Travel Agency Online Expansion Options

Slide 1 – Introduction

The individual giving the presentation is called John. The focus of this presentation is to consider the options for expansion online for a travel agency business that has traditionally operated from a high street shop.

During this presentation the aim is to consider the reasons and potential scope for an internet-based travel agency. The presentation will then move on to consider the types of products that would be best suited for the Open Skies Travel Agency given its current strategic position within the market. Once the scope and positioning has been established, the presentation will move on to look at the potential costs and benefits of the possible expansion and change of strategy. This will include consideration of both the financial and practical implications with implementing the new online venture^[1].

Slide 2 – Online Trends

Despite the current economic trends, the travel industry and more specifically the online purchasing of travel services has boomed, in recent years. The amount of money being spent online in relation to travel services has increased by 12 percent in 2007 and it is anticipated that this trend will continue between 2007 and 2012. This is not surprising when all factors are considered^[2].

The travel sector is vast with multiple suppliers offering a range of different products which lend themselves perfectly to online selling. As travel is perishable (i.e. it cannot be stored and used at a later date), companies will be keen to ensure that all seats on flights and all hotel rooms are fully occupied. This leads to incremental and ever changing prices which require immediate update and these are facilities from which online travel agencies benefit.

Package holidays sold through the high street travel agency have reduced by approximately 20%. This means that traditional agents such as Open Skies must embrace these new trends in order to maintain their market share. Correspondingly, however, the number of package holidays booked online has increased by 19%, showing that the market is still strong; it is simply the purchasing patterns that have changed^[3].

The scope online is much greater and this is widely recognised by many tour operators. In fact, travel services and agencies currently make up around a quarter of all online advertising, showing that there is an increasing recognition of the power and extent of the online travel sector.

When considering high internet users, i.e. those who use the internet for at least 16 hours per week, 66% of these people have booked holidays or travel services online^[4]. A further 10% of people will look for information about travel on the internet, before then going on to purchase the products in a traditional high street environment^[5].

Slide 3 – Product Mix

One of the major benefits that internet users cite about using the internet to plan holidays is that it allows for dynamic packages. This means that various flight options can be looked at alongside different accommodation options. By allowing for this degree of flexibility, customers are able to create their own packages that are individual to their own specific needs^[6].

Open Skies is a customer-friendly travel agency that has a high reputation for offering excellent personal advice to its local customers. This unique selling point need not be lost by having an online presence. Although there are several large online based companies such as Thomas Cook that have the advantage of a much larger network of offices and suppliers, they do not have the same personal relationships with their clients. Open Skies needs to look at the way in which it can capitalise on its added value customer service, while also allowing customers to investigate their various options for creating their own dynamic packages.

Open Skies is a locally based company and will physically remain so. Therefore, the main products being offered online will be no different from those currently offered in the high street. The travel industry is fiercely competitive in terms of pricing, which means that local high street travel agents such as Open Skies have to add value to their product mix by ensuring that they offer additional security and advice to customers. Having a website is an opportunity to capture a wider range of customers who can then contact the agency directly to finalise their booking. For this reason, it would seem prudent that the main focus of the Open Skies website should be to have an informative online presence that encourages customers to believe that Open Skies offers genuine additional value to their travelling experience^[7]. This will enable Open Skies to set itself apart from the larger online travel agencies that merely offer cheaper and price competitive travelling options.

Slide 4 – Costs and Benefits

Setting up the initial infrastructure to manage the website will require a degree of additional expenditure. There will be the need to purchase computing equipment to run the website software as well as the need to design, manage and regularly update the website. A basic website is relatively cheap to establish and can be updated and maintained with relative ease. As Open Skies already has a computer system in place and already makes use of the email system, it is possible that the expertise and infrastructure to manage the website is already in-house. This possibility should not be overlooked before outsourcing the tasks^[8].

Additional staffing will be necessary. Firstly, it will be necessary to maintain up to date and accurate information on the website, if customers are going to be able to trust and respect Open Skies Travel Agency. With increased traffic on to the website, it will also be necessary to ensure that there are staff members prepared to respond to booking requests within an acceptable timeframe.

Users of the internet are much more instantaneous in their needs and expectations. If Open Skies is to maintain its current position as offering value added products, then it will need to adapt its structure to be able to respond to this faster pace of trading. This will inevitably mean a larger, more flexible workforce^[9].

However, this expansion will be funded by the considerable increase in the number of customers and trade that will pass through the website. By establishing a web presence, Open Skies will potentially gain customers from across the country and even internationally. Customers are no longer limited by geography and this will naturally be reflected in the volume of custom that will come to Open Skies. This additional influx of customers will not be reflected with a similar increase in costs of servicing these customers. As bookings will be largely done online and over the phone, there will be no need to have additional office space (except to house the additional staff). Therefore, the returns from these additional customers will be greater and will continue to increase in line with the number of customers that are gained^[10].

