E-BUSINESS FOR TOURISM PRACTICAL GUIDELINES FOR TOURISM DESTINATIONS AND BUSINESSES

Transcription

1 E-BUSINESS FOR TOURISM PRACTICAL GUIDELINES FOR TOURISM DESTINATIONS AND BUSINESSES November 2001

2 World Tourism Organization Business Council CONTENTS Part A Introduction 1 Setting the Scene The Internet and tourism a powerful combination The importance of the Internet and Internet-based e-commerce The growth in Internet usage Internet user profile The growth of Internet commerce Travel and tourism s market share Travel products purchased The impact of Internet use on traditional channels Summary of main market trends The concept of electronic business (e-business) The principles of customer relationship management (CRM)...11 Part B E-Business for Destination Management Organisations 2 E-Business for DMOs - Principles and Concepts Evolving value chains The future of DMOs as intermediaries Positioning DMOs within the Value Net Integrated e-business systems for tourism destinations Destination e-business system model e-business Partnerships for DMOs The potential of e-marketing and CRM The scope for e-marketing by DMOs Customer Relationship Management for DMOs E-marketing techniques Critical success factors - for CRM and proactive electronic marketing E-commerce for DMOs New ways for DMOs to do business Strategic Challenges for DMOs Implementing a DMS as the infrastructure for e-business Introduction Step-by-step guide to implementing a DMS DMS Critical Success Factors DMS Case Studies British Columbia Finland Seychelles Tourism Marketing Authority Singapore Tourist Board Tirol Tourist Board / Tiscover Case study summary table Consumer Web sites vi

3 E-Business for Tourism 4.1 Step by step guide to development Critical success factors Case studies Berlin Caribbean Tourism Organisation New Zealand Singapore Tourism Vancouver Key features of a consumer Web site Networks for intermediaries Travel trade intermediaries Features of a travel trade Web site Implementing a travel trade Web site Online travel intermediaries Examples of good practice Meetings, incentives, conferences and exhibitions (MICE) organisers Features Implementing a MICE Web site Examples of good practice Media site Features Implementing a Media Web site Examples of good practice Networks for the tourism industry Getting SMEs wired and skilled Features and functions Publish corporate information Publish intelligence and provide access to resources Interactive services Business to Business trading Users and Content Costs and benefits Step by step guide Critical success factors Case Studies Canadian Tourism Exchange Scot Exchange vii

4 World Tourism Organization Business Council Part C E-Business for Tourism SME s Introduction to Part C Industry overview Growth of tourism e-business and impacts on SMEs throughout the industry Strategic importance of e-commerce and e-business for SMEs Mapping e-commerce and e-business applications Structure and content of each sector analysis Hospitality services Introduction Targeting your e-business strategy Attracting international visitors Offering customised packages Maintaining long-term relationships E-Business applications and functionality Step-by-step guide to implementing your e-business strategy Phase 1 Developing your Web site Phase 2 Positioning your Web site Phase 3 Reengineering your reservation process Phase 4 Building your back office Phase 5 Re-configuring your property Critical success factors of your e-business strategy Case studies of innovative e-business solutions Application service providers E-Procurement partnerships Property management systems Competitive intelligence Future of e-commerce and e-business Travel Agencies Introduction Targeting your e-business strategy Getting realistic about e-commerce and e-business Moving beyond ticketing Adopting an alternative revenue base structure E-business applications and functionality Step-by-step guide to implementing your e-business strategy Phase 1 Scaling your strategy and resources Phase 2 Building infrastructure and competencies Phase 3 Focusing applications on service excellence Critical success factors of your e-business strategy Case studies of innovative e-business solutions Finding opportunities for segmentation and specialisation Growing a small online travel agency on the side Joining an online referral service Becoming a click and mortar agency Applying e-business technologies for service excellence Future of e-commerce and e-business viii

