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E Commerce In Hotel Industry Marketing Essay

Paper Type: Free Essay Subject: Marketing
Wordcount: 4366 words Published: 1st Jan 2015

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New technologies are providing different channels for marketing and management that enhance the capabilities of society. And computers are providing faster and more reliable processing with lower cost continually.

In Hospitality and Tourism industry but not only, hardware, software, information management, and telecommunications systems have allowed for the processing and flow of information among organizations. And some sources claim that the way in which tourism organizations take advantage of IT tools will determine their future success in the marketplace [4]. We consider the importance of the trend of Information Technology by implementing an effective IT system for advertising, distribution, encouragement and co-ordination of the industry. It is important that Hotel Industry take the lead of the emerging technologies to improve management abilities and develop business plans focusing on the most efficient income of delivering value added products to clients. In this respect, tourism associations will be able to keep an aggressive advantage over those who are not applying this yet.

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Electronic commerce (known as e-commerce) is a broad expression that is used to describe the actions of businesses or commercial organizations. It included interaction and transaction that occur via telecommunications media to provide function, production or service to others. It allows for information to be streamed via network such as Internet on a worldwide basis virtually. The e-commerce direction is a benefit to all parties around the world in most industries because it is cost savings once everything is equipped.

E-commerce includes all business functions that may be processed over Internet, Intranet or Extranet in any industry. In General, there are four types of interaction on e-commerce transactions may occur.

B2C transactions involve business-to-customer interactions. For example, airline reservation system (Busiess) allow people (Customer) do online reservation of air ticket.

B2B transactions involve business-to-business. For example, a booking of a hotel room via Travel Agency system, where the Travel Agency is a business that pre-purchases blocks of rooms from a given hotel (another business) for sale to others at lower prices. The arrangement between Travel Agency and the hotel is a B2B transaction, whereas if someone interact as an online customer of TA system, which is a B2B2C transaction.

B2E transactions involve a business and its employees. For example, provides an electronic system for flight mechanics to order replacement parts for aircraft called INIRN, which stands for “I Need It Right Now.” In this case the business is providing an electronic service for its employees.

C2C transactions involve two or more consumers (customer-to-customer). eBay or TaoBao are some examples of a business that provide a network platform for customer to do business with another customers.

Technical components of e-Commerce

Most of computer networks consist of 3 major areas: the front end and the back end and Firewall.

Front end – User interface for e-commerce end users, including employees, customers, and business affiliates.

Back end – Contains interfaced components developed to provide e-commerce services or products to end users.

Firewall – Filters all network traffic to provide a secure data transfer on a network and transmission to other networks.

To be competitive in hospitality and tourism industry, they must follow the Internet trend for future long-term growth and competitive advantage. However, before implement e-Commerce, one most important thing to be considered on hospitality and tourism organizations is the core business in this industry involves to consist primarily of interactions (guest relations) with customers and build of memorable experiences F2F (face-to-face). So the transactions of online reservation of Hotel room or restaurant merely satisfy basic customer expectations

Hoteliers should have visions of airlines, hotels, cruise ships, restaurants, health spas, golf, concert, and the like, based on their individual experiences. Interactions include the relationships that take place during each transaction.


Fact / Hotel operation /

The industry can make profits to many countries and pull foreign currencies into the country. Consequently, tourism marketplace has rapidly grown. World Tourism Organization (WTO) estimates that over 1.5 billion tourists would take international journeys in the year 2020. Europe would still be the most popular tourist place. Second to Europe, Asia Pacific would welcome up to 397 million tourists. The growth rate is average as 6.5% per year [1].

(Electronic Commerce Resource Center (2000). “Electronic Commerce for Thai Tourism Industry”. Bangkok.)

The Internet is not the full solution to success in the hospitality industry. However, the Internet is the “overall business answer” across industries. The raise in travelers over the time has also driven IT demand on offering high quality products at low costs to the customers. The success of the tourism industry will depend upon the abilities to identify and answer quickly to current and potential customer needs. IT is playing a major role in “servicing” customers. It is a significant challenge for tourism organizations because it requires efficiency in external and internal interactions. The initial cost of IT will be quite high in a financial sense, and the tremendous cost savings in the long-term will depend upon the efficiency of the IT during its crucial implementation stages. In some way, Hotel could reduce the cost such as the commissions paid to travel intermediaries as suppliers will be directly linked to customers

Starwood Hotel Group was standing ahead of other Hotels to offer a online “virtual tours” of its properties. This feature provides a site visit to potential guests without having to travel to each property. And now, many well-known hotels are also providing this promotion feature for stand top of the roles to attract potential customers.

