Technical aspects of tourism

Executive summary:

This report deals with the introduction and usage of ICT (Information and communication technology in the field of tourism. This report discusses all the technical aspects of the tourism industry and its impact on consumers. First it discusses various basic factors relate to the ICT and how it has been used by the customer and the tourism sector to interact with each other and also stress on various other benefits arising out of it.

It discusses the topic of e-business in detail and explains how it has affected the consumers across the world. The topics like decision making by the tourist and various models by different analysts have also been taken into consideration to assess the topic in depth.

Competitive advantage of E- commerce has been brought into light. To analyse the impact of ICT on the tourism industry, we have taken an example of a tourist agency called “Thomas Cook”. It one of the premier tourism agencies in the word, that has achieved a lot of success through effective implementing the ICT system in their firm.

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This report has analysed the strategies adopted by “Thomas cook” for their success in tourism sector. One of the major factors called mySAP consumer relations management has been discussed in detail. This paper also deals with the advantages of the benefits that a consumer has through e-commerce as well as the barriers of e-commerce.

Introduction:

Information and communication technology (ICT) is the Contemporary style of doing business in an effective manner. This process was being used since the early 1930’s but in recent times i.e., the past 15 years this system is been followed extensively in various sectors. Major sectors like retail, banking, telecommunication, governments of various countries, Tourism, etc is using this system effectively.

This concept covers vide rang of appliances like internet, wireless, Digital Cameras Wi-Fi, VIOP, GPS, Digital Radio, etc. Every sector is trying to implement this process through one way or the other to improve their business performance. It is been so extensively these days that an article in the “Daily Telegraph IT” supplement said that, many large organisations would not survive 24 hours without the help of ICT. This attitude change towards ICT was always expected and is of no wonder.

This development was inevitable as this made the work easier and faster. This is the main reason why outsourcing of work began. The cost of production was reduced and so was the cost of goods. This technological development has eliminated the national boundaries and helped various businesses to go global, thus integrating markets as well as economies across the world.

This rapid growth in the technology has lead to the concept of E-Business and E-Commerce. With e-business there are various advantages due to the presence of global audience, online transaction, etc. This is playing a major role in reshaping the tourism sector across the world. This concept of ICT has brought people much closer to the tourism service providers. Now, customers do most of their holiday or travel plans online. Many tourism companies are adopting this technology.

The tourism sector being one of the traditional sectors it was not a smooth ride in taking up this technological advancement. Many small could not afford this kind of investment. They had to terminate a lot of workers as after this advancement there was minimal response to the traditional high street travel agencies. Although physical services are the core products of industry, it is dominated by information systems. (Shankar, 2008)

ICT and tourism sector:

Tourism is a fast growing and information intensive sector. In traditional tourism sector the customer has to all the way to the travel agency to get the information about the journey or trip. Now, it has become easy for the customers to just sit in their home and browse through various sites and compare different packages provided by different travel agencies. The ICT tools for organising, Marketing, Managing the customer is known. Advertising, promotions, managing sales, use of GIS and GPS to monitor and manage the customer can be considered as some of the ICT tool among many.

There are various reasons as to why the tourism industry is adopting this approach: (According to Avison and Fitzgerald, 1995)

• To expand the industrial boundaries.
• Reduce expenses.
• Improve relations with the customers.
• To deter the new entrants in the market.

With the ICT technology been used in various sectors like Airways, Railways, Tour operators, Hotels etc has made is essential for the tourism sector to adopt this system and later an advantage for the sector (Inkpen and Sheldon, 1997).

Various kinds of business are using social media to do their business through networking sites and other ways:

Web 2.0:

It has gained immense popularity in the web world and its users. This is been extensively used by the tourism industry. It has brought a new face to the industry. It has a lot of technological web applications like social networking groups, blogs, podcasting, online video, etc.

RSS:

RSS (Really Simple Syndicate) is used by the tourism industry to communicate with its customers in person. This simple syndicate enable the customer to receive information on the relevant tourism topic of his choosing. Through this a customer receives the links of different or best travel deals. (Nelson, 2006)

Blogging:

A person creates a blog and updates it with all the information and text. Then the blogger encourages a discussion on his blog by posting comments. This system of blogging is been used by tourism firms, where they post some information and encourage discussion between customers and keep their customer attracted.

Social networking:

This is the most accessed or most popular mode of sharing information on internet. As the majority are youngsters this has flourished. The most known social networking sites are Facebook, Hi5, Orkut, Twitter, etc. A person has access to various communities and has a chance to be part of different groups and to enter into discussions online (Boyd and Ellison, 2007). One of the fastest growing travel web sites is WAYN. It helps people to exchange information on their travel experiences and to share their interests online.

