The Disintermediation and Re-Intermediation of Travel Agents Free Essay Example

This report will discuss about how travel agents market is influenced by disintermediation and re-intermediation and what is the impact on industry and travel agencies. The travel industry, is the substance in the sphere of information technology, is beyond any doubt a fascinating area in terms of the options given by Internet. One of the considerable increses in electronic market is travel bookings noted by Berstein and Awe, 1999 (cited by Bill Anckar, 2003) and likewise ’’the use of Internet by prospective travelers to research and plan their trips has proliferated.

’ (Smith 2000) therefore a specific example of a tumultuous consequence on the new technology is the travel industry. ( Harris, L. and Duckworth, K, 2005). Over the years the Internet has rapid become an outstanding new channel for customers needs. Information and communication technology progressions has elaborate the tourism distribution system with different substitutions by adding extra ‘’layers of intermediation’’ (Kracht and Wang, 2009), supporting what Buhalis and Law, (2008) were saying: substitute the conventional intermediaries by making a direct link between suppliers and consumers supplied by technology.

Furthermore, it is also necessary to define re-intermediation process or cyber-mediation defined by Bennet and Buhalis, 2003(cited by Bennet and Lai, 2005) as ‘’ the utilization of ICT and internet tools for the development of either new intermediaries that enable them to re-engineer the tourism distribution channel’’. In other words the Internet introduces possibilities to travel agents for defining their position in the distribution chain. Consumers, through the use of the Internet will become more self-sufficient in the service delivery process.

The way we do business it will be changed, as well.

Consequently, the Internet will affect the way consumers develop expectations. Ultimately, the role of travel agent will change and move from a commission based revenue to more of a fee based service (Samenfink, 1999). In order to discuss about the topic of this paper it is necessary to look first at the roots of the travel agents, to describe their role on travel industry and how they were affected by technology and therefore the need to reposition in order to survive in E-business world. The second section will critically examine the effect of disintermediation and re-intermediation on travel agents.

The final section of this paper concludes with a short summary regarding the consequences of technology on travel agencies and as well some recommendations. The role of the Intermediaries The role of the travel agents was indispensible for suppliers and travel agencies claimed Dolnicar, S. , and Laesser, C. , 2007 (cited by Cheung and Lam, 2009). The travel agent is the person responsible with the arrangements in terms of tickets for hotels, resort accommodations, transfers of passengers, prepare itineraries, arranging business travels and in addition they need to check and verify the way the jobs are done in an agency.

According to Heng-Hsiang Huang and Chou-Kang Chiu (2006) the travel agents are important for developing relationships with the clients. The authors states that in tourism industry, customer loyalty is an essential feature for agency profitability and moreover for customer retention. (eg. Crossby et al, 1990) In the study by Gharavi H. and Roger M. D. Sor (2004) they stated that, in the past the principals players in travel industry were the suppliers of tourist products whereby they are represented by travel agents. Travel agents are people with standard rules, operating in most of the situations in small businesses.

The authors also mention about how expensive were airlines software in that time, for having their own suppliers, it was required a huge investment in technology and in training the personal. Disintermediation Over the years, without many alternatives, traditional travel agents were slowly eliminate, impel by the benefits brought by the internet to travel industry. Ronnie Cheung and Pamela Lam define the disintermediation as ‘’an established middleman is forced to be pushed out from the market. ’’ Therefore through disintermediation is no need for the travel agents; customers can interact directly with producers.

Different authors argue about the purpose of disintermediation. Hence, Berthon, Ewing, Pitt, & Naude, 2002;Jallat & Capek, 2001; Vandermerwe, 1999 (cited by Law. and Lau. 2004) stated that the direct link between suppliers and customers will lead to a reduction in transaction costs. Therefore the significance of the travel agencies will decrease as a result of ‘’accessibility of online travel Websites’’ (Law. and Lau. 2004). However some writers argue that is not necessary need for disintermediation as travel agents are valuable for counseling the customers and helping them to make decisions.

An alternative view is put forward for Sarkar et al. , 1995 (cited by Bill Ancker, 2003) who state that disintermediation is benefic for both customers and suppliers and consequently is no need for a total elimination of the intermediaries. How travel agents are affected by disintermediation? Travel industry was the first to experience disintermediation due to the varieties of products given by the Internet for customers. Consequently, the role of the travel agent, who is the main intermediary in the travel distribution chain, has been threatened (Bloch and Segev, 1997; Opperman, 1999; Potzl, 2000).

