies, call centres, etc.) will provide potential customers with the freedom to decide on their own when to perform a booking. This would erase the pressure to take a decision within the time frame of opening times.
Hypotheses 11 a:
An easy search for relevant and required information positively affects Perceived Ease of Use (PEOU). With the introduction of search engines and search functions embedded in websites, the process of finding appropriate and relevant information has been facilitated a lot in the recent years. This factor is believed to have a positive influence on the Perceived Ease of Use (PEOU).
Hypotheses 12 a:
Web site design will have a positive effect on Perceived Ease-Of-Use (PEOU). A well-structured Web site, including aspects of navigation, content, aesthetics, and usability can facilitate the process of finding relevant information and booking a holiday in general. A Web site that is well-designed can even assist inexperienced computer-or Internet-users in finding the relevant information and guiding them to the booking of a holiday. This will also reduce the potential for frustration on the side of the customer.
4.2.2 Perceived Usefulness
Access to constantly updated information concerning the availability of products and services positively affects Perceived Usefulness (PU). The ability to know which products are still available decreases the perceived power of the travel agent and in turn equips the customer with more information. Some years ago, travel agencies were the only ones having access to availabilities of holidays. Thus, they had a more powerful position within the customer - travel agent relationship due to their ‘expert knowledge’.
Nowadays, everyone can access databases or browse through travel portals and instantly see what holidays are still available. The ability to detect vacant products (e.g. hotel beds) will put the customer in a far better position. He or she no longer depends on the travel agent’s expertise. This factor is believed to have a positive influence on the Perceived Usefulness (PU).
Hypotheses 10 b:
The ability to make bookings without time restrictions (e.g. opening times) will positively affect Perceived Usefulness (PU). Customers do not have to invest time and money to get to their local travel agent. This will provide them with the feeling of a more efficient booking process. Since the Internet can be regarded as a 24/7 travel agency with no defined opening times, customers can book their holidays whenever it suits them best.
Hypotheses 11 b:
An easy search for relevant and required information positively affects Perceived Usefulness (PU). Customers do no longer have to skip pages in numerous travel brochures in order to find what they are looking for. Through the introduction of the Internet and e-Commerce to the tourism industry the customers do now have only one page they need to look at, namely the screen of their computer. Relevant information can be brought up screen by just a few mouse clicks. Customers do no longer have to switch between pricing sections and holiday descriptions in brochures. Everything can be displayed centrally. This development is believed to have a positive influence on the Perceived Usefulness (PU).
Access to a variety of information positively affects Perceived Usefulness (PU). Sheldon (Lang, 2000) already identified the tourism industry as being highly information intensive. Given the special characteristics of holidays being an intangible service / product, it heavily relies on detailed and up to date information to evoke emotions and positive feelings on the side of the potential buyer. In 2004, Shih argues that ‘consumers expect websites to support their shopping on the web, or in other words, consumers may require accurate and available information on target products and services’. He concludes that the quality of information can have a positive influence on e-shopping behaviour.
I believe that booking holidays via the Internet saves me time. This statement is positively related to the Perceived Usefulness (PU) of e-Commerce in the tourism industry. Customers, or users, positively responding to this statement perceive that booking holidays via the Internet possesses a tremendous potential to save time. Especially nowadays, where more and more people get stressed while they are trying to fulfil all the appointments of their agendas, potential opportunities to save time become increasingly important (e.g. Fast food, online shopping, home banking, etc.). Introducing e-Commerce to tourism, people are now able to book their holidays in their lunch breaks, or even via their mobile phones. They do no longer have to visit a travel agency and have an extensive and time-consuming conversation with the travel agent. This development is believed to positively affect Perceived Usefulness (PU).
The timeliness of Information affects my purchasing decision. This statement is positively related to the Perceived Usefulness (PU). Tourism companies cannot afford to display outdated information. This would lead to frustration and denial of the company on the side of the customer. Information on the Web needs to be reliable. Customers do not want to be bothered with wrong information as their holidays should represent a stress-free time. The timeliness of information is positively affecting the Perceived Usefulness (PU).
Transparency of offers and companies positively affect Perceived Usefulness (PU). The ability to find the cheapest offer via the use of automated search engines increases the bargaining power for customers and again decreases the dependability in the relationship between the customer and the travel agent. In addition to this, customers are able to compare between different companies. Through the introduction of travel portals like opodo.de or expedia.de the process of finding the right product for the best price will be facilitated and a lot more faster. These portals can be regarded as personal assistants or digital travel agents. With their help customers can erase potential disadvantages of online booking. Since they can no longer receive advices from their travel agent they can benefit from the ‘expertise and knowledge’ of the databases of those travel portals. Customers do not have to rely on their travel agents, promising them the best price for the best quality.