Slide 5 – Strategy into Action

Whilst it is clear that there are benefits to Open Skies from obtaining an online presence, it will require careful planning if the reputation of the company is not to suffer. Firstly, Open Skies will need to ensure that the infrastructure and back-up procedures are in place. Customers will need to trust that the systems are accurate, efficient and secure; any breaches in this respect would lead to a loss of trust which would impact on the value of the company.

The current workforce will need to be considered in terms of how the individual members of staff can adapt to this new way of working. It is almost certain that additional staff will be required to manage the increasing number of customers and the immediacy of the demands of online customers. This increase in workforce will need to be managed carefully so as to ensure that the costs of the expansion are evenly matched by the increase in revenue^[11].

Continuous monitoring and updating will be necessary to ensure that the information is accurate and that Open Skies is making the most out of its new online arm.

Slide 6 – Conclusions

Online travel agencies are experiencing a continuing boom, despite the current economic downturn. For a company such as Open Skies, gaining an online presence is vital, if it is to maximise the potential in the market. Depending on the current infrastructure in place, the costs of set up and maintenance could be relatively little. Security and back-up processes will be important, if it is to maintain its current high level of customer service and reputation.

New staff will almost certainly be required to deal with the increase in trade and to continue to offer the high level of customer service that it currently offers. The need to go online is clear and Open Skies needs to embrace the changing trends. However, embracing new, online technologies needs to be planned carefully so that the value added services can be maintained and customers will be prepared to pay more for these services, meaning that Open Skies will not have to compete with the low prices offered by the larger organisations.

Bibliography

Bharadwaj, Prashanth Nagendra, Soni, Ramesh G., E-Commerce Usage and Perception of E-Commerce Issues among Small Firms: Results and Implications from an Empirical Study, Journal of Small Business Management, 45, 2007

Buhalis, Dimitrios, ETourism: Information Technology for Strategic Tourism Management, Pearson Education, 2003

Duray, Dave, Vering, Matthias, The E-Business Workplace: Discovering the Power of Enterprise Portals, John Wiley, 2001

Frew, Andrew J., Information and Communication Technologies in Tourism 2004: Proceedings of the International Conference in Cairo, Egypt, 2004, Springer, 2004

Goeldner, Charles R., Brent Ritchie, J.R., Tourism: Principles, Practices, Philosophies, John Wiley and Sons, 2006

Kozak, Metin, Andreu, Luisa, Progress in Tourism Marketing, Elsevier, 2006

Rayman-Bacchus, L., Molina, A., Internet-Based Tourism Services: Business Issues and Trends, Futures, 33, 2001

Tate, Will, Rosen, Cheryl, Frame a Travel Strategy: Find the Delicate Balance between Avoiding Travel Costs and Keeping Travelers Productive, Journal of Accountancy, 199, 2005

Watkins, William M., Technology and Business Strategy: Getting the Most out of Technological Assets, Quorum Books, 1998

2002 Mori Survey commissioned by Association of British Travel Agents (ABTA)

Footnotes

^[1] Bharadwaj, Prashanth Nagendra, Soni, Ramesh G., E-Commerce Usage and Perception of E-Commerce Issues among Small Firms: Results and Implications from an Empirical Study, Journal of Small Business Management, 45, 2007

^[2] Rayman-Bacchus, L., Molina, A,. Internet-Based Tourism Services: Business Issues and Trends, Futures, 33, 2001

^[3] 2002 Mori Survey commissioned by Association of British Travel Agents (ABTA)

^[4] Travelers Use of the Internet, 2004 Edition

^[5] Frew, Andrew J., Information and Communication Technologies in Tourism 2004, Proceedings of the International Conference in Cairo, Egypt, 2004, Springer, 2004

^[6] Goeldner, Charles R., Brent Ritchie, J.R., Tourism: Principles, Practices, Philosophies, John Wiley and Sons, 2006

^[7] Kozak, Metin, Andreu, Luisa, Progress in Tourism Marketing, Elsevier, 2006

^[8] Watkins, William M., Technology and Business Strategy: Getting the Most out of Technological Assets, Quorum Books, 1998

^[9] Buhalis, Dimitrios, ETourism: Information Technology for Strategic Tourism Management, Pearson Education, 2003

^[10] Duray, Dave, Vering, Matthias, The E-Business Workplace: Discovering the Power of Enterprise Portals, John Wiley, 2001

^[11] Tate, Will, Rosen, Cheryl, Frame a Travel Strategy: Find the Delicate Balance between Avoiding Travel Costs and Keeping Travelers Productive, Journal of Accountancy, 199, 2005