Internet Distribution

It is accepted that the travel and tourism industry is heavily reliant on information. This information is required by the customer as the intangibility of the product and the method of payment prior to consumption can have a negative effect or produce a fear of purchasing the unknown[1]; the greater the level of information available the greater the likelihood of purchase. Airline travel has become a mass-market product and as such, information has to reach the widest possible audience. Traditionally the high street intermediaries such as Thomson (http://www.thomson.co.uk) or First Choice (http://www.firstchoice.co.uk) could offer a number of different products on a commission basis to customers that could not be achieved by the airlines directly. As such it could be seen as a ‘win win’ solution for both parties. The intermediaries were in a strong position within the industry, competitive rivalry between the airlines was high, barriers to entry had been reduced, and the power of the buyer i.e. the end consumer was low. Essentially the intermediary was a vital component of distribution and the airlines needed them as a route to market or a channel of distribution. The development of the World Wide Web in 1993 provided exactly the opportunity that suppliers had been looking for. It provided the possibility to communicate directly with the end consumer without the need for the traditional intermediary commission payments significantly reducing costs. Traditional intermediaries were slow to adopt the new technology, partly due to the significant investment required in what were now legacy systems.

This opened up an opportunity for other organisations to enter the market such as Microsoft (http://www.microsoft.com) who in 1995[2] started Expedia (http://www.expedia.co.uk) an online travel company. Although it is fair to say that Microsoft had little experience in the travel industry, their knowledge of technology provided them with an opportunity to compete in a different market.

The Internet has allowed companies such as EasyJet (http://www.easyjet.co.uk) and Ryan Air (http://www.ryanair.com) to facilitate communication directly with the consumer, and provide online booking facilities removing the need for intermediaries in most cases. Online booking is not for everyone however as some traditional travel agents such as Bath Travel (http://www.bathtravel.co.uk) who’s customer is often slightly older and possibly less Internet orientated, are still offering a more personal service by placing bookings on behalf of their customers for a small fee (£15) [3].

The Internet has also resulted in collaboration or alliances and vertical integration in terms of distribution as organisations realise the benefits of working together, as in the case of Opodo (http://www.opodo.co.uk), an online flight booking service which is jointly owned by British Airways, Air France, Alitalia, Iberia, KLM, Lufthansa, Aer Lingus, Austrian Airlines, Finnair and Amadeus.

These circumstances are not unique to the travel and tourism industries as can be seen in the case of rightmove (http://www.rightmove.co.uk) one of the UK’s leading property search engines which is jointly owned by Halifax, Countrywide Assured, Royal & Sun Alliance and Connells.

---

[1] Citrin, A., Stem D., Spangenberg, E., & Clark, M. (2003). Consumer need for tactile input. An internet retailing challenge. Journal of Business Research 56 (2003) 915– 922

[2] http://overview.expediainc.com/phoenix.zhtml?c=190013&p=overview

[3] http://www.bathtravel.com/nofrills.htm