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Chapter 1 Overview.


After you complete your study of this chapter, you should be able to:

* Understand the rapid growth of the Internet.

* Explain why the hospitality and tourism industry, as well as its consumers, are at the forefront of Internet usage.

* Explain how the Internet can be used for different communication and business purposes.

* Understand the impact of the Internet on the many sectors of the hospitality and tourism industry.

* Explain why it can be difficult to maintain up-to-date Internet knowledge.


The growth of the Internet can only be described as breathtaking, if not revolutionary. This is seen from the increased number of Internet users in recent years. In 1994 in the United States, there were only 25 million Internet users (Verity and Hof 1994), but this number increased to 40 million in 1997 (Cortese 1997) and to 95 million in 2001 (Figure 1.1).

The ability to communicate with one another instantaneously, without geographical limitations, and without time constraints, captures the imagination of millions worldwide. The total online population was estimated to be 619 million in 2002 and will reach 940 million in 2004 (Global Reach 2003). This is not surprising. Countries, both large and small, are seeing the Internet not only as a means of communication, but also as a new area of economic growth. China, for instance, has invested billions of dollars in developing its Internet infrastructure and is projected to own the most Internet users by 2006. Table 1.1 presents a brief overview of the number of Internet users according to languages spoken.


The hospitality and tourism industry has always been among the first to capitalize on new technology. Because it is an information-rich industry, it depends heavily on finding and developing new means to distribute travel and hospitality products and services, marketing information to consumers, and providing comfort and convenience to travelers. Similarly, consumers are constantly seeking new sources of information to help them make decisions before purchasing travel services to make their trips more satisfying. It is not surprising that travel and hospitality e-commerce is among the top four growth categories, second only to finance and insurance services.

Use of the Internet by travelers to plan and book their trips continues to grow at a rapid rate. In the United States, according to the Travel Industry Association (TIA 2003), about 64 million online travelers used the Internet in 2002 to get information on destinations or to check prices and schedules, growing about 400% over three years. From 1999 to 2002, online booking showed a remarkable double-digit growth for four consecutive years, with a spectacular 58% growth in 2001, followed by a 25% growth in 2002. It is estimated that online leisure travel sales totaled $20.4 billion in 2002 and that hotel reservations booked online reached $3.8 billion (Forrester Research 2002).

Statistics also suggest that online travelers are a very attractive group of people. They tend to be under the age of 55, have an annual household income above $75,000, are college educated, and work in a professional/managerial occupation. The average spending by frequent online travelers was about $3,200 in 2000 (TIA 2001). As a whole, online travelers spent over $13 billion in 2000, buying travel and related services over the Internet. With the Internet evolving so rapidly, these statistics will soon become outdated. There is strong evidence to suggest that this trend will continue in the years to come.

In Canada, Buhasz (2001) has also shown that travelers are increasingly turning to the Internet for travel planning and booking, bypassing travel agents and making fewer phone calls to airlines, tourism offices, hotels, and car rental agencies. The general consensus is that compared to other online transactions, such as retail shopping or banking, online travel booking will be the number one growth area for the Internet in the following years.

The demand for travel products and services from the Internet is still growing despite the dot-com bust that took place beginning with the last quarter of 2000. This is when the NASDAQ plummeted from more than 5,000 points to under 2,000 points in early 2001 and to under 1,500 points in 2003, a loss of almost 70% from the peak. Some well-known travel sites, such as Expedia ( and Travelocity (, are still going strong, and new sites are being added. In late 2000 and early 2001, a new travel site, Orbitz (, received a $50 million investment fund from some of the major airlines in the United States. Among the founders of the site, we see some of the largest airlines, including American, Continental, Delta, Northwest, and United. The Orbitz site promises to use new technology to help consumers find the best available fare. In Europe, it is predicted that the online travel market will more than triple in size, from an estimated $2.9 billion worth of gross bookings in 2000 to more than $10.9 billion in 2002.


The exponential growth of the Internet is due in large part to its unique capabilities. The first characteristic is its peer-to-peer system. This means that everyone on the Internet can communicate and function as an equal with anyone else. Anyone with an IP (Internet Protocol) address can host server functions from their own computer and offer these to anyone else on the Internet. Theoretically, therefore, every business in the hospitality and tourism industry can offer and market their services and products directly to customers. Information about these services and products can be updated instantly around the clock.

The second characteristic is that the Internet is an interconnected network and thus has the capability of interaction. Its peer-to-peer design allows users, including customers, merchants, and financial institutions, to interact with each other. This has resulted in a real-time online reservation system--a direct electronic distribution system accessible through the Internet to the general public. This characteristic can also be used to gather customer feedback to help plan or design customizable new products or services or to test-market new products or services.

The third characteristic of the Internet is its hyperlink capability. Unlike the traditional print publication, the Internet allows text and information to be linked in such a way that a simple click will lead you to the next level of text or information. It is truly a web of information. This characteristic makes the Internet a great research tool and an instant information finder.

The fourth characteristic is that the Internet embodies a key underlying technical idea: that of open architecture networking. In this approach, the choice of any individual network technology employed by individual companies and organizations is not subject to a central control. In an open architecture network, each network can be designed according to the specific environment and user requirements of that network. However, this can create a situation in which different communication hardware and software compete with one another and may thus create compatability problems. This is an important consideration when a business tries to use the Internet for communication and/or commerce. It is important to realize that barriers exist in both hardware and software systems used in Internet communication.

