Chapter 7 E-marketing And Information Distribution E-commerce and Information Technology in Hospitality and Tourism Copyright 2004 by Zongqing Zhou, PhD Niagara University

Learning Objectives After you complete your study of this chapter, you should be able to: Understand the Internet’s impact on travel suppliers. Know how the Internet impacts intermediaries. Understand the Internet’s impact on destination marketers. Understand the Internet’s impact on traditional brochure information distribution. Be acquainted with the emerging e-commerce marketplace.

7.1 Introduction 1. The hospitality and tourism industry has probably been the most affected industry by the Internet. 2. The industry depends on the distribution of information about its products and services. 3. Hospitality and tourism suppliers have been looking for new ways to expand channels of distribution so that they can reach target travelers in a more efficient and effective way.

7.1 Introduction (cont.) 4. Travel agents are an effective (but not efficient) way to reach customers. 5. Reducing the cost of information distribution and service has been a tempting proposition from the suppliers’ point of view. 6. The advent of the Internet has made it possible.

7.2 The Impact On Suppliers Airlines Cruise lines Lodging Rental car industry

Airlines For decades, airlines have been heavily dependent on travel intermediaries The Internet has changed everything, enabling airlines to find a way to bypass intermediaries to reach their customers directly and save money at the same time. Their first move was to cut commissions they paid to the travel agents

Airlines Cont’d The airlines use strategies such as online pricing and incentives to lure travelers to book and plan travel on their sites. Today, almost all major airlines own their own Web sites that are capable of taking reservations online as well as conducting other travel services. In fact, all major airlines are aggressively investing in the e-commerce, using all kinds of marketing strategies to lure customers to book and shop at their Web sites. At the heart of the popularity of online booking and reservations is the idea of customization of travel products and services.

Airlines Cont’d These online booking capabilities reduce costs by eliminating transactional fees and providing real-time reporting tools for travel managers. Before the Internet online reservation, this customization process was done through the travel agents, airline products and services are not that complicated to customize and therefore the Internet becomes a perfect channel of distribution of airline travel products and services.

Cruise Lines Cruise lines industry has witnessed a boom in its business partly because of the economic prosperity of the US economy and partly because of cruise lines’ successful marketing efforts. They resisted the temptation of online booking. Cruises are designed to replicate the many variety of amenities and activities available at the world’s leading land resorts. To book a cruise requires the consumer to make a variety of major decisions that can include elements of three major travel categories, airlines, hotel and cruises.

Cruise Lines (cont.) With the emergence of Internet e-commerce in the travel industry, the cruise lines were tempted several times to follow the airlines in offering direct online marketing and reservations. But they have not gone so far because their products are much more difficult to customized online However, in 1997, cruise lines sought to control distribution costs by eliminating or restricting bonus payments, keeping the base commission intact. 1998, Renaissance Cruises announced the “Quik Pay” policy-a flat commission of $500 per cabin for all agent bookings.

Cruise Lines (cont.) By 1999, nearly every cruise line had its own Web site (Hughes 1999). Both agents and consumers could book online with Carnival Cruise Lines, and consumers could do so with Renaissance Cruises. For now, the cruise lines are walking a thin line between their online direct booking and avoiding losing the support of travel agents. Cruise lines will keep their partnership with the travel agents for some time to come, even with the Internet’s direct booking capability. Amadeus, a leading global distribution system (GDS) and technology provider, launched Amadeus Cruise in 2000, an advanced cruise-booking technology for travel agents and cruise providers.

Lodging The lodging sector of the travel industry, though starting late in e-commerce, is fast catching up. hotel industry room nights and revenue booked electronically in 2001 by travel agents and consumers grew at a rapid rate. This growth was spurred by GDS booking both by consumers directly and through third-party travel Web sites such as Travelocity.com and Expedia.com

Lodging (cont.) Today, all major lodging chains have invested in e-commerce and information technology to various degrees. These investments include in-room high- speed Internet connections, online direct booking Web sites, and online procurement of services and products. Small bed-and-breakfast properties, too, are either setting up their own Web sites or joining major bed-and-breakfast marketing sites.

A survey of Major Lodging Websites. Company and URL WHAT CAN YOU DO? Online Booking The Four Seasons Hotel Picture links to vacation getaways, business travel and rates, availability, residential properties. Yes The Ritz Carlton Hotel Reservations and explore the hotels. Each different hotel link has extensive information on all hotel services, packages. Yes Embassy Suites Reservations, check rates, find a hotel, special offers, hotel locator, by city, state, country. Yes Marriott Hotel Find a hotel, reservations, hotel directories, route planner, frequent visitors, links to all Marriott Properties. Yes The Adams Mark Hotel Choosing a location of an Adams Mark Hotel, reservations; search rates & availability by city, state, country. Yes Hyatt Hotels Rates & reservations, special offers, Gold Passport Program, Hyatt Resorts, Hyatt Extra Subscription Search for Hyatt worldwide hotels. Yes

Rental Car Industry With its quiet start in the early 20th century, the rental car industry has gone a long way toward embracing technology. Beginning in the 1990s, the industry started to adopt technology to improve its reservation systems Online booking and marketing of vehicles has helped rental companies streamline their business, increase its reach and efficiency and at the same time better serve the customers’ needs and wants. Rental car companies are targeting their Web strategies not only at leisure travel customers but also at the corporate travel market.

