A Historical Development of “IT” in Tourism Marketing

Yasar Sari, Metin Kozak and Teoman Duman

Introduction

“Intelligence and access to information have become the new basis for power in the world”

(Godbey, 1997, p. 55). The advances in information technologies (ITs) show that destinations and tourism enterprises will lose their competitive advantages unless they adopt themselves to current electronic distribution channels and apply this electronic transformation to their businesses (Buhalis, 1998). Mostly as services, tourism products cannot be evaluated comprehensively before the actual experience because these products are generally purchased away from residence (Morrison, 1989). Information about tourism products is composed of descriptions of services that are produced by travel agencies, which have important effects on tourist-decision processes. Therefore, information that is current and that matches the needs and wants of the tourist is key to meet the tourism demand. In other words, for consumers, the satisfaction of needs and wants and for marketers, the successful promotion of tourism products depends on successful deliverance of current information through distribution channels (Sari & Kozak, 2004). Accordingly, tourism is one of the areas where IT is heavily and widely used (Sheldon, 1993).

As a definition, information technology (IT) implies the latest developments in elec- tronics and communication through which information is compiled, decomposed, saved, analyzed, processed and distributed (Senn, 1998; Bensghir, 1996). To this end, the tourism industry has heavily used IT for last 20 years under the names of virtual realities, electronic commerce, digital currencies, teleconference, CD-ROM and Internet. Nowadays, the use of technology plays a crucial role in tourism marketing. The development of IT along with the rapid changes in network technologies has created a number of opportunities for tourism enterprises. As the creation, compilation, processing, saving and transmitting of information ease the daily business activities, IT is becoming a more important element of business applications in tourism. Moreover, the mutual growth of demand for and supply of tourism resulted in the heavier use of IT in the industry. It is generally accepted in

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34 Yasar Sari et al.

tourism academia that developments in IT has revolutionary effects on the industry and result in significant reshaping of operation of activities in tourism (Stamboulis &

Skayannis, 2003). Hence, it is necessary to overview the gradual development of IT in tourism. The purpose of this paper is to analyze the development of IT in tourism with a historical perspective. The historical development of IT and its applications in tourism is presented in a framework, which will enable tourism companies to evaluate growth process of IT and to create a vision for their future.

Literature Review

Mentioning about the turning points in the past, well-known futurologist Alvin Toffler argued that two important transformations had been experienced long ago and the third one is being experienced in today’s time. According to Toffler, the first societal turning point was the appearance of agriculture and the second one was industrial revaluation. These two transformations were experienced in long time periods in the past. About 10,000 years ago, the humans scattered around all over the world and they adapted to a new way of life with the agriculture revolution. Through the end of 17th century, in Europe, the second big transformation in human past, the industrial revolution, came about before agriculture revolution had lost its effects on human life. This process, which is frequently called as

“industrialization”, had its effects on nations and continents much faster than the first one.

During the last two centuries, the effects of agricultural revolution have slowed whereas the effects of industrial revolution have spread around the world especially in Europe, North America and in some other parts of the world quickly. Today, in many parts of the world, the effects of industrial revolution are still continuing and many of the countries whose economies depend heavily on agriculture have still been building steel production facilities, automotive and textile factories and railways.

As the effects of industrial revolution had been continuing through the beginning of 20th century, the third wave of changes started to show its effects on human history. At the roots of this change were information and technology. Especially, during the years after the World War II, this third wave of changes started to influence every aspect of human life and showed its effects in the US during the mid-1950s. Later, its effects have spread to other industrialized countries up till now. Still, many developed countries have been struggling to transform their heavy industrial structures that carry the effects of second wave of development to today’s information-based technological structure. Beyond the hardware technology, IT is also making travel and tourism markets more competitive, as in other markets.

Large-scale transformations in human history also brought about new societies with them. Peter Drucker calls the society that appeared after the World War II with new wave of changes as “society beyond capitalism”. In this respect, main economic sources for the new generation are not or will not be capital, labor or natural resources but information. In an economical analysis presented in 1941, it was argued that a typical economy had three components, the primary of which was agriculture, the secondary was production and industry, and the tertiary of which was services. In other words, an economy is composed of these three components at varying proportions. If an economy is becoming industrialized, much of the labor is employed in production related units. As a national income is to

A Historical Development of “IT” in Tourism Marketing 35 increase due to differences between sectoral productivity levels, the need for services and information will also increase. From this point of view, a number of European theorists pointed out the importance of information and technology in the transformation of industrial nature of many economies.

