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 4: THE CURRENT CONSTRAINTS ON INTERNET TOURISM MARKETING*

The Internet has created great opportunities for tourism marketing. However, the current level of online travel sales is low though most researchers expect it to increase rapidly in the next few years. For example, it was estimated that purchases of travel products represent just 6% of overall Internet sales and 0.5% of all travel and tourism spending (Smith and Jenner 1998). In the US, Jupiter Communications  forecasts that  online  travel bookings will grow from US$2.2 billion in 1998 to US$ 16.6 billion by 2003, representing a market share of total travel sales of 1.7% and 9.6% respectively (Bates 2000, Tyler 2000). In the UK, Thomas Cook predicts that one in five package holidays and 40% of all flights will be sold via the internet or digital television in the next three years (Banerjee and Mayling 2000). Obviously, the comparative advantages of using the Internet in tourism marketing is compelling but its full potential as a marketing tool will only be realised if a number of well-documented limitations are successfully addressed.

Demand Factors
Consumer  demand  is  the  fundamental determinant of all forms of businesses. Whether an industry is initially supply-led or demand-driven, consumers are the key force in deciding the scale, structure, style and speed of its development. The small size of Internet business transactions in the world economy at present is caused to a great extent by insufficient demand, though more limited by consumers' willingness than their ability to shop on the Net.

First, the penetration rate of computer using and Internet connections is still low worldwide. In the main developed countries, about 30-50% of the adult population are Internet users while the global average is about 1-2%. One estimate shows that in 1997, there were 50.2 million web-users, of which 60% were in US and 20% in Europe; the world total web-population in 2001 was predicted to be 174.5 million, the US and Europe account for 54% and 18% respectively (Juliussen and Petska-Juliussen
1998). Although people with Internet access tend to be more affluent, better educated and younger than the average consumer, the small number of web-population does reveal that globally it is still a relatively small market. Furthermore not all web-user are frequent users. In the UK for example, a quarter of the 15 million adults with Internet access surf the Web less than once a week, and only a fifth of web-users have actually ordered something via the Internet (Fletcher Research 1999). At the well publicised travel web cite - lastminute.com - only 6% of its 1.5 million register users have ever purchased anything there.

Second, the low frequency of web surfing is mainly caused by high access cost, especially in countries outside of North America. In the UK for example, local telephone charges are still metered, though the Internet subscription fees has largely gone from last year. Most consumers find it is an expensive hobby to surf the Web, especially when the search task is complicated by low speed and difficulties in locating the desired information. The main UK Internet service providers (ISPs) have recently launched unmetered packages which will be available from mid-2000. This new development could see a surge in web visitation in the country.

Third, The vast majority of users access web sites for information or entertainment purposes rather than for online shopping. Among the Net resources, email is the most frequently used, news and sports sites attract more visitors than commercial sites, and sex and MP3 are for many years the most searched key words. Although Internet transactions offer the potential benefits of convenience and cost savings, due to factors discussed later, consumers still believe traditional shopping methods are more reliable and sometimes more economical. A recent survey of 50,000 Internet users in the UK show that 80% used the Web to access email while less than a third had bought online (Fletcher Research 1999)

Fourth, concerns over privacy, information abuse, web crime, payment security and undelivery or late delivery, are often cited as the main inhibitor to online shopping. There is a lot of trust involved in online shopping. A web users has to trust that he receives the product he orders as well as trust its quality to be as described. He also wants to be sure that his private information such as address and credit card numbers is handled  sensitively (Ratnasingham 1998). However, there is at present no special legal provision to protect consumers' interest in web transactions and according to a Consumers International survey: 6% of the items ordered took more than a month to arrive and at least 8% never did; many sites did not give clear information about delivery charges; only 13% of sites promised that they would not sell customers' personal information on to a third party; and only 53% of the companies had a policy on returning goods (BBC 1999a). As a result, in average less than 1% of those 'looking" are actually 'booking" at the web site. A recent MORI survey of package holidaymakers in the UK also found that only 45% of the respondents answered 'Yes" to the question of "In principle (if you had access) would you be prepared to book a holiday through the Internet?" while 46% answered "No"; and 9% answered "Don't know" (Martin 1999). A report on travellers' use of the Internet in the US, which has the most advanced Internet businesses and Internet users, shows that 52.2 million people used the Internet for researching travel in 1999 but only 16.5 million (32%) of which actually made their travel reservations online (Tyler 2000).