Online videos and podcasting:

When it comes to this mode the most famous site that pops in our mind is “YouTube”. It is of great help in the tourism as a visual is provided so as to inform/communicate with the customer in an effective manner. A social networking provides called “metaverses” enable the customers to interact while doing business. Virtual websites are also coming into existence where we can create a personalised avatar and go for a virtual holiday on web. (Hay, 2008)

Tagging:

This process saves a lot of time for the customer as many travel agencies are tagging different item from different sites so that the customer doesn’t have to search in multiple places. Like tourism website may tag the location of the place from “Google maps”, information taken from encyclopaedia and video from “YouTube”. (O’connor et al, 2008)

Tourist Decision Making:

This is important factor on how a tourist thinks and what are the factors that determine or influence the decision making of the tourist? There were many models which tired to explain the consumer behaviour but failed as they were regarding the tangible goods and did not take into consideration the intangible factors or the feeling part of the customer. (Gilbert, 1991)

All the models were criticised that they were just an extension of other models. Let us take into consideration Schmoll (1977) which is based on decision making process in tourism. Motivation, desires/needs, and expectations are said to influence the final destination. There are other factors also which influence the decision making that is, travel stimuli, external and internal variables. (Swarbrooke and Horner, 1999)

The process of decision making includes 5 points as proposed by Mathieson and Wall (1982).

1. A desire to travel.
2. The potential of the customer in obtaining information from the respective tourist agency, broachers, advertisements, etc. Other factor like cost of the trip, availability of alternative tours, facilities available in that region, etc.
3. Accommodation type, travel mode and ultimately the final destination.
4. Travel preparations like packing of clothing and equipment and the travel begins.
5. Evaluation of past travel experiences and the result of this will obviously effect future tours.

All these models have tried to analyse the behaviour of the tourist and the factors (tangible and intangible) that affect their decision making.

Competitive Advantage of E-Business:

There are a lot of competitive advantages that arise out of e-business and information technology.

• The customer can find out about the product, its various uses and compare with other products online sitting at home rather than going all the way to the store.
• Sometime lot of product comparison may go against the firm so they can adopt the method of product bundling. As various services can be added to the bundle and keep the customer away from individual product comparison. (Schiesel, 2001)
• Innovation and introduction of niche products which deals with the issues related to product substitutes and new entries into the market. (Sinha, 2000)
• Consumer centric strategy that is, gathering of information from the customer and developing the packages or products accordingly. (Viehland, 2000)
• Transfer of skills and sharing of activities and be exploited via extending to related product lines. (Porter, 1980)
• Price lining and smart pricing: Selling the same product at different price levels to reach people of different standard is price lining. In smart pricing, different price is charged at different market and also according to the value of the product in that region. (Sinha, 2000)
• Price discrimination must be done to save the profit margins, so that when the competition intensifies then they don’t have to lower their prices.
• Dialogue based marketing must be done in order to explain the customer about the product as well as to obtain a feedback on the packages and upgrade accordingly. (Sealey, 2000)
• Establishing revenue sharing strategies with other web sites so as to provide customer with subsidiary requirements and fulfilling their needs to the maximum extent. For eg, dell computers is already doing this and has been successful in providing better services. (Hoffman and Novak, 2000)

Completely automated delivery system so as to meet the customer desires.

About Thomas Cook:

It is a leading leisure travel group with 22.1 million customers. It operates around 21 countries across the word. It operates with 31,000 employees all over the world with a fleet 95 aircrafts and 3400 franchised office all over the world. (Thomas Cook Group). It has captured 30% of the UK, Ireland, India and Middle East market, with a fleet of 43 planes and a controlled distribution of 68.6%.

Their strategy is to focus on their main business that is, the travel agency and to strengthen it. They also want to invest in travel related sectors and financial sectors through mergers, acquisitions and investing with partners. Ultimately their aim is to become the largest individual travel service provider in the world. They are also planning on becoming independent financial service provider in the world market. To attain this they are with the implementation of highest standard of corporate governance to have an effective decision making mechanism. (Thomas Cook Group Ltd.)

Challenges for Tour Operators:

All the major tourism companies after 1980 are focused on increasing their profit margins by vertical integration. Although this did not produce anticipated results as the tourism companies expected due to high costs of integration and less returns on their investment or expenditure. Due to rapid growth of travel eMediaries and commission erosion at that time had a negative impact on the travel industry. (Dombey, 2005)

Due to this Crisis Thomas cook changed its strategy from an ideal integrated leisure travel group as this model was outdated. In 2006 CEO of Thomas cook announced a new business model where they will be offering optimum flexibility to the customer at the expense of low investment. (Karstadt Quell, 2006)

With the vast usage of internet by the consumers and the presence of eMediaries in the market, Thomas Cook had to rethink its strategies. Although not completely abandoning of the traditional integrated vertical system, the advantages of the traditional system were integrated with that of the new dynamic and flexible system that is the system of ICT. This model was also known as hybrid model. (Chaffey, 2004)

Changes in organisation as a whole:

Thomas cook had to go through a lot changes on the organisational level as they have now opted for a new model of performing their business. The traditional system was more human with minimal technological involvement in the process of customer service. Now, the new model was highly sophisticated and technical so the whole organisation had to go through a change in terms of structure, work culture, workers mind set, technical changes etc.