Therefore, the unification occurs between qualified labor, science and technology. D.

Bell and A. Touraine who are known for their work on post-industrial societies argue that there are no industrial societies in developed countries. According to Bell, in post-industrial societies theoretical information is centralized and the share of services in the economy is getting larger with the influences of professionals, engineers, technicians and scientists on the economy. Touraine has also talked about societies that are defined with new bureaucratic and expert classes and information-based occupation trends. Despite the differences in the details, these types of definitions imply a drastic socio-economic transformation processes. These processes have brought about information societies, which are quite different from agricultural and industrial societies. Information society is defined with labor most of which is employed in information-related occupations. Also, information societies are characterized by the use and application of information in most parts of the economy.

The number of people employed in agriculture, industrial and information sectors dif- fer between nations. Differences in the number of people in different sectors are more apparant in developed nations. For example, in 1980 only three percent of the total labor was employed in the agriculture sector in the US while 76 percent was employed in the services and information related sectors. Furthermore, more than eighty percent of new business ventures in the US are reported as related to service and information sectors.

Similarly, a number of western European nations are becoming information societies just as the US, Canada and Japan (Akin, 2001). A number of socio–economic changes appear with effect of information societies. Some of these changes are as follows:

1. A deviation from goods production to services production. A rise in the professional, technical, educational, health and fast-food sectors.

2. The change in the nature of tasks.

3. The increase in the number of professional and technical jobs.

4. The technological change toward more advanced technologies. Widespread use of small and capable devices used for compilation and managing of information through microelectronics and semi-conductors.

5. The spread of informatics and the use of telecommunication parallel to the advance- ments in computer technology for coordination with far points.

It is generally accepted that the information era starts with the years that follow the World War II. Some writers propose that the year of 1957 during which the number of white collars overrode the number of blue collars is a strong indication of the start of information era. With the start of information era, a number of sectors in the economy includ- ing tourism started to be heavily influenced by the changes this new time period brought about. As a part of worldwide services sector, tourism industry can also be considered as an information industry. The retrieval and use of information in production and consump- tion of services and in daily activities are more important for tourism industry than for many other industries (Yarcan, 1998). Because of the nature of tourism product, the

consumer or the tourist purchases or acquires the information before the actual product.

For the tourist, the acquisition of information becomes more important as the distance between buyer and seller increases. On the same time, tourism enterprises want to collect information about their prospective customers for planning purposes. The mutual need for information between tourism product buyer and seller entails that the information exchange be correct, fast and low cost. In tourism industry, information flows through many channels that comprise consumers, producers, research units, destination organizations and governmental units (Yolal, 2003).

As very well known, most tourism products are consumed where they are produced.

Therefore, most of the time, potential tourists have no chance to sample or physically investigate the components of the product they plan to purchase. Therefore, initially tourists purchase an image of what they expect. This image is a result of information they collect through different channels. The nature and the quality of information presented before the actual experience becomes crucial because this information is the source of expectations which are used for evaluation of service quality following the experience (Zeithaml, Parasuraman, & Berry, 1990). Similarly, the supply of up-to-date information that includes details of the tourism product becomes important for creating reasonable expectations. The widespread use IT has also triggered a number of changes in tourism consumer behavior. The easy reach of information about tourism products and services has created more demanding tourists who are less loyal, more selective about product and service quality, and are more apt for frequent and short-term holidays. A natural result of such behaviors is shorter decision-making periods that may create inclination for last minute deals. These changes in holiday buying behavior are also reshaping tourism-marketing efforts in many destination countries (Sar, 2003).

According to Poon (1993), information acts as a cement for tourism-product producers (i.e. airlines, tour operators, travel agencies, hotels, car-rental agencies). The connection between the producers focuses on the information in all aspects of business not on the product per se. This information flows through different channels and connects the pro- ducer to the end consumer. For this reason, the interconnection between producers and consumers in tourism necessitates a well-organized information network (Wertner &

Klein, 1999). Furthermore, most of the time, the information flow in tourism is not only between producers and consumers but also between other markets, competition and related governmental entities. In general, the information within and outside sources is necessary for cost-control, sustainable competitive advantage and more efficient marketing functions. As a result, today information is ultimate source for retaining and maintaining quality in service production.