Finally, consumers' anxiety over safety and security in online shopping is further exacerbated by frequent media reports about web security breaches and frauds, and insufficient knowledge of the matter itself. Most of the security worries are caused by people who are not sufficiently aware of the possible protection that exists (Furnell and Karweni 1999). Although the Web is generally considered to be user friendly and even 'foolproof", a user without the proper IT knowledge and skills will certainly encounter more problems and feel less confident in conducting web-based transactions.

Technological Factors
Many of the current constraints and problems of conducting web-based business are caused by the Web technology itself. 'Web technologies consist of the hardware, software and networks that enable individuals and organisations to connect with and interact with the World Wide Web. Hardware consists of the client terminals, the server, the gateway, the router, and hubs. The software consists of operating and application software, including the browsers and application software on the client side, database servers, web servers and other application servers on the server side, and network operating systems and managers on the network side. The networks consist of cables, either leased or proprietary, and message carrier services" (Dc and Mathew 1999:432). The main causes for concern over the ability of the Web in implementing c-commerce are as follows:

The Web's slow speed, often dubbed as the 'world wide wait", slows down the growth of the web-based businesses as users are often not prepared to wait for too long to see the information appears on the screen. The slowness of the Web is a combined results of three factors: the increasing number of Internet users, the increasing frequency of use, and the increasing richness of the information (from simple text to full colour pictures and videos) being transferred over the Internet (O'Conner 1999). Technology will not reduce these growing demands on the Web, on the contrary, technology will constantly expand the Web's capacity for accommodate and even stimulate the increasing demand. For example, the new digital broadband service, due to be introduced in the UK this year, could offer instant and always-on high-speed (10 times faster) Internet access. It will not only enable much faster Internet access but also enhance facilities such as interactive digital TV and video e-mail. The advent of broadband and mobile accessibility is creating a second wave in Internet development (after the WWW in 1993). Research shows that a broadband customer will stay online four times as long as a narrowband customer, and spend nearly three times as much on c-commerce BBC 2000).

Functionally, the Internet is close to fully operational for commercial purposes. The main remaining impediment to maximum use of the Internet for c-commerce is the concerns for information security. The securing of information includes the protection of: (1) confidentiality -providing confidentiality in the transmission (and sometimes the storage) of data; (2) authentication -proving the identification of the individuuals both transmitting and receiving the data; certifying that all parties to a transaction are indeed who they claim to be; and (3) non-repudiation - providing proof that the transaction actually took place, establishing an irrefutable time stamp on the sending and receiving of the message (Liddy 1997). In particular, there is an urgent need for an integrated financial transaction system that is suitable for an open electronic marketplace such as the Internet. How the consumer will pay for goods and services and how the provider will receive the payment securely over the Internet are issues which are being seen as some of the most important success factors for Internet commerce. A survey of US corporations revealed that 75% of the executives lacked confidence in the Internet as a vehicle for electronic commerce, primarily because of the vulnerabilities. The risks in electronic commerce are shown in poor security such as: from the short-cuts in the software development process, shortcomings in the popular operating system, deficiencies in the Internet protocols and problems inherent in managing the Internet (Ratnasingham 1998).

Related to security is the issue of 'cyber' crimes. Internet crimes include not only fraud and theft-related activities, which simply represented the extension of traditional crimes into the electronic environment, but also new and more advanced forms of abuse such as hacking and computer viruses (Furnell and Warren 1997). Web scam and online credit card fraud are also increasing rapidly. Visa International says that half of all credit-card disputes are about Internet transactions, despite online transactions making up just 2% of Visa's overall business. Visa found that across the EU only 5% of consumers trust e-commerce (BBC 1999c). Web technology does not cause the web crimes but these cyber crimes are more difficult to prevent and detect as they are committed in a virtual space. Unless the IT industry can come up with some effective solutions to the security problems in web-commerce, consumers will have to either take a high risk in or stay away from Net-shopping.