4.2.3 Perceived Trust
Hypotheses 6 b:
Easy and secure payment methods positively affect Perceived Trust (PT). Providing customers the opportunity to choose among different payment methods is expected to result in a beneficial effect concerning the transaction process. Customers can now choose the payment method they feel most comfortable with. This is a major precondition for a successful transaction.
Since the transfer of money can be regarded as one of the most critical points in the booking process, it is important that customers are furnished with the perceived power of deciding which payment methods is being applied. This will increase customers’ trust in the company on the one side, but will also lead to a more comfortable and satisfying experience for them. By choosing their favourite payment method, customers make sure they are using the one they are most comfortable with and expect it to be the most secure one.
Hypotheses 12 b:
Web site design will have a positive effect on Perceived Trust (PT). Kim and Moon (Chadwick, 2001) found out that ‘perceptions of trustworthiness can be manipulated by varying the design of a Web site, particularly the use of graphics and colour. Web site design also includes the aspect of content’.
Security and encryption of Internet connection will positively affect Perceived Trust (PT). As mentioned before ‘customers need to trust the technology they are using as well as the payment system applied and the other parties involved in the transaction process’ (Shankar et al., 2002). The higher the level of trust is the more likely will the customer be to purchase or even re-purchase via the Web site of the merchant. In surveying attitudes toward Internet-based e-banking, Liao and Cheung found that ‘system security is a significant determinant of customer attitudes toward system use’ (Shih, 2004).
Reputation of the company will have a positive effect on Perceived Trust (PT). In case the seller distributes his products online as well as offline the offline reputation will have a strong impact on the customer’s decision to purchase a product via the Web site. Furthermore, the larger a company is the more reliable are its products. A larger company will also have higher monetary assets to invest into IT security infrastructure. Jarvenpaa et al. ‘argued that the reputation (i.e., social influences/subjective norms) of the parent companies, in this case, can provide a cue for the evaluation of the reliability value of the sites to the consumers when they visit Internet shopping sites’ (Kim et al., 2009)
The security of private data positively affects Perceived Trust (PT). As pointed out earlier in this work, customers are greater than ever concerned with the security of their private data (including bank account information, contact details, etc.). Furthermore, incidents of online fraud have increased tremendously over the last years. An increase in the security of private data is expected to lead to an increase in e-Commerce.
I trust the security of my current network. This statement is positively related to Perceived Trust (PT). Customers who do not trust the security of their network will definitely not participate in online transactions. This aspect of trust can be defined as one of the major preconditions for successful e-Commerce.
The security of my privacy affects my purchasing decision. A positive response to this statement will affect Perceived Trust (PT). Customers are concerned whether their privacy is still secure nowadays. Recent affairs (e.g. Telekom) where databases containing customers’ private data have been hacked and data was stolen add fuel to this concern. ‘Anonymity of online purchases and visits of Web sites is another worry of many customers today. They simply do not want that their online behaviour can be traced, due to spamming, identity theft, and so on’ (Gadzheva, 2008).
I believe that most online sellers are trustworthy. Positive responses to this statement are a major precondition for online transactions to be materialized. As Koufaris and Hampton-Sosa (2004) suggested, ‘lack of trust in online companies is a primary reason why many users do not shop online’. It is believed that this aspects positively affects Perceived Trust (PT).
Fig. 2 TAM Adoption
5.1. Demographics and Computer (Internet) Literacy
The mean age of all respondents was 33.05 with ages ranging from 19 to 74. The majority of all participants, 90, 8%, had an educational level equal to Abitur or above (Master, Bachelor, Diploma). 54, 1% of all respondents were male. The greater part of all respondents has an income up to 3,500 € per month.
On average one can say that all respondents are familiar or very familiar concerning their experience with the Internet (53, 2% very familiar, 42, 2% familiar). This is also be demonstrated in the experience with online bookings, where 90, 8% of all respondents had already booked a trip (rail-, flight-tickets, etc) via the Internet.
The most popular holiday type (multiple answers were allowed) amongst the respondents were city trips (60 mentions), All-Inclusive (32 mentions) and others (41 mentions). The majority of respondents (59, 6%) spend between 600 -2.000 € per person and trip.
The most popular method of payment (multiple answers were allowed) was credit card payment (84 mentions) followed by transfer (paperbound and online) with 65 mentions and debit entry with 41 mentions. More sophisticated methods like payment via E-Mail (PayPal) are used with a lesser frequency (only 18 mentions)).
