Internet Tourism Marketing: Potential and Constraints

Hotel Online: Ideas and Trends. July 2000. Liu, Zhenhua.

(Fourth International Conference "Tourism in Southeast Asia & Indo-China:  Development, Marketing and Sustainability June 24-26, 2000 ") 

Part 3: THE MAIN APPLICATIONS OF THE INTERNET IN TOURISM MARKETING*

The Internet as a marketing media can be of great benefit to virtual all areas of marketing, from marketing research, through market segmentation, targeting and positioning, to the effective use of the marketing mix, and marketing organisation and control. The following discussion does not attempt to provide an exhaustive list of the Net's use in tourism; rather, it simply intends to exemplify its common applications in and main implications for tourism marketing.

Marketing Research
The Internet does more than automating online business transaction, it can "informate" in that it provides a vast amount of information which was previously unavailable. Marketing is essentially an information-processing activity which links an organisation to the external environment in which it operates. The Internet is an invaluable source of low cost but up-to-date marketing intelligence which can be sourced through a company's own site (for details of its customers) and other web sites (for information on competition situations, market conditions and the general environment). The Internet is extremely useful in build a customer information database. With the use of proper software such as Aurum Software's Web-Trak (and even with simple means like cookies, web forms and email feedback) it is easy to gather systematic data about all users who visited the company's web site. This information can be used to identify prospects, understand  customer  needs  and  customise resources to give greater levels of service to customers (Heinen 1996). A database of online transaction histories can be the primary marketing resource of tourism companies, determining what kind of travel products they can deliver, what market segments they serve best, and what is the lifetime value of each customer to the firm.

By searching other web sites, a company can get valuable information about market demand, supply, competition and economic, demographic, legislation and technological changes in the domestic and international markets. Web sites of government agencies,  media  companies  and  non-profit organisations usually provide large amount of information free on general issues; while commercial sites are good sources of information on new technologies, best business practices, and industry initiatives. Scanning competitors' home pages helps companies to track  competitors'  marketing strategies and tactics. For example, from hotel chains' web sites, one can easily locate information about the chains' main business activities, financial performance, new hotel openings and investment plans, and key marketing strategies; whereas airlines' web sites often show such useful data as business and financial analysis, strategic alliance groups, new routes development and fleet expansion plans, frequent flyer programmes and (where a online GDS is available) the fares and availability of flights between any two destinations.

Market Targeting
An important feature of the Web as a medium is that it is the consumer who is actively searching for information about products or brands in which they are interested. In effect the consumer is "pre-screened" and shows both interest and involvement in visiting the web site. While on the Web, the consumer can also provide instantaneous feedback to the marketer (Stern, 1995). All the feedback, and indeed, every "click" or "hit" the user makes can be memorised by the web server. Through the application of the IT data mining technique, companies can find patterns within their internal customer data and make sense of data or turn data into  meaningful  marketing  information.  For instance, the visitation record of an online brochure may show the total number of hits, the distribution of the hits among the pages and across time, the order of the pages been accessed. The user's visitation data can be easily combined with user profile information from user registrations through online visit cards or questionnaires and used to uncover the consumers 'interest and the patterns of demand and buying behaviour. This in turn leads to identification of likely target segments, often niches based on specific benefit sought. Armed with such information, organisations can refine their targets and develop specific means to achieve true one - to- one marketing (Pitta 1998).

The appropriate use of user profile and surfing behaviour data can improve the effectiveness and efficiency of market segmentation and targeting. This is because the traditional approach to market segmentation is often based simplistically on geographical, demographic and economic variables while the psycho, behavioural or lifestyle data is costly to collect and difficult to measure and compare. In Internet marketing, it is easier to collect these data from potentially each and every user of the company web site, though tangible rewards such as free prize draws and free membership, are often needed to attract users to fill in web forms. It is even a great deal simpler and more effective in market targeting as the email messages and even tailor-made web-pages can reach the intended receiver with little cost. It is possible to set up 'virtual" or cyber - communities for each target market niche in the form of news-groups through which consumers with similar interest and behaviour patterns can be sent with relevant product offering and other information from the marketer. Members of such Internet communities can regularly exchange information between them and strengthen a sense of belonging.