Furthermore, the 'unorganised" nature of the Web, makes it difficult to locate the information users desired. The Web offers an uncontrolled and vast universe of information: there are now about 5 million web sites with some 1 billion web pages. However, there is no overriding structure and control over information, no single entry point to the Web, and no centralized directory of content. Although the development of search engines and online directories has made finding information somewhat simpler, it i~ still easy to get distracted or lost during a search and much precious time can be wasted in gathering information. Ironically, this may negate the productivity benefits that derived from its use (Soh et al 1997, Hormozi et al 1998).

The other problems of the Web can be seen from Internet Industry Almanac's "Top 10 pain in the Net" - junk email, slow web sites with too many images to load, web sites with white text that you can't print, cookies, broken links, interstitial ads, hard-to-read tiny text, web sites with no basic company information, old forgotten web sites, and the server is not responding (Juliussen and Juliussen 1998).

Organisational Factors
The low level of web-based business is also attributable to the failure of business organisations in implementing the Web technologies in operation and marketing. Most business leaders did not realise the potential impacts of the Web on commerce until very recently (some still do not). A survey of US hotel managers found that they believe the Internet will 'someday" become an effective marketing and communication tool but not at the present time. Ironically, respondents with greater exposure to the Net rated its present usefulness lower than those with no net experience. On the other hand, those same experienced users gave the Net's future prospects a much higher rating than the inexperienced respondents (van Hoof and Combrink 1998).

Many companies, even with recognition of the advantages of the Internet in marketing, failed to exploit its full potential due to the lack of management commitment, investment capital and the qualified technical and managerial personnel. This is particularly the case for small tourism businesses. In the UK for example, travel agents are not using the Internet to provide better service to customers because of perceived investment and access costs and fear of new technology. Sabre (UK) recently discovered that fewer than half of its agency customers had an email address (Fox 2000).

On the other hand, some large  travel corporations failed to develop web-based operations wholeheartedly due to both complacency about their market leader positions and the vested interest in their highly vertically integrated business structure. The top three tour operators in the UK - Thomson, Airtours and First Choice - for instance, did not have a formal Internet strategy until March 2000. They probably overlooked the potential of the new Internet start-ups since the Net-commerce had a slow start and the travel web sites were mainly selling airline seats instead of package tours. The major tour operators were also concerned with the impacts of web-based operation on their own travel agent chains because the "disintermediation" in travel distribution saves operator side cost at the expense of losing businesses at the agency side.

As a result, not all tourism companies are on the Web. When they are on the Web, most of their web sites are PR or promotion sites that provide merely the companies a presence on the Net or little more than advertisements for their products and services. With the few comprehensive sales and transactions web sites, users were often asked to phone an operator or offered a brochure in the post. Just a fifth of the UK's top 40 tour operators have a real-time booking facility on their Internet sites. A recent survey also shows that 62% of the travel companies which have facilities to sell via the Web or email have less than 1% of its total business is conducted through online booking (TTG 2000).

Even when web sites are fully operational in real-time transactions, such as many airlines owned sites, they often offer limited choice. Consumers increasingly want to use the web, and they want the convenience to see all the options in one place, no matter which airlines or tour operator is involved. However, most of the travel products on sale over the Net are stored at various web sites owned and operated by individual companies, such as airlines, tour operators, travel agencies and ferry companies. Another problem is that the Web does not always offer the lowest prices compared with the traditional distribution outlets. Research by Express Money (1999) shows that booking holidays and flights through the Internet is not cheaper and traditional, low-cost outlets offer lower prices for several popular destinations. This is particularly the case for airlines as where a single flight could have over 50 different fares, the cheapest fares are usually given to flight-brokers or consolidators. Since most web users consider 'price" as the most important factor in buying an airline ticket, they will certainly be discouraged from booking directly on the Web when they realise that the traditional agents offer better deals.