Structural changes:

The traditional system followed a hierarchical structure where everything was strictly departmentalised. But as they went for e-business this kind of traditional structure was considered as barrier in performing e-business. So, they went for a system which was more like an informal networking (Shand 2000). For eg the number of directors was reduced to 8 from 40, to ensure that decisions were taken quickly in the organisation.

Cultural changes:

With adoption of internet and a highly technical based system it changes the whole organisation, how it thinks, how it does things and it completely effects the organisational. When a company is about to adopt e-business then it must take into consideration the two most important factors that is, the organisational culture and technical skills.

The high level management was up for the rapid implementations of e-business techniques but the annual report was suggesting that it would take some time to completely adopt. It was found was part of the organisation was running fast and the rest of the organisation jus looked like they were trying to catch up. With e-business they were able to concentrate more on the consumer and their need therefore, by obtaining the loyalty and also deepening the relationship with the customers. (Siegel, 2000)

Technical Changes:

E-business required knowledge of skills at both the managerial as well as the operational level. Now in this scenario there will more knowledge based jobs available and there is a possibility that the manager could be less competent than his employee as he may be update with all the new technological skill. (Mahesh and Hartman, 2005) It was also observed that some of the junior managers were training or giving suggestions to their superiors. As a result 80% of the recruitments in the e-business section were made outside the organization as they didn’t have the ability as they lacked technical knowledge.

One of the biggest challenges to Thomas Cook was to make the technological changes that is, updating or installing new software’s, purchasing of high end computers, etc. Thomas Cook has announced a £64 million replace it s legacy reservation systems to multi channel reservation platform.

Thomas Cook and ICT:

We have discussed on the information and communication system, its implications in tourism sector and the competitive advantages arising when then system is followed. Now, let us take an example of a tourism agency and analyse how the ICS has benefited them.

Thomas Cook has started using the ICS from February 2000. It has made huge investments on the technical development of the firm. After they entered the online system their business was up by 15% and 30% of the customers were using the online services. It has invested a lot in e-business development and training and is now reaping the benefits of it.

Thomas cook adopted the strategy of direct marketing which is nothing but an interactive use of the advertising media to stimulate and to modify in such a way that the behaviour’s can be recorded, tracked, understood, stored for the future use of the information. (Jacobs R. and Stone B., 2001)

They first adopted the Communicating Sequential Processes (CSP) which was then proposed by the IT project manager in the firm. This is a Formal Language that was used to describe patterns in interaction between concurrent systems. It was a failure because of the following reasons:

• CSP complicated the process for error search and made it very tedious.
• It delayed the process of generating the campaigns and market segment reports as, by 2004 its database was full and was unable to accommodate or manage further data/information.
• In travel world each customer has a different choice and the CSP database was not sophisticated enough to handle these issues as it was an outdated method.
• The cost of campaign was increased due to the use of CSP as it was outdated and did not serve the purpose of the dynamic future needs.

As cost of maintenance was increasing and thus were unable to use the profits for various aspects of their business. They were now looking for a cost effective, and a system which could enable the smooth processing of the information, effective campaign, etc. Their answer to all these problems was one solution an thaw was “mySAP CRM”. This was a product of SAP global for customer relations management (CRM).

What is “mySAP CRM”?

This software unlike other CRM software helps in not only in formulating and achieving the short term imperatives but also in the process of decision making and in reducing the cost of managing or maintenance. It can also help a company in achieving differentiated capabilities to compete in the market. SAP CRM covers various aspect of the tourism industry and helps them in various ways like: (According to SAP Global)

Marketing:

• It helps in achieving the organisational goals.
• Better understanding of market spending and the returns on them.
• Visibility and control of operations is increased which accelerates the process of marketing.
• High value customers can be identified and retained with the help of Customer loyalty programmes.
• A central marketing platform could be established.

Sales:

• Profits can be increased.
• Customer interaction and be initiated and their demands could be met more efficiently.
• The focus on sales is increased
• Enterprise sales process can be initiated across channels.
• Personalised experience to the customers can be provided.

Service:

• With the help of in spot information and other resources there shall be an improvement in first contact resolution.
• Service employees are provided with tools and the information that is requires to retain the customer and to prevent a churn.
• Easy access to resources and information boosts field utilization.
• Product based services are provided to the customer to increase the revenue.
• Issues related to product defects can be handled effectively.
• A unique and consistent user experience is possible with various interaction channels like voice mails, text messages, e-mails, etc.