Product
One of the major advantages of the Internet in marketing is that the tourist can here be a value creator for tourism companies through redefining the labour division between the marketer and the tourist in providing tourist experiences (Dellaert 1999). This is because, on the one hand, tourists can  provide  individual  preferences  for  or specifications of holiday packages through feedback in the forms of web forms, email messages or simply the 'clicking' patterns, which the tourism marketer can use to development new products or tailor-make existing products to suit the needs of particular consumer(s). In this sense, the Internet has accelerated a shift in the nature of products from mass produced and tangible to customised and information based.

On the other hand, the self-servicing tourist can not only conduct transactions online and reduce costs of sales for the supplier but also actively participate in the production process itself. Provided with choices, a tourist can now assemble his own product according to the specifications desired. This is especially useful in the production and marketing of package holidays. Tour operators, for example, can offer modular products or services, such as flights, rooms, tours, car hire and performances on their web sites, and allow the user to participate in the development of the specific holiday packages using a menu of options, ie., 'pick and mix" his own package. As tour operators negotiate with the providers of these separate holiday items and buy in bulk, The economies of scale will enable the  operators to offer lower "parts" prices to individual consumers than they buy directly from the different producers of the travel products. At the meantime, since the booking engine is integrated with the product inventory, it is easy for the operator to adjust in real-time the prices of different holiday components in response to their relative popularity and demand patterns. In this way, tour operators can effectively provide the market with low cost and flexible (rather than the conventional rigid) package tours This is what both marketers and consumers have long dreamed for - high quality products made individually at a unit cost level of mass production -all enabled by the power of the Internet.

Internet technologies can also contribute to the improvement of current products on offer or development of new products and services that redefine the company's strategic position. For instance, Boeing announced on 27 April 2000 plans for a network which will allow passengers to use the internet, watch TV and receive other data while flying. Called Connexion by Boeing, it will use satellite technology to provide broadband services to aircraft, which could greatly improve passengers' flight experiences. The introduction of electronic ticketing  (e-ticketing)  and  flight  information exchange through mobile phones by many airlines in recent years also improve customer services. The Internet also give tourist attractions such as museums and galleries wider format options for electronic presentation and show web collections which are physically impossible to construct (Taylor and Ran 1995). Zoos and aquariums can improve its product offering through 'live" camera links using web sites like whale-watching to show views of animals not in captivity (Benhow 1997).

Pricing
The role of the Internet in pricing is based on its ability in processing and exchanging large amount of data instantaneously with a great number of people.  This information processing capacity enables a company to analyze relevant pricing data effectively and quickly. The information exchange capacity enables firms to set and change prices in real time and also facilitates online bidding and flexible pricing. Both of these qualities of the Net are extremely useful in tourism marketing.

The major tour operators in the UK, for example, produce some 2,000 to 3,000 brochure pages annually, most pages feature a price panel with perhaps 100 separate prices, making a total of about a quarter of a million individual prices (Holloway and Robinson 1995). The sheer number of prices, together with the fact that most brochures are launched 10 months in advance of the holiday season, mean that pricing in the travel industry is extremely difficult Since it is unpractical to set the
prices for such a great number of holidays on the bases on demand analysis or competition research, most operators simply follow a cost-plus policy with little regard to the market changes in the months to follow. Even an operator wishes to adjust its holidays prices it is a costly and cumbersome process as new price panels have to be printed and distributed to the travel agencies. With the help of a web-based reservation system, the task can be a great deal easier. A tour operator can make real-time adjustment to its thousands of holiday prices at a touch of a button in response to competition moves and demand changes. A special late-booking section can also be included in the main web site to promote 'left-over" holidays at the last minute to solve the problems of over-supply or under-demand in the package tour industry which has become a chronic issue in the UK during the last decade or so.