5 E-Business for Tourism 10 Tour operators Introduction Targeting your e-business strategy Concentration and niche market structures Changing relationship with travel agencies Competing with new entrants E-business applications and functionality Step-by-step guide to implementing your e-business strategy Phase 1 Moving towards e-marketing Phase 2 Adapting your technological base Phase 3 Making product development more flexible Critical success factors of your e-business strategy Case studies of innovative e-business solutions Developing new concepts for online tour operators Integrating e-business applications for growing tour operators Becoming a click-and-mortar consolidator Future of e-commerce and e-business Visitor Attractions Introduction Targeting your e-business strategy Managing attraction information strategically Creating more flexible operations Exploiting the power of alliances E-business applications and functionality Step-by-step guide to implementing your e-business strategy Phase 1 Creating and diffusing attractive informational contents Phase 2 Creating seamless e-business processes Phase 3 Becoming an agile and innovative attraction Critical success factors of your e-business strategy Case studies of innovative e-business solutions Cultural tourism Nature-based tourism Sports tourism Urban tourism Rural tourism Future of e-commerce and e-business Conclusion Appendix A Review of consumer Websites Appendix B Technical glossary and abbreviations Appendix C Suggested reading Appendix D Bibliography ix

6 E-Business for Tourism PART A - INTRODUCTION 1 Setting the Scene 1.1 The Internet and tourism a powerful combination. The Internet and its protocol (TCP/IP) have created a universal platform for communication and presentation - a truly open, global network. Increasingly it will be accessed from different types of equipment - TV, mobile devices, in-car technology, terrestrial phones, kiosks, computer games consoles, etc - for a range of purposes. The cost of access is going down and the speed of access is going up. The Web is becoming more useful (in terms of functions and content) and more userfriendly. This is a powerful combination of factors driving increased usage, as shown in Section 1.2. Tourism and the Internet are ideal partners. For consumers, when they are planning a trip to a new destination, they face the problem of making a costly purchase without being able to see the product. The Internet provides them with the means to gain immediate access to relevant information of greater variety and depth than has been available previously, about destinations throughout the world; and to book quickly and easily. For tourism destinations and businesses, it offers the potential to make information and booking facilities available to large numbers of consumers at relatively low cost; it enables them to make large-scale savings on the production and distribution of print and on other traditional activities (e.g. call centres and information centres); and it provide a tool for communication and relationship development with tourism suppliers and market intermediaries, as well as end-consumers. Tourism has a key difference from most other sectors of e-commerce its consumer goes and collects the product at the point of production i.e. the destination. Thus the tourism sector avoids the need to deliver products around the world - a task that faces real logistical problems that have been a major source of customer dissatisfaction. These factors, taken together, have resulted in the travel and tourism sector taking a larger and larger share of e-commerce globally as documented in Section 1.2. As a result, the Internet is revolutionising the distribution of tourism information and sales. Not only does it provide tourism destinations and businesses with direct access to end consumers, but also it is becoming the primary channel for business to business communication. 1

7 World Tourism Organization Business Council 1.2 The importance of the Internet and Internet-based e-commerce The growth in Internet usage The dramatic growth in the number of Internet users over the past five years and projections for the next five years are shown in Figure 1 a nine-fold increase over five years. The top fifteen countries in terms of the absolute number of Internet users (predicted for year-end 2001) is shown in Figure 2, with the United States clearly dominating. The world s top nine generators of international travel are included (except The Netherlands) and Pacific-Asia features strongly , Figure 1 Number of Internet users world-wide (in millions) [Source: etforecasts, July 2001] US Japan China Germany South Korea UK Canada Italy Brazil France India Russia Australia Taiwan Spain Figure 2 Top 15 markets in terms of numbers of Internet users at year-end 2001 (in millions) [Source: etforecasts, July 2001] 2

8 E-Business for Tourism Figure 3 shows a different pattern the top 15 countries in terms of the number of Internet users per thousand population. On this basis, smaller countries stand alongside the larger ones, with Sweden having the highest rate of usage. Other Scandinavian countries and Australasia also feature strongly, as do the smaller Asian countries. Of the world s top ten major markets for outbound international travel, the following do not appear on this chart: Germany, UK, France, Japan, Italy, Spain and Belgium Sweden Iceland Canada Denmark Norway USA Finland Singapore South Korea Switzerland Australia Netherlands New Zealand Austria Taiwan Figure 3 - Top 15 markets in terms of number of Internet users per thousand population at year-end 2001 [Source: etforecasts, July 2001] Future growth in Internet user numbers is expected to vary markedly between the different regions of the world. Jupiter predicts (Figure 4) that: North America will have a relatively slow rate of growth, but still remain predominant in 2003 The largest growth overall will be in Pacific Asia The largest percentage rates of growth will be in the late adopter markets, particularly the Middle East (from a low base) North America Western Europe Asia Pacific Middle East Latin America Eastern Europe Africa Figure 4 - Internet users (in millions) by world region [Source: Jupiter Communications, 2000, quoted by emarketer] 3