Being asked to choose a desired payment method for the settlement of transactions in the tourism industry, responses were almost congruent with those given in the previous question. The first three most desired payment methods are again, credit card (78 mentions), transfer (65 mentions) and debit entry (27 mentions). Respondents also had the possibility to choose other payment options. This response was only made twice.
This indicates that customers (or at least the majority of all respondents) seem to be pleased with the payment options offered today. The results of question 15 (‘I think that most web sites offer easy and secure methods of payment’) support this assumption. 62, 4% of all respondents agreed to this statement.
5.2 Analysis of Measurement Model
The analysis of the data gathered was twofold. First the author examined the measurement model in terms of convergent and discriminant validity. The next step dealt with the examination of the structural model aimed at identifying the strength and direction of the three constructs Perceived Trust (PT), Perceived Ease of Use (PEOU) and Perceived Usefulness (PU).
5.2.1 Convergent and discriminant validity
The statistical analysis was performed using SPSS PASW 17.0 and AMOS 5.0. First of all, discriminant and convergent validity was tested applying AVE (average variance extracted). As suggested by Fornell and Larcker (Shih, 2004), ‘the average variances extracted should exceed 0.5, which indicates a good convergent and discriminant validity’. Except for three items (Search for relevant information is easy, Bookings without time restrictions and Transparency) all other items achieved a satisfactory value between ,505 and ,717.
Table 1: Demographic profile of respondents
5.3 Hypothesis Testing
Table 3: Frequencies of cumulative positive and negative responses per item (in %)
realized under the precondition that these requests are being met on the part of participating companies in the area of the online tourism industry.
Furthermore, it is not surprising under these results, that the question ‘How important is personal consultation (e.g. travel agency) for you?’ is being assigned a comparably low percentage in terms of importance (only 42, 3%). This question can be regarded as the testing question for this variable. Customers, who value the facilitating factors of e-Commerce, will no longer seek for personal consultation any more. There has not been the possibility, technology-wise, to offer personal consultation in combination with e-Commerce at the same time yet.
Nevertheless, many customers are still aiming to benefit from both sides of the monitor. Those customers are being informed by their travel agent in a personal consultation but might book this trip from home, looking for a bargain. On the other side, many customers do also use the internet to inform themselves about their desired holiday and then book via their local travel agency. According to the V-I-R (Verband Internet Reisevertrieb,2007) 39% of the German population aged 14 years or older are using the Internet in order to inform themselves about holidays. However, only 19 % are actually conducting bookings via the Internet.
Relating this statistic to the outcomes of the questionnaire for the variable PU, one can assume that the aspect of personal consultation plays a big role for those customers still hesitating from using the Internet for holiday or travel bookings.
5.6 Results Perceived Ease-Of-Use (PEOU)
Davies (Shih, 2004) described PEOU as ‘the degree to which one believes that using a particular system would be free from effort’. Flavián et al. (2006) were using the term usability for that what has previously been defined as Perceived Ease of Use by Davies. Amongst others, the speed with which users can find what they are looking for, the simplicity of website use and the perceived ease of site navigation have been assigned to the aspect of usability. Respondents were asked to evaluate the importance of the above mentioned attributes in the survey.
A variety of questions from the questionnaire relate to this variable, containing aspects of usability and computer literacy. Flavián et al. (2006) suggested that ‘greater usability has a positive influence on user satisfaction and this also generates greater website loyalty’.
Companies who want to participate in online transactions need to consider every technological and design aspect that can assist the customer in the process of finding the right web site, performing information gathering and conducting the booking. Those aspects include speed, simplicity, updated information concerning the availability of holiday components and information search. Furthermore, demographic and user-specific aspects like the familiarity with the Internet and experiences with bookings made via the Internet need to be considered.
The latter two are probably the most important ones, since they determine the customers’ level of awareness, his or her level or ability to comprehend and use the system (e.g. Internet, search engines, payment method, etc.) accordingly and eliminates potential barriers of technophobia concerning the use of this medium. Once a customer has gone through the process of booking a trip via the Internet he will assumingly be easier convinced to repeat the purchase via the web site of an online seller. The companies do not have to explain the process to the customer any more.
The process of site navigation, information gathering and booking can also be regarded as every individual users’ heuristic experimental testing. The more often a user iterates the whole booking process, the more likely is the development of a certain routine. This routine will also increase the users’ self-confidence. Flavián et al. (2006) argue that ‘greater self-confidence improves consumer trust in a website’.
Referring to the data gathered in the course of the survey, it becomes obvious that the aspect of Perceived Usefulness (PU) needs to receive more attention in the future. Especially attributes like simplicity and availability of updated vacancies have received a very
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