In Internet marketing, the potential for price discrimination is diminished given the enhanced capability of consumers to identity the least expensive source, regardless of supplier or location. The skilled consumer could have the "perfect knowledge" of market prices, which could facilitate the realization, to certain extent, of 'perfection competition" at the national and global markets. This will lead to the increasing standardisation of prices across companies or even borders, especially for the undifferentiated products such as airline seats, beach holidays and city breaks. Other applications of pricing on the Web including bidding and flexible pricing - many web-based businesses allow customers to bid for products on their sites. Customers commit to the sale if the price is agreed upon. The bidding locks in customers to the sale and the committed price. This is a flexible pricing strategy where the buying capacity of the customer reflects in the eventual price. Companies such as Ebay.com and Bid.com have developed a model where other vendors can place products up for bids (De and Mathew 1999). Airlines could sell seats on over-demanded flights or routes through online bidding to the highest bidders to generate extra revenue. Tour operators may use online bidding in a different manner to market special holidays the demand for which may be extremely difficult to estimate in advance. For example, a tour operator can put on its web site the details of a package holiday to the moon and the total cost (including profit margins) for a group, say 50 travellers, the more people bid the lower the price for each traveller. This way of pricing could well enhance the operator's image and profitability, as it is both an innovative marketing and sound financial approach.

Place
The uniqueness of the Internet as a means of distribution is based on the fact that it exists in "cyberspace" thus physical phenomena such as location and distance are less significant or even irrelevant. For the producer, the Web enables it to have direct links with consumers at a low cost therefore provides it with the opportunity of "disintermediation". For the retailer, the Web threatens its livelihood and changes its critical success factor from location, location, location to access, access, access. For the wholesaler, web-based business means it can bypass retailers while at the same time risk being bypassed by the producers.

The foremost role of the Web in tourism distribution is the direct electronic reservation and transactions between tourism product supplier and consumers. AIdridge et al (1997) argues that direct marketing is the name of the game on the Internet, offering both consumers and marketers greater control and lower potential costs of access due to the conveniences of the Net. Because direct channels may be producer-direct or intermediary-direct, the potential for channel conflict will be magnified. In order to assuage channel conflict and price  competition  between  direct-sellers and retailers, both producers and intermediaries will have to develop augmented product features and unique benefits. For example, direct online booking of airline tickets often carries special benefits not available from travel agents, such as extra frequent-flyer miles; while purchasing an airline ticket from an online travel agency may also benefit from such services as hotel reservations and travel insurance.

Airlines are among the first industry to invest in and develop CRSs and GDSs to exploit the potentials of IT. The Web offers the airlines even greater opportunities in streamlining and shortening the distribution channel. The no-frills or low-cost airlines emerged in the last few years are already heavily relying on the Web to distribute flight tickets directly to customers. The major global airlines have also started to believe that the Internet offers a unique opportunity to drive down costs and restore profitability to the sector which is troubled with financial losses across the globe (e.g., the 266 IATA member airlines as a whole made an accumulated loss of US $800 million during the first 8 years of the 1990s) (IATA 2000). British Airways, for example, launched an e-business strategy recently which places the Internet at the centre of its efforts to transform relationships with both customers and suppliers. It is planning to invest £90 million during the next two years to develop its web-based operations with the aim of increasing the share of tickets sold over the Internet from less than 1% in 1999 to 50% by 2004. It is also preparing to operate via mobile phones and interactive television. Major airlines have also started to use the Internet to manage  the  supply  channel  and  reduce procurement costs. For instance American Airlines, Air France, British Airways, Continental Airlines, Delta Airlines and United Airlines have agreed to jointly create and operate a web site that will handle supply purchases with US$32 billion a year (CNET News 2000).

The biggest change to tourism distribution brought by the Web could, in the next 5 to 10 years, be the noticeable shrinking of the travel agent sector. Agents are squeezed by both a decreasing market as more and more consumers go online and book directly from airlines and operators and by airlines'  declining  commission  levels.  The Association of British Travel Agents (ABTA) believes that the Internet will not cut out the middleman, but it will certainly put their added value under scrutiny. It warns that High Street travel agents that do not excel in what they do may not survive the competition. Nevertheless, the travel agent sector will not be doomed to extinction. How far and how soon the role of travel agent will diminish in the future is dependent upon how flexible and innovative the travel agents can be and how fast the Web can dominate both business and everyday life (Liu and Jones 1995). The Travel agency will have to reinvent itself to suit the new Internet era by transforming from a travel ticket seller to a travel information manager.

