E-Commerce in Hospitality and Tourism Industry

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

In Hospitality and Tourism industry, hardware, software, information management, and telecommunications
systems have allowed for the processing and information flow amongst organizations. The way in which tourism
organizations take advantage of IT tools may determine their future success in the marketplace. 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.

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 over the world
in most industries since it is cost savings.

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.

1. B2C transactions involve business-to-customer interactions. For example, airline reservation system
(Busiess) allow people (Customer) do online reservation of air ticket.
 2. 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.
3. 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.

4. C2C transactions involve two or more consumers (customer-to-customer). Lazada, Shopee, 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.

e-Commerce in Hospitality and Tourism industry

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.

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

The Internet is not the full solution to success in the Hospitality and Tourism 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 Hospitality and 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. This challenges Hospitality and Tourism organizations because efficiency in
both external and internal interactions are required. The setup cost of IT may be quite expensive in a economic
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
agencies as suppliers will be straightly 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.

Sign from Advertisement forecast

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 phone will be the number one screen for digital brands to engage users

There will be at least 5 metrics that advertisers will regard as more important than the “click”

75% of web ads will be “social” in nature such as facebook. Therefore, Ads will be shared, discussed, subscribed to
and recommended

Multimedia 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

This forecast shows that competition to attract potential customers via worldwide web will be more and more
drastic.

Changing of e-Commerce in Hospitality and Tourism Industry

Customers feel empowered to arrange their own itineraries for airline, hotel room, transportation and other travel
amenities directly via the Internet. It is predicted that the internet will take the majority of reservations directly
from customers and intermediaries at a portion of the costs associated with today’s around 800 number and
Global Distribution Systems (GDSs).

A global distribution system (GDS) is a computerised network system owned or operated by a company that
enables transactions between travel industry service providers, mainly airlines, hotels, car rental companies,
and travel agencies. The GDS mainly uses real-time inventory (for e.g. number of hotel rooms available, number
of flight seats available, or number of cars available) to service providers. Travel agencies traditionally relied on
GDS for services, products and rates in order to provide travel-related services to the end consumers. Thus, a
GDS can link services, rates and bookings consolidating products and services across all three travel sectors: i.e.,
airline reservations, hotel reservations, car rentals. (AMADEUS AND SABRE).

GDS is different from a computer reservations system, which is a reservation system used by the service
providers (also known as vendors). Primary customers of GDS are travel agents (both online and office-based) to
make reservation on various reservation systems run by the vendors. GDS holds no inventory; the inventory is
held on the vendor's reservation system itself. A GDS system will have real-time link to the vendor's database. For
example, when a travel agency requests a reservation on the service of a particular airline company, the GDS
system routes the request to the appropriate airline's computer reservations system.

The travel distribution system is currently facing many changes as online agencies such as Priceline, Travelocity,
Expedia, etc. have introduced a way to access travel suppliers directly via the worldwide web. In general, Global
Distribution Systems have not shown much of an effort toward targeting on-line customers. As an alternative,
Customer Relation Systems have remained trustworthy 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 . Statistics indicate that travel agents handle 80-85% of
vacation packaging. However, from the beginning of popular in technology and the worldwide web, these figures
are changing. Buying tickets online via airlines will continue to dominate the travel market. A major challenge for
airlines company, other suppliers and travel agencies is to encourage customers to do the online booking for their
travel packages. They must continue to add value 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 straight link to customers as they compete directly against travel agents [23].
Furthermore, they could have stronger control over the customers due in part to the e-ticketing. In this respect,
online technology has replaced the travel agency by adding value via fare shoppers, promotions, and personalized
recommendations. Although travel agencies have maintained market share, they must strategize to become either
a niche competitor or a large player in the changing business situation.

Another e-Commerce model such as Auction style-pricing models are becoming customer preference, where the
customer are able to control the price of the products and services to be consumed. Meanwhile, providers still
keep hold of 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 popular in offering the
best price for hotel packages. Since customers are focusing on price as a main factor in shopping for travel
packages, online auctions such as Priceline are a considerable threat to the hotel branding system and the
industry in general. The future distribution channel calls for service providers, suppliers, and customers all linked
up together in an integrated environment.

Customers are almost guaranteed that they will obtain the best price by negotiating via an online agent such as
Priceline. But a shortcoming to all of this is that the customer will not understand all of the normal benefits of air
tickets as they are sacrificed via online auction purchases. For example, in many cases the travel ticket does not
permit any changes or accrual of or 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.

Expedia cooperate with Yahoo!

Latest news about Expedia in Europe that introduces Expedia’s travel booking and packaging engine on Yahoo!
The benefit to them of the corporation brings end users in both inspiration of Yahoo!’s information and the
capability to improve this option according to the users preferences and book with assurance that you are making
the most suitable choice by checking their choice with a variety of selections and reviews from previous customers
and reviewers’ photos in Expedia.

Obviously, customers use variety of online tools and sites while planning and researching their trip. Organization
such as Expedia and Yahoo! are trying to make that process shorter as possible for travelers, to attract more
customers to access their website.

The online travel space has seen a variety of new developments over the last decade and these are very
interesting times in the online travel websites. There is always been a close connection between travel and search
engine and there are a number of opportunities which this presents for collaboration such as Yahoo and Expedia.
Another example for that is Expedia launched a new service www.expediahotelview.co.uk which using Google’s
Street View technology to offer users to view the hotel exterior and take a virtual walk around the hotel area
before booking with Expedia. [~~]

Small travel agencies should be needed to develop an innovative, appealing, attractive, and fast web-site in order
to be survival.

The Future Role of Travel Agents

The growth of the Internet businesses leads to the subject of what will happen to online travel agents and
intermediaries. How they can continue to add value to customers?

As low cost computer real-time data, fast speed internet access, voice and video communications become a
reality, travel agencies may no longer be needed. On the other hand, the Internet challenge can also mean chance.
Hotel owners and operators who understand and master e-commerce or m-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.

Langham Hotel International is one of the Hotel groups which are trying hard to stand on top of modern hotels
with high technologies in recognition to the world. They has launched an application on Apple store on last year
for royal members offering, online reservation for all properties over the world, and some tools have been
integrated on the applications for public use. And recently, Langham Place Hotel Hong Kong has completed a
renovation on their guest rooms and equipped some iPhone4 on those rooms. The guest could have unlimited
local call and 3G Internet access on the mobile device during the stay. Meanwhile they have release some iPad
apps such as a eWine list, iMenu for restaurant use in order to attract more guest for buying their service and
product to increase the income via Technologies.
Information Technology tools have allowed travel intermediaries to expand their role in the industry by presenting
opportunities to venture into other markets on a geographical level.

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. Hoteliers should able to provide customized services for individual guest and maintain good customer
relationship with guests.

Not only should hoteliers focus on the business traveler, but they should also consider whether there are other
types of potential target customers as we may find that both young and older generations were sitting in the
Internet shops utilizing online services during their vacation as well.

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, the best
way is to identify their target prior to marketing/selling their products/services online

Primary Constraints of the e-Commerce

Organizations have to invest in the expertise and equipment (Hardware, Software) for building a strong IT base at
first.

As Involved in the reservation process: room reservation dept., central reservation system, banquet dept., restaurants,
spas, golf courses. The operation and system complexity is difficult to develop.
Internet security has been a major issue surrounding the Internet community. There is an endless amount of
information passing via on a worldwide basis. And online payment may involve credit card information over the
Internet. Hacker may attempt to attack these servers to obtain credit card information for illegal use.

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

Some of 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.

https://en.wikipedia.org/wiki/Global_distribution_system

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