The trends of Hotel websites are designed with many photo graphics that allow visitors to inspect the facility, lobby, grounds, guestrooms, and amenities visually. Many hotel websites also provide superior multimedia presentations designed to give virtual tours of the facilities to potential guests, using streaming videos and 360-degree viewing platforms of the properties.


Google presented the vision of Internet marketing is likely to grow by 2015. Some of them are worth to be informed and aware about.

50% of ad campaigns will include video ads bought on a cost-per-view basis

50% of ads will be bought using this real-time bidding technology to tailor experiences for different viewers

Smartphones / mobile is going be the number one screen for digital brands to engage users

There will be at least five metrics that advertisers will regard as more important than the “click”

75% of web ads will be “social” in nature i.e. Ads will be shared, discussed, subscribed to and recommended

Rich media formats enable great creativity and interaction – these will grow from 6% of display ad impressions to 50%, especially for brand building campaigns

Digital display advertising is going to grow to a $50 billion industry

It shows that competition to attract potential customers in worldwide web will be more and more

Age of e-Commerce in Hospitality and Tourism Industry

Customers feel empowered to construct their own itineraries for airline, hotel and other travel amenities directly through the Internet. It is predicted that the worldwide web will drive the majority of reservations directly from customers and intermediaries at a fraction of the costs associated with today’s 800 number and Global Distribution Systems (GDSs)[20].

The travel distribution system is currently facing many changes as online agencies such as Expedia, Travelocity, Priceline, etc. have introduced a way to access travel suppliers directly through the worldwide web. In general, GDSs have not shown much of an effort toward targeting on-line customers. Instead, CRSs have remained loyal to their travel agency distributors.

Traditional Travel Distribution Channels

The traditional travel distribution channel works where the customers contact the travel agent or direct selling channel to book their entire vacation or business travel package (please refer to Appendix I). Statistics indicate that travel agents handle 80-85% of vacation packaging[22]. However, with the advent of technology and the worldwide web, these figures are changing. Purchasing tickets online through airlines will continue to dominate the travel market. A major challenge for airlines, other suppliers and travel agencies is to encourage customers to book their travel packages online. They must continue to keep customers satisfied by offering traditional programs, recognition, servicing, and other rewards that keep them coming back for more. When it comes to competing directly with the major online players such as Priceline, Travelocity, etc., airlines and other suppliers have an advantage because they have all of the loyal customers, brand recognition and large call centers that online agencies do not possess. Airlines have a stronger direct link to customers as they compete directly against travel agents[23]. Further to this, airlines have stronger control over the customers due in part to the paperless tickets (e-ticketing). In this respect, online technology has replaced the travel agency by adding value through fare shoppers, promotions, and personalized recommendations. Although travel agencies have maintained market share, they must strategize to become either a niche player or a large player in the changing business environment.

Auction style-pricing models are becoming customer preference, where the customer controls the price of the products and services to be consumed. At the same time, vendors still retain control over the final terms of the transaction and can utilize mechanisms such as Priceline to help clear the market of unsold inventory. Travel auctions such as Priceline have become the latest trend in offering the best price for hotel packages. Since customers are now focusing on price as a main factor in shopping for travel packages, online auctions such as Priceline are a significant threat to the hotel branding system and the industry in general. The future distribution channel calls for service providers, suppliers, and customers all linked together in an integrated environment

The customer is almost guaranteed that he will obtain the best price by negotiating through an online broker such as Priceline. But a downside to all of this is that the customer will not realize all of the normal benefits of air tickets as they are sacrificed through online auction purchases. For example, in many cases the travel ticket does not permit an accrual of miles or any changes without significant penalty charges.

Many customers have made Travelocity their online vacation planner. Sites such as Travelocity offer real-time, on-line reservation capabilities for unsold inventory and vacation packages. By tracking customers on the Internet, online companies can create profiles of potential customers in defining their target markets

The New Distribution System

The customers then proceed to purchase an entire travel package directly through an online broker

Expedia partnership that introduces Expedia’s travel booking & packaging engine on Yahoo! sites across Europe. The combined strength of the partnership brings users both inspiration of Yahoo!’s content and the ability to refine this choice according to their preferences and book with assurance that you are making the right choice by checking their choice with a variety of mapping options, reviews from previous Expedia customers and photos

We understand that consumers use a variety of tools and sites when planning and researching their travel online and we want to make that process as simple as possible for travellers so we believe it’s important to work with sites like Yahoo!

Yahoo! and Expedia have larger plans to leverage each other’s content and ability to inspire travel.