Contact Centre:

• The number of relevant calls can be increased.
• Personalised telemarketing campaigns can be initiated.
• Customer services can be improved from the first call itself.
• A proper analysis on contact centre is possible and insight is attained on the current trends.

E-Commerce:

• Improving sales and to extend market with relevant offers.
• Personalised and targeted e-marketing campaign to attain the customer loyalty.
• Intuitive self services could be provided to increase customer convenience.
• The cost of sales can be reduced by following proper and consistent ways of pricing and customer information across channels.
• Reliable commitments are made using streamline end to end order to cash.
• Possibilities of analyzing the actions and trends of e-business.

IT Services:

• IT service agents and track and solve the problems easily through streamline service desk.
• Management of IT financials by the use of native integration of SAP ERP financial solutions.
• Built in analytics and add on tools enable to get a insight into the IT service desk.
• Both the customer and the stakeholders are satisfied as there is a transparent process in defining and enforcing agreements on service levels.
• Web 2.0 supports native integration with SAP solution manager so all the SAP and non SAP related IT support services are managed appropriately.

With all these advantages of mySAP CRM in providing effective services in the tourism industry has enabled Thomas cook to attain a superior level in the tourism sector then its counterparts in the same sector. The major competitive advantage that Thomas Cook attained from mySAP CRM are:

1. To integrate campaign between various departments and partners this in turn helped in maintaining the brand consistency.
2. The marketing department have streamlines and standardized the process for creating or approving a particular campaign.
3. Complex segmentations and database operations have become faster with the use of high speed segmentation and also provide new insights into customer behaviour.
4. Thomas Cook was able to provide campaign relevant data for the execution of a campaign due to highly flexible customer structure.
5. It reduced the cost of reaching the targeted customer and now Thomas Cook and reaches more customers without any increase in spending. (Reiner Wegmann, IT Project Manager, Thomas cook, 2006)
6. Thomas Cook was now independent and not relying on any other IT department for third party subscription.
7. Interactive drag and drop phase and graphic visualisation has speeded up the process of market segmentation and listing.
8. The process of decision making was faster due to personalised portals. This also enables the players to take wise and quick decisions as important information is already there in there portals.
9. Thomas cook was able to make long term business propositions as well as to focus on the operational business objectives. (SAP customer success story retail, Thomas cook, 2006)

Benefits of E-commerce to Customers:

From the above analysis we can say that there are a lot of benefits to the customers:

• The web provides ample information about every destination and the facilities over there.
• Through e commerce the tourism agencies are able to provide all the information about the desired destination.
• The products or packages can be compared and the customer can take a decision accordingly.
• The customer can use the social networking and discuss the tour experiences or enquire about them or to know about them.
• It provides flexibility to the customer.
• The customer no longer has to go all way to the agency to gather information about his desired destiny.
• E-commerce provides various packages and concessions online which are not available otherwise.
• E-commerce has user friendly web sites that are designed for the targeted customers.

Barriers of E-Commerce:

We have discussed all the various factors that influenced the tourism industry to adopt ICT system and e-commerce played an important role. There also some barriers associated with e-commerce that has to be taken into consideration by the tourism industry and to work on them to get better results in the future.

• It cannot functions without the basic requirements like backup services and required hardware. These can be an expensive investment in the company at the time converting from a traditional system.
• The trust factor of the e-commerce must be given preference and both the government and the private sector should work together in increasing the safety of e-commerce. Confidentiality should be provided to the customer’s personal information, safety of credit card details must also be ensured.
• The existence of regulations and presence of international laws prevents e-commerce from being an effective source.

Conclusion:

From the above analysis we can conclude that, Information and communication system plays an important role in the development of the tourism industry. Social networking and various other options on web have taken the tourism industry to the next level. The web has provided a huge marketing source for the tourism sector in cost effective manner. (Armstrong and Hagel, 1996; Kozinets, 1999; Wang et al, 2002)

It is also evident that the latest upgrade in information systems has clearly given Thomas Cook an edge over the other tourism agencies. Although it has gone through rapid changes in the organisational structure but it has effectively managed its resources and is able provide one of the best services in the world to desired tourists. In the process of adopting new skills and systems, the mindsets and cultures have to develop and resistance at any level of the organisation need to be handled with lot of care. (Jackson and Harris, 2003)

Thomas Cook has effectively used mySAP Consume Relation management system to provide quality services to the customer and at the same time limiting their expenditures on publicity or promotion of the product. The process of innovation and implementing new methods in work place has paid off for Thomas Cook. It was a bold step to adopt the ICT system into a traditional tourist sector.

Thus, we can conclude by saying that ICT has played an important role in the development of the tourism industry and enable the customers to enjoy better services that they deserve. Although there is this trust issue regarding e-commerce and its uses but more people are using this facility every day.

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