Governmental Factors
The nature of the Internet enables no one to control its structure and content, while as a recent phenomenon, laws and standards are yet to be developed and adopted to facilitate and regulate its commercial use. Some of the problems highlighted above are partly attributable to or greatly escalated by the lack of effective government involvement in promoting, facilitating and regulating e-commerce on the Internet.

Governments across the world have been slow in realising the potential of the Internet for economic growth and even slower in providing the necessary regulatory framework appropriate for conducting Net-based business. Although existing business laws and regulations are applicable to e-commerce, the particular nature of Internet-based business does requires special treatment, especially in the areas of security, fraud, sabotage, and data and consumer protection. Without the confidence and trust of those participating in the process, it will be impossible to achieve sustainable growth in e-commerce.  However,  censoring indecent  and potentially criminal material on the Internet were often the main reasons chosen for regulation. In the UK, one of the advanced Net-economies, the Government put forward a draft Electronic Communications bill last year which deals with a wide range of issues central to the healthy development of e-commerce, including consumer protection, information security, authentication and digital  signatures,  confidentiality,  encryption, taxation  issues,  intellectual  property  rights, technical standards, illegal content and so on. The problem is, the bill remains to be a draft bill until the Parliament passes it through a lengthy process that could last for years.

As the Internet is a global computer network and e-commerce is essentially global business, the establishment of international standards and legal provisions for its smooth function is also critical. International bodies like the Organisation for Economic Cooperation and Development (OECD) and the European Union (EU) started to address some of the key issues in e-commerce from 1998, such as building trust in electronic commerce by ensuring the security and privacy of information and the protection of consumers; establishing ground rules for electronic transactions; and enhancing the information infrastructure through common interoperable standards, and access to open networks (BBC 1998). However, progress is lamentably slow. It appears that each country will have to create their own Internet acceptable use policies, and figure out how to enforce them. Until then, the Internet will be a lawless frontier where anarchy and vigilantism are alive and well (Thomas et al 1998, Westphal and Towell 1998).

Legislation is of fundamental importance, but legal provisions only mark the boundary of unacceptable business practices and protect the consumer by redressing any illegal treatment. Consumers want to buy from companies that are not only law-abiding but more importantly are reliable and offer quality and value. Nevertheless, it is extremely difficult, if not impossible, to judge a company by its web site. Therefore, other (non-legal) measures must also be taken to boost consumer confidence in online shopping. The UK Government is trying to promote the ideas of 'e-hallmarks" which will guarantee that its users are legitimate traders offering assurances on security of payments and communications and giving accurate information on goods, prices and a returns policy. A new body -TrustUK - will be set up to accredit c-commerce codes and there are plans to market the c-hallmark internationally  (BBC  1999b).  However, many business organisations oppose the idea, wanting instead  to  rely  on  self-regulation  without government intervention. For example, ABTA aims to clamp down on Internet sales by creating regulations for online travel transactions. It plans to publish a single revised code of conduct for agents and operators in May 2000, with a new section on Internet sales. It will require members to have a secure payment system if using the Internet to take bookings, and to observe the same ABTA rules as for other types of advertising.

The government can also play an active role in e-commerce by providing the necessary infrastructure for conducting Internet business. After all, the Internet was first started by Government - the US Department of Defence - in 1969 as ARPANet and
only became commercialised in 1993 (Krol 1994). Uncertainty in many countries with regard to policies for investment, ownership, technology selection and general public access to the Internet has restricted the development of Net-based business and the penetration of Internet itself. Especially in the developing world, the huge investment required to establish the network and to make full use of it is out of reach of many businesses. In such circumstances, government could provide start-up funding for small companies. The UK government is also trying to close the gap between technology haves and have-nots and has launched an initiative to make computers available to low-income families for as little as £5 a month.

* Section taken from full text article.