In general, IT is defined as means and applications that are used for retrieval, storage and distribution of information (Senn, 1998). It encompasses computers, computer networks, printers, national or international cable or cordless communication devices (telephone, satellite communication systems etc.), printed, auditory or visual media devices (radio, TV etc.) and the like (Maddison & Darnton, 1996). IT has become a means of reaching development, prosperity and competitive advantage at the macroeconomic level.

Similarly, at the microeconomic level, it serves as a means of efficient operational management that is also necessary for keeping up with competition in business (Buhalis, 1998). The use of IT provides the management with synchronic decision-making and 36 Yasar Sari et al.

control opportunities, which are necessary for instant problem solving. In other words, the use of IT makes quick, dependable and cost-effective interchange of data possible within businesses, customers and public agencies. As a result, it seems unlikely for businesses to reach sustainable competitive advantage, producing quality goods and services, increasing productivity in business practices and developing long-term customer relations without benefiting IT opportunities.

Historical Development of ITs

An overview of historical development of IT and its use in tourism is presented in Figure 2.1. As shown in the figure, initial developments in IT start with the invention and use of telegraphy during the second quarter of 1800s. From late 1800s through the mid- 1900s, telephone, radio, fax and TV technologies appeared and later followed by computer technology. Computer use kept pace with the developments in network technology during 1970s. Computers were used for a number of purposes from conception and reservation to production and communication. Until 1980s, companies heavily used IT for operational purposes. Computers were used for payroll productions, business correspondence, inventory and accounting records, stocking and customer database development by the businesses. With the enhancements in data stocking and processing capacities with smaller and cost effective devices through 1980s, computer use has become widespread in every aspect of business practices.

After 1980s, increasing competition in the world forced companies to use IT more heavily for marketing purposes. Managerial and operational use of IT continued with an increasing pace but companies started to put more emphasis on collecting information about markets and reaching customers through 1990s. During the last decade, primary functions of IT has been to produce better quality services and promote products more effectively by research and product differentiation. Today, a number of innovations (i.e.

virtual reality, multimedia kiosks, hard storage devices, intranet and extranet, home shopping and interactive TV, intelligent agents, intelligent cards, space technologies) promise more future developments in IT. Use of IT in production, presentation and promotion of services will bring about competitive edge to future businesses.

Use of IT within Organizations

Initially, most companies used computers for organizational purposes. Some of the intra- organizational uses of computers included payroll productions, business correspondence, inventory and accounting records keeping, stocking and customer database development.

In other words, computers were initially used for computation, storage, search, listing and printing purposes. As for the use of IT in travel and tourism, airline companies were the first to adapt IT to their business practices. During late 1950s, high communication costs due to heavy data processing forced airlines to use computers in all aspects of their business. In time, these companies have developed specific airline reservation system soft- wares that have been used for flight reservation, seat arrangements, ticket confirmation, ticket sale and related services (O’Connor, 1999; Yarcan, 1998).

A Historical Development of “IT” in Tourism Marketing 37

Yasar Sari et al.

Systematic use of information technologies in tourism -Virtual reality -Multimedia kiosks -Hard storage devices -Intranet and Extranet -Home shopping and interactive TV - Intelligent agents -Intelligent cards -Space and mobile technologies -Data mining -Geographical information systems

s m e t s y s s s e c c a e l p i t l u m d e t s o h - e D

-Internet and World Wide Web (www) - e-mail, chat -e-markets -Travel portals -Developments in Microelectronics -PC Usage -Network technology

Computer Technology

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Figure 2.1: Developments in IT and its use in tourism.

Source: Adapted from O’Connor (1999, p. 14) Buhalis (1998), and Berce (1997, p. 337).

Nowadays, despite being highly costly, most tourism companies have adopted IT in their operational systems. Most business functions are completed with electronic devices and systems that bring out important operational efficiency. A number of hospitality companies set examples with their high-tech operational systems where the effects of such systems on customer loyalty and profitability have been shown (Siguaw & Enz, 1999).

Examples of these systems include HOTELEXPERT of Barbizon Hotel and Empire Hotel New York, SOURCE of Marriott Courtyard and POWER-UP of Cendant Corporation.

These organizational computer systems eliminated most paperwork, improved communication through the organization and eased managerial decision-making. The returns of such systems are known to be reduced costs, increased productivity, occupancy and ulti- mately profits.