One of the main reasons of disintermediation is to reduce the fees and commissions given by travel agencies applied to their services. As a result it was a disadvantageous consequence for travel agencies which contributed to a dramatic reduction in their income (Cheung and Lam, 2009). Initially, this action was mainly encouraged by airlines companies by supporting the people in making their bookings online and direct with the airline and bypassing the travel agencies.

In time, customers realized, how easy is to use the Internet and how many benefits can bring them in terms of reservations. For example let’s take a random destination; Turkey can be a good example of where Internet can win over traditional travel agents. You can easily find a map on Internet to find the hotel you are looking for, what the Turkey weather is like right now with even 10 day forecast and everything you want to know about your location you can find in seconds, on search engines or on Sites like Thomson Holidays or Thomas Cook Holidays (Google).

Another reason for bypassing travel agents is the lack of experience of the personnel and inadequate training thus, Lawton and Weaver (2007) in their research identify customers complaining about the fact that they have been misinterpreted or even ignored by some travel agents, regarding their requirements, blaming for ‘’lack of professionalism than a rational comparative assessment of consultation and booking option. ’’ As a result, travel agents are jeopardized by disintermediation and they need to adapt to the new era for remaining on the market. (Tsiotsou and Ratten, 2010) From Disintermediation to Re-intermediation

While many of the debates were based on the possible dismissal of the travel agents, the internet is also seen as an opportunity to a reinvention of travel agents. Therefore, some authors argue that technology is a chance for travel agents to add value to the customers through their capacity, to work with a large amounts of data, O’Connor, 1999; Palmer and McCole, 1999, (cited by Bennet and Lai, 2005). Re-intermediation, also called cybermediation, is an alternative for the traditional high street players, who need to adapt to the technology or even who need to be replaced by new business models (Anckar, 2003).

Therefore, travel agents need to evolve from a traditional intermediary to a type of middleman who can manage the business by providing both traditional and online services. In contrast, it is recognized by travel agents that the internet is an efficient way for agencies to use to increase their business (Bennet and Lai, 2005 p16). The authors propose that travel agents, in order to survive and moreover to increase the market share, they need to reposition themselves as travel consultants and furthermore they need to become more technological orientated accepting that the internet is an important tool for increasing competitiveness.

Electronic markets let companies to reach a big number of customers at a very low cost (Benjamin and Wigand, 1995; cited by Wigand, 2001). The role of the cybermediaries can vary considerably as well as their relation with the suppliers and customers. Accordingly, Anderson and Anderson (2002) (cited by Barnes and Hinnton, 2006) classify cybermediaries in three categories, depending on the role they perform. Hence, the first role is an informational one, which, link the buyers and sellers together by providing information about each of them and their product.

The second role is twofold, where customer delivery has to be at the right time in the right place and at the right price to allow a transaction to take place, whether is physical or virtual environment. Finally, the last category defined by the authors suggests that cybermediaries are crucial to the travel industry through the way of providing quality like trust in both the product and the purchasing transaction. Besides, providing anonymity to buyers, if required, and customizing the products. A good example can be the comparison Websites like www. expedia. om, www. orbitz. com, www. opodo. com ,after their association with other Websites (Longhi, 2008; cited by Kracht, p742), they re-intermediated themselves. Hence, they provide additional services to the customers by facilitating online transactions, as for customers might be inconvenient and inefficient to go to different providers directly for information or comparisons or even to search information on several Websites; in this way, only by using one of this Websites can give to customer different details about bookings while the data privacy is protected.

Practically, Orbitz was launched by airlines to re-intermediate the OTA market (early online travel agencies), (Granados et al. , 2008). Conclusions Travel industry has been dramatically affected, as many consumers nowadays go online to research, shop or book their travel. Therefore, the role of traditional travel agents it is slowly substituted. It is advised that travel agents should diminish the threats and take advantage of the major opportunities brought by technology (Lawton and Weaver, 2009).

Thus, as Anckar (2003) suggests from his study is that it is vital for firms to create and maintain presence in the electronic market. Particularly, a big influence on commitment and loyalty towards the principals providers, are relationship value, trust and long-term orientation. In addition, travel agents need to concentrate on different benefits that can be brought to the clients, by providing value-added services, which are stated to be essential in the disintermediation context of travel industry (Lewis et al. , 1998; cited by Saura et al. 2007) To conclude, it is important to specify that nowadays, in the age of global economy, e-commerce and e-business are important for any business strategy and for economic development. With the development of the internet and web-based technology the role of the travel agents become narrow. In conclusion it is about a considerable change on travel agents and their role, indebted to the internet together with its technological capabilities, which introduce new possibilities for the distribution of travel services (Debicka, 2010).