Travel agencies exist primarily as intermediaries between suppliers of travel services such as
airlines and hotels, and customers. Unlike distributors in many industries, travel agencies do not deal with physical products but with information. Travel agent is defined as a person who undertakes a job for another person, who is the ‘principal’. The principal in such a relationship not only sets the goals of the job, such as selling tickets, but may also control the means and manner in which the job is done.
The fundamental role of a travel agency can be broadly summarized as: information, distribution, reservation and services.
For a typical business day, a travel agency’s functions include:
1.Arranging transportation – air, sea cruises, bus, rail, car rentals locally and abroad.
2. Preparing individual itineraries, personallyescorted tours, group tours and selling prepared
3. Arranging hotels, motels, resort accommodations, meals, sightseeing, transfers of passengers and luggage between terminals and hotels, as well as special events such as music festivals and theatre tickets.
4.Handling and advising on the details pertaining to travel and baggage insurances, travelers’ cheques, foreign currency exchanges, documentation requirements (visas, health certificates etc.)
Traditionally, the travel industry focused on the travel agency sales channel. Customers used to visit their local travel agencies, and purchase travel tickets or gather vacation information through the agencies. The birth of the Internet and electronic commerce has caused this to change. Customers discovered that they can search travel destinations and even purchase airline, train, and cruise ship tickets online. When one realizes just how easy it is to use the Internet for travel arrangements, it’s hard to justify using a traditional agency. Popular sites such as Expedia, Travelocity, and Preview Travel offer point and click results to the customer’s home or office.
Traditional travel agencies appear to be losing the battle against its online counterpart and the airlines. In addition, many traditional travel agencies are afraid to enter the online market because the commissions are nearly obsolete and they are so far behind the curve at this point in time. The airlines also appear to be winning out over traditional channels by cutting, and in some cases, eliminating commissions. Several airline sites even offer reduced costs and extra incentives for customers ordering tickets online.
Agencies that are focused on major corporate clients are emerging as they have the power to negotiate compensation structures with airlines. Agencies are becoming specialized in certain types of travel, offering expertise on senior citizen services, family packages, adventure programs and disabled facilities. Travel agencies that leverage information technology are also providing services such as travel cost management for corporations while ensuring compliance with corporate policies for employee travel.
For example, Rosenbluth Travel a large Philadelphia based agency, provides Wal-Mart employees with desktop access through the Wal-Mart Local Area Network (LAN) to arrange air, hotel, and car rental reservations. The Rosenbluth system is programmed to ensure compliance with Wal-Mart travel policies, and links directly to the Wal-Mart financial system. Smaller companies that do not require LAN access can use Rosenbluth’s website, accessible through the Internet or direct dial-up.
Upon the introduction of Internet technology, travel industry is one of the industries which are strongly affected by electronic commerce. It is clear that IDR cycle exists in the travel industry. In the intermediate phase, traditional travel agencies dominate the market. However, as new EC-only travel agencies emerge in the market and build up their competitive abilities, traditional travel agencies lost over 50% market shares.
This is the disintermediation phase. Traditional travel agencies need to sustain their positions in the market by reintermediating and reinvigorating their business strategies in the emerging marketplace. Apart from securing the ownership of necessary co-specialized assets, traditional travel agencies have to acquire new electronic commerce technologies to reconfigure themselves to EC-able intermediaries to preserve the advantages that they have built. As proposed in this paper, traditional travel agencies can acquire electronic commerce technologies in different ways such as alliance with technology provider, portfolio partnering or develop electronic commerce technologies by themselves.
Turn to be EC-able is the direction for traditional travel agencies to survive and retain competitive power in the e-business era. In the conversion process, no matter which approaches they take, they have to clearly define their firms’ electronic commerce strategies by carefully considering their favorable conditions and resistance factors.