The online travel space has seen a wide range of new developments over the last decade and these are very interesting times in the online travel world. There’s always been a close relationship between travel and Search and there are a number of opportunities which this presents for collaboration. For example, we recently launched a new service www.expediahotelview.co.uk using Google’s Street View technology which enables users to view the hotel exterior and take a virtual walk around the area before booking with Expedia.

A solution to this problem for small players is to develop an innovative, catchy, attractive, and quick web-site

Threat of Online Players & The New Distribution Channel

The web-based reservation system has experienced severe problems in maintaining control over room inventories

The Asian Internet Challenge & Online Threats

Given that Internet marketing is still in its beginning stages in the US, the development throughout the Asian region is still quite immature as well. There is not as much of an online threat to travel agents and intermediaries in Asia compared to the US. Now that the threat is obvious, perhaps hospitality and tourism companies in Asia can take advantage of the Internet and gain an edge on competitors.

Ctrip / Thailand

In most Asian countries, credit cards are not utilized as much as in the U.S., which is a major disadvantage to Asian online companies unless they are targeting U.S. customers. However, the hospitality and tourism industry in Asia still must look at Internet marketing for a long-term strategy. (NOT UPDATE) (EXPAND)


In general Asia is currently experiencing many challenges in the e-commerce revolution, especially on the business to consumer area due to the fragmentation of the market. Some examples of successes have been a Hong Kong company called Park ‘n Shop and Welcome supermarket chains which sell online groceries (WHAT ELES ???)

Online companies have more of a chance at success in Hong Kong due to the dense population, strong education systems, high credit card and cell phone usage. This leaves room for the future development of the next Priceline or Travelocity in Asia which could pose a major threat to hospitality & tourism organizations[29]


Asia Travel Mart is known as the first online travel reservation Internet-based booking system. Asia Travel Mart offers a secure booking system for worldwide hotels, tours, transfers, meals, car rentals, travel insurance through its network of suppliers

Provide service like savings on travel, graphics and destination guides, advice, news, exchange rates, weather patterns, and flight schedules providing a full web experience

signal for Asian organizations, travel agents, and intermediaries to reevaluate their long-term strategies[30].

The Future Role of Travel Agents

The growth of the Internet leads to the question of what will happen to online travel agents and intermediaries.

negotiating prices at lower costs for customers and handle much of the logistics. They also advise customers and build an ongoing trusting relationship in order to maintain customers for the long-term.

As low cost desktop real-time data, voice and video communications become a reality, travel agencies may no longer be necessary. On the other hand, the Internet challenge can also mean opportunity. Hotel owners and operators who understand and master e-commerce challenges will be able to jump ahead of online threats from large players such as Priceline. Otherwise, many will find themselves out of business.

IT tools have allowed travel intermediaries to expand their role in the industry by presenting opportunities to venture into other markets on a geographical level.

Challenge – how they can continue to add value to customers.


The Internet Target Market

The business traveler seems to be the number one target for hoteliers who are focusing on the Internet trend Most of the hotels mentioned previously are offering online services specifically to accommodate business traveler demands.

LANGHAM PLACE OFFER iPHONE 4 on Guest room for travel use

Langham Touch for reservation

Not only should hoteliers focus on the business traveler, but they should also consider whether there are other types of potential target customers

Both young and older generations were sitting in the Internet shops utilizing online services during their vacation (STATIS)

Hospitality and tourism organizations will have to be up on all of the latest technology, in order to realize a competitive advantage in the market especially in the long-term. One major challenge for all online travel companies is in evaluating how their target customers are using their computers.

young generation will utilize their computer differently from a 40 year-old or even a 60 year-old traveler

identify their target prior to marketing/selling their products/services online

Primary Constraints of the Internet

Must invest in the equipment and expertise in order to build a strong IT base

As more and more hospitality & tourism companies become well educated on the long-term benefits of IT, they will realize the significance of it to their organizations.

involved in the reservation process: room reservation dept., central reservation system, banquet dept., restaurants, spas, golf courses

Internet security has been a major issue surrounding the Internet community. There is an endless amount of information passing through on a worldwide basis.

credit card information over the Internet


Governments are currently addressing Internet based global commerce by considering rules of conduct, guiding principles, laws and taxation

Dot com companies have an advantage in funding, leadership, low channel conflict, organization and technology skills while traditional companies have the brand and customers base. Although Dot com companies seem to dominate in this sense, traditional hospitality & tourism companies have the capabilities of coming out on top if they opt to venture online[35].