Computer Reservation Systems (CRSs)

The computer reservation systems (CRSs) imply a centralized reservation network between interconnected companies such as airlines, travels agencies and hotels. In tourism, this network enables the firms to make and confirm reservations and to get information about customers and other firms recorded in the system. It is generally accepted that the electronic era for tourism businesses starts with these systems. Through 1990s, the scope of CRSs widened and these systems turned into global distribution systems (GDSs) (Buhalis, 1998). The range of products and services reserved through CRSs increased rap- idly and large GDSs such as Amadeus and Galileo came about during last decade. Not only have these companies served as reservation agents but also they have operated airlines and accommodation companies (Buhalis, 1998).

Global Distribution Systems (GDSs)

In 1978 in the US, air carrying capacity increased about 94% following the deregulation of air transportation system. Increasing capacity and deregulation brought about fiercer competition, declines in prices and profitability (Werthner & Klein, 1999).

This resulted in managerial and marketing partnerships between airlines in the world.

Airlines initially developed their own reservation systems and after that they created global distribution systems by merging their systems with accommodation, travel agency, car rental and tour operator systems. In time, these computer networks progressed both vertically and horizontally. Horizontally, a number of airlines combined their networks to pro- vide better air travel services while vertically they created partnerships with other travel and tourism companies to increase the quality and variety of services (i.e. hotel reservations, entertainment organizations, car rental, ferry tickets). Because GDSs combine a number of travels, tourism and intermediary organizations with computer networks, they lead to standardizations of many services and easier control of market shares in the industry (Buhalis, 1998). The centralized GDSs in the tourism industry are also called travel distribution supermarkets. As the computerized reservation systems develop and are interconnected, the number of monopolistic electronic formations increases. In other words, monopolistic sale of tourism products becomes more common with increasing electronic partnerships.

A Historical Development of “IT” in Tourism Marketing 39

Internet and World Wide Web (www)

The first Internet use was launched by American Defence Ministry in 1970 with a project called ARPAnet. The purpose of the project was to develop a communication network for recovery after a possible nuclear war. During the years of peace, this project served a common purpose of fast communication. Until 1980s, Internet was mostly used by large aca- demic institutions, but later it became popular among larger audiences with the development of www applications. Fast developments in Internet technology in 1990s (i.e.

new communication protocols that ease the traffic in the networks, appearance of www applications, computer technology innovations) changed the way to do business to a greater extent and the term “electronic commerce” (e-commerce) entered into the world business terminology. Electronic commerce can be defined as reliable exchange of knowl- edge, goods and services through computer networks and supplemental digital infrastruc- ture (Buhalis, 2003). During 1990s, commercial use of Internet was commonwide and tourism marketers started to use this new technology for promotion and sale of tourism products. Today, tourism is the second larger industry to use Internet applications for business purposes after the computer industry (Sheldon, 1997).

The rise of the importance of electronic commerce and the growth of business potential through it forced tourism industry to move an important share of its business practices into Internet and to benefit more from opportunities electronic commerce has brought to business world. One of the consequences of global development of Internet was the change in the traditional intermediaries of travel and tourism products. Previously, travel intermediaries were composed of tour operators, international travel agencies and domestic travel agencies, which commonly used computerized reservation systems, global distribution systems, travel networks and teletexes. However, as electronic commerce has become commonwide, tourism and travel services providers (i.e. airlines, car rental companies, hotel chains) developed e-commerce applications in their business practices and tried to have their potential customers to directly reach their systems. Currently, a number of destinations, along with single or multiple tourism service providers are structuring electronic-marketing systems through which they try to inform current or potential customers about their products. Traditional service providers in tourism are continuously adapting their businesses to IT and attempting to reach their markets through vertical and Internet portals (Buhalis, 2002). A summary of electronic marketing applications in tourism is provided in Table 2.1.

Travel portals are one of the fastest growing business types on Internet. There are a number of online travel agencies that make accommodation and ancillary service reservations electronically and that can respond to traveler needs as they arise during travel. Such leading travel agencies are “expedia.com” in the US and “orbitz.com” in Europe. Through these portals, travelers have a chance to reserve their plane tickets, hotel rooms and rental cars electronically in a few minutes. According to Jupiter Research Company, online travel sales that reached 24 billion dollars in 2001 is expected to reach 64 billion dollars in 2007.

“In 2000, 42 percent of online travel planners made online reservations” (Morrison, 2002).

While travel and accommodation companies are benefiting from Internet opportunities to solve capacity problems (e.g. last minute pricing), travelers enjoy value pricing by using electronic systems. The ease of reservation and price opportunities increases the business potential of travel intermediaries on the Internet (Greenspan, 2003).

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Dalam dokumen progress in tourism marketing (Halaman 64-76)