Rental Car Industry (cont.) In June 2000, Avis rolled out an Internet-based information system called Avis InterActive ( which was updated in 2001 with its Avis InterActive with Release 2.0www.avisinteractive.com Alamo has already introduced a system called QuickRent®. This system allows online travelers to complete the entire rental process online. A future development in the rental car industry will be to develop an online rental system that streamlines the rental process, including reservations, changes of schedule, signing agreements, checking in, and payment.

Rental Car Industry (cont.) With QuickRent®, online travelers can bypass the counter by choosing all their options online, signing the rental agreement online, or using one of the ATM-style kiosks at one of the 36 Alamo rental locations in the United States. This type of system differs from those of the past, when online travelers were required to complete the rental transaction at the counter unless they were a special club member or frequent travel member.

Major Timeline for Rental Car Industry Development 1939: Hertz begins to offer vehicles with automatic transmissions. The company was founded in 1918 by Walter Jacobs as Rent-A-Ford. In 1923, the company was purchased by John Hertz. 1947: National Car Rental is founded as an association called the National Car Rental system. 1958: Thrifty Car Rental is founded by L. G. Crane, with one location in Tulsa, Oklahoma. 1958: Budget Rent-a-Car is founded by Morris Mirkin in a storefront in Los Angeles. Mirkin offers rental rates as low as $4 per day and 4 cents per mile.

Major Timeline for Rental Car Industry Development 1962: Avis Rent-a-Car introduces the “We Try Harder” campaign, which is still used today. 1966: Dollar Rent-a-Car is founded by Henry Caruso. 1972: Avis introduces the Wizard computer system. 1973: Payless Rent-a-Car is launched. 1974: Alamo Rent-a-Car opens for business.

Major Timeline for Rental Car Industry Development 1980: Avis introduces the Wizard II system. 1984: Hertz introduces computerized driving directions for its rental customers. 1989: Thrifty Car Rental introduces FASTRAC. 1990: Alamo introduces its frequent-renter program, Alamo Express.

7.3 The Impact on Travel Agents The deepest impact of the Internet and e- commerce is on travel agents since almost all travel suppliers are marketing directly to travelers The impact is so deep that many two-year travel schools that used to be a good employment source for travel agencies are closing their doors or are forced to revise their curricula to meet the needs of the employment market.

7.3 The Impact on Travel Agents (cont.) With increased interest by travelers in online travel information research and booking and the aggressive marketing efforts of travel suppliers to sell tickets online, travel agencies are being squeezed from all sides. Suppliers, led by the airlines, began to cut their commissions as early as in 1997, which turned out to be a deadly blow to travel agencies. Travel agencies have used various strategies to cope with the new reality.

7.4 The Impact on Traditional Brochure Information Distribution If we add those who will use both print brochures and the Internet and those who will only use the Internet, we come up with a figure as large as 58 percent. The biggest impact on the travel and hospitality industry is in the area of travel information search and planning. Online brochures have many advantages, more accurate because it can be updated around the clock. Can be customized to the customer a lot easier.

7.4 The Impact on Traditional Brochure Information Distribution (cont.) Traditionally, travelers rely heavily on print brochures to obtain information on destinations and travel products and services. With the increasing popularity of the Internet, the reliance on the print brochure as a major marketing tool is now in question. Nearly 60% of people will use the Internet either as a sole source of information or as a complementary source of travel information. Convention and visitor bureaus and other destination marketing organizations are shifting their focus to the Internet.

7.4 The Impact on Traditional Brochure Information Distribution (cont.) Online travel brochures have several advantages over traditional print ones. First, they are more accurate since their information can be updated around the clock Second, they can be customized according to the needs of an individual online visitor Third, information can be accessed 24/7, anywhere in the world. In the future, travelers will have a walking brochure (a Web-based wireless device) in their hand wherever they travel. Finally, online information distribution breaks the barrier of a brochure, which can carry only a limited amount of information.

7.5 The Travel E-commerce Marketplace Online-only travel Web sites have loomed large in travel information distribution and travel reservation Some of these players are trying to establish themselves as a one-stop shopping portal for travel needs, supplying travel information as well as booking for all types of services, ranging from lodging to airlines and from entertainment to transportation. This e-commerce marketplace is still in its development and, in fact, is going through some rapid changes. The winners of this intense competition are consumers