9 World Tourism Organization Business Council Another company, etforecasts (Figure 5), projects much stronger growth in Asia, to the extent that it will have overtaken North America by 2003 and will have twice as many users in The assumption of rapid growth in Asia is based on rapidly increasing use of wireless Web devices N. America W. Europe E. Europe Asia S/C America M. East/Africa Figure 5 - Internet users by regions (in millions), [Source: etforecasts, July 2001] Internet user profile Internet users tend to be relatively: wealthy well educated interested in independent travel In other words, they relate very well to some or all of the target markets of many destinations. However, as the number of Internet users grows, particularly through increases in the use of new access channels (especially interactive TV and mobile devices), the user profile will change, broaden and become less up-market. In the United States, it is already the case that a very high proportion of people travelling internationally is, or will be soon, Internet users. The same will be true in other major markets within the next two or three years. Thus, based on user profile, the Internet appears to be an ideal medium for marketing by tourism destinations and businesses. We shall see later in this chapter how this is, indeed, proving to be the case. First, however, we look at the key question of how far the Internet is being used as a medium for buying, as well as researching. 4

10 E-Business for Tourism The growth of Internet commerce Figure 6 contains a key analysis provided by Jupiter, showing how, in the US, the propensity to purchase increases directly with length of time as an Internet user. Those who have been Internet users for three years or more, are more than twice as likely to buy than a first year user. 100% 80% 16% 23% 37% 60% 40% 45% 56% 51% Buyers Browsers Non-Shoppers 20% 0% 39% 21% 12% < 1 year 1-2 years > 2 years Figure 6 - Browsing and buying, related to experience online - in US [Source: Jupiter Communications 2000] Thus, as the market has matured, there has been and will be substantial growth in both the number and the percentage of Internet users who are buying see Jupiter figures again in Figure 7. Figures 8 shows IDC forecasts of the number of Internet users and of Internet buyers on a worldwide basis % Millions of Users % 29 29% % 47% 40% 34% 80% 60% 40% 20% % Number of Online Buyers % of Online Users Figure 7 - Online buyers increase as a proportion of online users in US [Source: Jupiter Communications] 5

11 World Tourism Organization Business Council In millions 1, INTERNET USERS (includes PC/IAD and mobile) INTERNET BUYERS (includes users purchasing via PC/IAD and mobile) WORDWIDE HOME INTERNET BUYERS Figure 8 IDC Internet Commerce Market Model Worldwide (in millions) [Source: IDC, 2001] As a result of these factors, IDC forecasts that e-commerce revenue worldwide will increase approximately eight-fold between 2001and 2005, rising from $634 billion in 2001 to more than $5 trillion in The highest growth rates (percentage increases) are expected to be outside North America. As figure 9 shows, the US, Japan and the rest of the world are expected (by IDC) to have a reduced share of Internet commerce, whilst the share of Western Europe and the rest of Asia will increase. 50% 43% 40% 30% 20% 10% 26% 16% 9% 6% 36% 34% 11%12% 6% US Western Europe Japan Asia Rest of the World 0% Figure 9 Shares of Internet Commerce Revenue by Region [Source: IDC, 2001] 6

12 E-Business for Tourism Travel and tourism s market share For the reasons outlined in Section 1.1, travel and tourism have become rapidly the single largest category of products sold over the Internet. In 1998, Datamonitor estimated that their share of Internet commerce increased from 7% in 1997 to 11% in 1998 and they projected an increase then to 35% by Other sources have suggested that this forecast may have been achieved already. Jupiter has forecast that, as a result of these trends, US on-line travel industry sales will increase from $18 billion in 2000 to $63 billion in 2006, of which nearly half will come from the corporate travel market. PhoCusWright s projections for Europe are that online travel and tourism sales will increase from $2.9 billion in 2000 to $10.9 billion by Travel products purchased Travel Industry Association of America (TIA) research in 2001 has shown that a large majority of Internet using US travellers have bought air tickets and made hotel reservations online see Figure 10. Because of the size and frequency of air ticket transactions, they have taken the largest share of the market, but that share is diminishing, from 80% in 1998 to a forecast 59% in 2003 (Jupiter). 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 84% 78% 59% 33% 18% 17% 8% Bought an airline ticket Made a hotel reservation Rented a car Booked entertainment tickets Booked tickets for amusement park Booked a travel package Booked a cruise Figure 10 - US consumer on-line travel booking by sector [Source: Travel Industry Association of America, 2001] 7