Today, hotels are distributing their product through more and more channels. How they keep control of availability and price, maintain a consistent level of customer service, plus keep their distribution partners up to date at the same time has becomes a complicated and expensive process. Major companies have gone to a distance to develop new strategies for competing in the online environment. These strategies differ widely from selling rooms online, providing customers with better online customer services, keeping track of the individual customer likings to developing the best customer loyalty reward programs. For major hotel chains, E-commerce doesn’t only mean marketing products from an online portal but developing a strong relationship with the other travel partners in order to ensure the wider range of facilities for the varied traveler profile. It also means supplying a travel product to tour operators and the need to know which operator has the strategy and distribution power to sell their product online.

The core transactions of our business involve intimate face-to-face interactions, which have certain limitations in regard to the use of e-commerce in the hospitality industry compared with other enterprises

Although the main telecommunications link for e-commerce is the Internet, private networks such as extranets and intranets are also part of the e-commerce landscape. The major functions of B2C, B2B, and B2E e-business include management information systems and the marketing, accounting, human resources, and operations departments

The hospitality & tourism Internet future first calls for a user-friendly platform containing a wide range of services that fit all customer interests. Web customers are looking for the ultimate experience when browsing through the Internet. A professional web graphic designer is an option for companies requiring assistance in creating an innovative attractive web-site that will lure customers into the web travel experience of a lifetime. A travel site that is quick, user-friendly, and includes state of the art graphics will prove attractive for web customers[36].

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Now is the time for hospitality companies to take advantage of the opportunities available in creating a new value added customized online travel shopping experience for customers. The ultimate trend calls for something comparable to the shopping-bot. For those who are not familiar with the shop-bot concept, it is meant exclusively for online clothing shoppers who prefer to have a personal agent. Similar to the shop-bot, the future of the Internet in the travel industry will provide a travel bot who will play the hand-holding travel agent for those that require the most guidance in arranging their travel plans. This travel bot will create a custom experience that suits the particular customer needs offering a range of services including hotel rooms, restaurant tables, airline seats, and rental cars. The travel bot will provide advice and recommendations as currently found on GDSs[37].

It is important to take a look at how Internet technology will effect the future of the tourism industry. Most IT tools are being utilized. However, there is still much room for improvement in speed, reliability, and adaptation to new technologies. It is crucial for companies to take advantage of the Internet before the competition. A solid R&D function is one of the elements in this process. It is pertinent to study the customers and their businesses by encouraging them to fill out a customers profile form on the web. As an incentive to fill out this form, a company may consider offering to provide a service or reward to the customers in return. In order to keep up on the changing technologies, maintaining or subscribing to a data or data trend bank is a key option for hospitality & tourism organizations. The process of turning data into knowledge can be found through working with such companies as Horwath, Smith Travel Research, PWC and PKF consulting[38].

It is important to consider how technological drivers will influence changes. Many traditional small and large players in the industry are having a difficult time adjusting to the changes involved in switching to a full IT based strategy. This is mainly due to the extent to which the Internet changes how hospitality services and amenities are delivered. It further alters the organizational structures within hospitality companies and modifies the interaction of the customer and service provider.

The hospitality & tourism internet future suggests a universal system where property management systems will eliminate the need for expensive on-site computer hardware/software. The maintenance problems relating to breakdowns, backups, and upgrades will be resolved in an easy efficient manner. The Internet will control all transactions involving credit card authorization, travel agent commissions, and point of sale transactions. This will result in fewer problems, a decrease in staff and an increase in profits. The typical hotel guest will have the option of selecting movies, games, software, shopping and information through voice communication and data/video, all available at a low cost[39].

Future success for hospitality & tourism companies depends upon their abilities to identify a target market and the strategic opportunities available for survival and growth. If data is managed properly, the technology can assist hoteliers and restaurateurs in projecting the lifetime value of guests, creating increased loyalty, resulting in an increase in market share. The process of mass production has never been accepted in the tourism industry, therefore customized services are a must for survival. Today’s computer world allows for mass customization in pricing, location, and amenities to a more knowledge-based format. In this case, marketing and IT departments must work closely toward a merger of core competencies. The drive toward e-commerce success includes a plan to track surfing and consumption habits such as the buyers, payers, and the return visitors. Independent consultants are available to provide this data efficiently and confidentially.

It is crucial for hospitality & tourism organizations to stay on top of the roles of the major online players that are posing a serious threat to the industry such as Travelocity, Priceline, Expedia, Yahoo, etc. Their role in the future of hospitality & tourism marketing is crucial to the survival of Hoteliers. Hospitality & tourism organizations might want to look into the potential of becoming one of the first movers to join the dot com craze. The already established loyal customer base will allow hospitality & tourism organizations to have an upper-hand over general online threats.

The customized travel bot could provide the ultimate travel experience of a lifetime for customers in adding the most value, thus allowing first movers in the industry to gain an overall competitive advantage.


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