For tour operators, the potential disintermediation has a dual effect. On the one hand, they can be bypassed by the producer as airlines and hotels that directly sell their products to the travel agencies and consumers; on the other, tour operators could benefit from its own direct sell operation by eliminating the travel retailers. It is hard to estimate the full impacts of the two. But one thing is sure to say that the tour operators, more than travel agencies, have a future in the Internet era. This is based on the understanding that tour operators are not purely intermediaries as they do perform some production function in assembling the various parts of tourism products into a marketable package. Through this value-creating activities, tour operators can provide convenience and better value for consumers, by passing on to them some cost savings gained through bulk buying the separate components of the package, than they would otherwise get from the individual tourist product providers. The major tour operators (in the UK) are also 'backward" integrated and have their own charter airlines thus major schedule airlines' direct selling is not much as a threat to them as to travel agents.

Promotion
Arguably, the component of the marketing mix being most quickly transformed as a result of Internet usage is promotion. The Internet provides a labour-efficient and cost-effective way of distributing information almost instantaneously to millions of potential clients in the global markets. Internet promotion combines mass media's reach with the personalization inherent in two-way dialogue -previously only possible in personal selliing. It can be used for corporate visibility, brand name recognition, advertising, public relations, corporate sponsorship,  direct  sales,  sales  promotion, customer support and technical assistance. There are three main issues in the application of the Internet to tourism promotion.

First, present the promotional information on the company's web site. The Web enables more information to be transmitted to (potentially) more people cheaply, instantly and with multimedia effect. The key to achieve these benefits is a well-designed and maintained web site which is attractive, informative and interactive. Through its multimedia capability, a good web site can and should incorporate information as accurate and detailed as brochures or timetables, photos and graphs as glossy as magazine ads, and videos as entertaining as TV commercials. The site can and supply as much promotional information as possible as there is virtually no capacity constraints or advertising space limits on the Web. By hyper-'inking pages together in an appropriate fashion, the Web marketer can create an ultra-comprehensive brochure to include everything a user wishes to know. For instance, a tourism destination web site may become a 'information mall" which provides the users with all the basic information about it such as the exchange rates, local traditions, weather, what to buy, etc. and, through the hyperlinks to the sites of tourism firms, details of flight schedules, tour prices, park opening times, late offers, and so on. A company web site with email links or even telephone numbers and address will enable users to contact it for further and often more personalised information.

Second, promote the web site itself to increase its exposure and visitation since a company's web site has to compete in the clutter of thousands of other web sites selling similar products and services. This can be achieved through a number of ways. A memorable Internet address to help user locate it on the Web, usually the company or brand name or a catchy word or phrase. Links "from" other web sites, by registering with search engines and online directories and paying relevant sites for click-through links or banners ads, are particularly important if the company's site is not well known. Links 'to" other sites, such as those offer news or entertainment   services   and   those   offer complementary products can also make the site more interesting as well as providing more relevant and up-to-date information for the users. Promoting the web site through the traditional media is also important, especially when it was first set up. For example, expedia.co.uk launched a £4 million promotion campaign on British TV and Press recently. The company's web address should also be included on all its media messages "to drive consumers to the Web" (Pardun and Lamb 1999).

Third, use the company's web site as a platform for advertising sites or products of other businesses. Through "banners" and banner linked web pages, a company's web site can also generate revenues by becoming an advertising medium for other organisations. Indeed, the effectiveness of the Web as a medium for advertising has already made online advertising a boom business itself. The Internet Advertising Bureau's research shows that online advertising revenue reached US$4.62 billion in 1999. It also finds that banner advertisements is the predominate type of advertising, accounting for 56%, sponsorships at 27%, interstitials at 4%, email at 2%, and other rounding out the category at 11% (IAB 2000). Increased Web advertising will reduce the attractiveness and spending on some traditional forms of promotion such as direct mail, outdoor displays and radio advertising. Fletcher Research (2000) predicted that the online advertising spending in the UK would soar from £50 million in 1999 to £625 million by 2004, while expenditures on direct mail could see a 33% fall in the same period.

* Section taken from full text article.