13 World Tourism Organization Business Council The impact of Internet use on traditional channels A key question for DMOs and tourism businesses is the way in which the Internet is affecting the use of traditional channels of marketing. A number of recent surveys cast light on this: A travel & lifestyle survey for Concierge in 2000 (Figure 11) showed that, across the US population as a whole, the Internet had already become the number one source of information consulted when choosing or planning a vacation. 30% 26% Internet * 22% 20% 10% 0% 11% 10% Travel Agents Guide Books Newspaper/Magazines * Among Internet users this figure rises to 64% Figure 11 First source consulted by US consumers for researching and planning travel [Source: Results of travel & lifestyle survey for Concierge, 2000 reported at Results from the e-travel tracker Survey, prepared by MORI on behalf of the Scottish Tourist Board, on the UK market, which tends to follow months behind the US market, showed that in March 2001, the Internet and brochures were used in similar proportions, as sources of information for booking holidays or other forms of travel, by Internet using travellers- see Figure 12. In May 2000, when interviewees were asked which source provided the most complete information, the Internet was rated much more highly than brochures or any other source see Figure 13.? 60% 50% 40% 30% 20% 10% 0% 51% 50% 47% 29% 24% 16%16% 12% 11% Brochures Internet Travel Agent Friends/Relatives/Colleagues Teletext Guide Books National Press Magazines TV Travel Programmes Figure 12 - Use of different sources of information for booking decisions UK Internet users. [Source: Results from thee-travel Tracker Survey from March 2001 Base: all who use the Internet (605) March 2001] 8

14 E-Business for Tourism 35% 31% Internet 30% 25% 20% 15% 10% 5% 0% 22% 16% 12% 11% 2% 2% Brochures Travel Agent Guide Books Friends/Relatives/Colleagues Teletext TV Travel Programmes National Press* Magazines* Figure 13 - Most complete source for researching and planning travel UK consumers. [Source: Results from the E-Travel Tracker Survey from May Base: all who have used any source of travel information May 2000 (1,112)] TIA research in 2001(Figure 14) showed that about 70% of Internet using travellers were using travel agents and state tourism offices less often. A similar proportion was calling airlines less often, whilst nearly 60% were using other travel call centres less. In 2000, US on-line travellers reported that since they started planning their trips on-line, they were 80% 70% 60% 50% 71% 68% 68% 58% 57% 57% Using travel agents less often Calling or visiting state tourism offices less often Placing fewer calls directly to airlines 40% 30% Placing fewer calls directly to rental companies 20% Placing fewer calls directly to lodging companies 10% 0% Ordering travel brochures by phone less often Figure 14 - Consequences of increased use of Internet for traditional channels [Source: The Travel Industry Association of America, 2001 ( Thus, over a period of only five years, the Internet has become a primary source of travel information for the more mature markets of Internet users, which are also major tourism generating countries. At present, the proportion of travel booked through the Internet is relatively small (between 6 and 15% in the US, according to sector, and less elsewhere), but will increase substantially, as the number of Internet users grows and the propensity to purchase increases. It seems reasonable to anticipate that transactions across the Internet may account for 20-25% of all tourism sales in the main markets, over the next four or five years. 9

15 World Tourism Organizat ion Business Council Summary of main market trends Usage of the Internet is increasing dramatically Increasing proportions of Internet users are buying online Travel and tourism will gain a larger and larger share of the online commerce market Ground products will gain a larger share of online commerce in travel and tourism User profiles relate well to the target markets many tourism organisations The Internet is having a major impact, relative to other channels, as a source of information for choosing and planning holidays and other forms of travel, and increasing importance as a booking channel. 1.3 The concept of electronic business (e-business) E-business has been defined as improving business through connectivity (PriceWaterhouseCoopers 1 ) and the use of Internet technologies to improve and transform key business processes (IBM 2 ). Taking these two definitions together, it is clear that for tourism destinations and businesses, e-business is about realising the opportunities of improved connectivity both externally, through the Internet, and internally, through intranets. The external dimension is about transformation of the value chain, linking the tourism supplier (or service provider) to the customer, and of the supply chain, linking the tourism supplier with its ow n suppliers. This brings in e-marketing, e-commerce and e- procurement: e-marketing exploits the Internet and other forms of electronic communication to communicate in the most cost-effective ways with target markets and to enable joint working with partner organisations, with whom there is a common interest e-commerce is the sales activity undertaken through electronic distribution channels e-procurement streamlines the purchasing process by allow ing a business to tie its inventory and procurement systems into the despatch and billing systems of its suppliers, or vice versa. Not only does this reduce costs through automation, it also facilitates identification of best value sources of supply. Figure 15 illustrates diagrammatically how these three aspects of external connectivity fit within the envelope of e-business. e-marketing e-business e-commerce e-procurement Figure 15 Components of the external di mension of e-business /28212.html 10

16 E-Business for Tourism The internal dimension is about transformation of the way in which the organisation functions, enabling it to work in a fully integrated way, through the use of common systems. The transformed organisation should: Be fully networked for internal and external communication Use a common set of tools, protocols and standards Share product and customer data as a common resource Have staff operating as teams, focused on maximising the synergies of sharing resources. In other words, the staff of a DMO or tourism business can work together more effectively, both to compile information and to use it - in effect, pooling knowledge and expertise. The tools (applications) that may be shared include content management, customer relationship management (CRM), financial management systems (sometimes called Enterprise Resource Planning ERP) and operational control systems. The internal and external processes are, of course, linked intimately. Most simply, the enhanced internal e-business processes enable the organisation to maximise the benefits of the external opportunities. Also, the boundaries between internal and external business processes become more flexible. Buying services in (or outsourcing) becomes a more practical proposition as external connectivity improves. Thus the benefits of e-business may be summarised as: More cost-effective communication with target markets Making it quicker and easier for the customer to buy and thereby increasing conversion and levels of spending Improved customer service and retention Reduced costs through more efficient internal operations and purchasing processes. Later chapters of this report look at the implications of e-business for DMOs (Part B) and tourism businesses (Part C). There is, of course, a direct relationship. The various categories of tourism business are key elements in the DMO s e-business network (see Section 2.1). The DMO has a particular responsibility to tourism suppliers to act as the integrator of the many elements of the destination product and present them in the marketplace under the umbrella of the destination brand. E-business provides an ideal way of doing this more effectively. 1.4 The principles of customer relationship management (CRM) A key aspect of e-business and of e-marketing is customer relationship management and/or marketing normally referred to by the acronym CRM. CRM is a highly effective and cost efficient approach, some would call it a philosophy, based on the principle that knowledge of, and relationship with, customers is key to maximising sales opportunities, particularly through repeat purchase. It merits particular attention here, because it provides the basis for re-focusing and restructuring the whole organisation. The principles can be applied to customers of whatever type whether end-consumers or intermediaries. As for e-business generally, there are many definitions of CRM. The one used by Nykamp Consulting Group 3, optimising all contacts with customers or potential

17 World Tourism Organization Business Council customers, picks up the essence of it in a few words. Nykamp has also provided an excellent conceptual model for the CRM cycle, set out in Figure 16. Perhaps the best starting point is the understanding of customer needs (lower right hand quadrant), followed by the differentiation between customers in terms of those needs and their potential value and the type of relationship that may be most effective. Figure 16 The Nykamp CRM cycle The cycle then moves through product and channel development and customisation for different segments, customer interaction and delivery of increased value to them, customer acquisition and retention. CRM involves building up in depth information about customers or contacts. In the case of consumers, this information would normally include their socio-demographic profile, interests and activities, past and possible future requirements, etc. With this type of information, it is possible to be: Knowledgeable and efficient in servicing enquiries Pro-active in targeting best prospect customers with products specifically appropriate to their needs Establish the basis for a lifetime relationship with the customer, and maintain it even where transactions are not involved. Relationships should be developed over time, as a result of contact through different channels, requiring that all customer facing staff have access to the same customer database. In the context of tourism destinations or businesses, the aim should be to maintain the relationship with customers before, during and after the visit, through the Web, , call centre, kiosk, Tourist Information Office, etc. see Section 2.3. CRM is not a module that can simply be added on to an organisation s activities. It must be integral to the whole ethos and method of operation, with customer (rather than product) focus to the fore. Marketing staff should be geared to addressing the 12

18 E-Business for Tourism needs of specific customer segments and their targets should be in terms of customer acquisition, retention, value and profitability, as well as satisfaction. This will require excellent monitoring systems, together with creative and focused market research. As it happens, the Internet provides a good means for instant research (through e- mail or surveys linked to Website usage) on customer requirements, interests, activities, attitudes, satisfaction, etc. This will need to be supplemented by market research through traditional methods from time to time. 13