The fifth characteristic is that the Internet is platform independent, meaning that no matter what kind of computer or operating system you use to connect to the Internet, you can still communicate with other computers and operating systems. A platform is specific computer hardware or a specific combination of hardware and operating system. Unix, Windows, and Macintosh are examples of three different computer platforms.

Finally, making a presence on the Internet is no longer a task that requires a technical expert or huge financial clout. With the price of computers becoming more affordable and the availability of Web page authoring programs, anyone with a connection to a Web server can publish a home page in literally hours. One need not worry about complicated HTML (Hypertext Markup Language) codes that control the appearance of a Web page.


E-commerce is the new buzzword in the global economy. The heart of the global financial center, the New York Stock Exchange, has been transformed into a roller coaster because of the introduction of Internet-based companies. At its golden days, it seems that a new dot-com is coming on the scene every day. Media and television are saturated with advertisements and promotions for these dot-coms. E-commerce has now taken a more sophisticated approach and is being integrated into the strategic planning processes of many companies.

Business-to-consumer e-commerce in the hospitality and tourism industry has about 95 million online travelers in the United States alone, or about 45% of the U.S. adult population (TIA 2001). A number of researchers (Buhasz 2001; TIA 2001; Zhou and Lin 2000) have reached the conclusion that travelers are increasingly using the Internet for travel planning and reservations. The TIA (2001) reported that 66% of online travelers use the Internet to get information on destinations or to check prices and/or schedules. This figure confirms Zhou and Lin's finding that about 60% of the respondents will use the Internet for similar tasks (Zhou and Lin 2000). In terms of online buying, over 39 million people booked travel using the Internet in 2002, a 25% increase over 2001 (TIA 2003). It was reported that by the end of 2000, 59% of Canadian Internet users have gone online at least once to research travel information, and 18% have used the Internet to book some element of their travel plans (Buhasz 2001).


The hospitality and tourism industry is an information-rich industry. Most of its products and services are intangible, perishable, emotionally appealing, and people oriented. In addition, exposure to the services and products are typically brief. Since such products and services are intangible, consumers rely heavily on information about the product or service before they buy. Consumers need up-to-date, fast, interactive information that is available 24 hours a day, seven days a week. In addition, customer service assumes a much more important role than in any other industry since it is part of the travel experience. Fast, interactive, 24-hour customer service has been the ideal goal for the hospitality and tourism industry. For the first time, the Internet has made that dream come true. With the capability of the Internet, communication between service providers and customers can be done in a timely manner.

The Internet has broken both time and geographic barriers. Today, no matter where you are, you can communicate with your customers by e-mail as long as they have an access to the Internet. Changes in weather conditions, price, schedules, and programming can be communicated instantly to your customers. Previously, because of budget constraints and market limitations, small businesses in remote areas had difficulty marketing their services to potential customers. With the Internet, geographic location is no longer a problem. A small bed-and-breakfast inn in a small town, previously unknown to outsiders, can now reach potential customers by having their own Web site or having their products and services listed with a Web site.

The ability to communicate with customers 24 hours a day, seven days a week, and without the limitation of the geographic location can help travel and hospitality service providers. It builds up their customer relationships and therefore increases customer loyalty. Through data mining and other customer information collection methods, market segmentation and market customization can be done to deliver customized information to customers. Today, many companies are setting up their own Internet portals to attract and allow customers to communicate with them on a regular basis. Many Internet tools, such as e-mail, e-newsletters, newsgroups, and discussion forums are being utilized to communicate to consumers.

The Internet is used not only for business-to-consumer communications but also for business-to-business and within-business operations. The creation of intranets and extranets provides new opportunities for businesses to conduct communications with each other more efficiently and more effectively. It also increases the convenience and savings for businesses to communicate with their own employees.


Internet marketing, also called e-marketing, opens up new opportunities for companies to market their services to consumers in ways that could only be dreamed of in the past. Marketing is about bringing product information and services to targeted consumers in a timely, accurate fashion. The Internet is a perfect medium for doing precisely that. More companies are realizing that they need to devote more resources to Internet marketing to capture this growing online travel market.

Companies are paying more attention to Internet marketing because of both the size of the market and the ability for market segmentation and consumer interaction. Traditional marketing media, such as television, radio, and newspapers, constitute one-way mass marketing. Internet marketing, on the other hand, can be done so that target markets are clearly selected and interactivity is built into the marketing message.

The technology that enables this type of target marketing is called push technology. Using push technology, companies send their marketing messages to individual consumers based on their predefined preferences. In this model, users do not have to search their way through what the Internet has to offer. Instead, they simply enter a variety of interests and needs into a server-side database. The server then collects all the information it feels is relevant and pushes the customized marketing information to the user's desktop. This is typically in the form of an e-mail message or portal Web site through client software that is sometimes a standard browser and sometimes a proprietary interface, such as PointCast or Yahoo News Ticker.

The intangible nature of travel and hospitality products and services dictates that information has paramount importance to both consumers and the industry. This industry has always been looking for new ways to distribute travel and marketing information to consumers and to provide comfort and convenience to travelers. Similarly, consumers are constantly seeking new sources of information to help them make decisions before purchasing travel services and to make their trips more satisfying. With the new capabilities of the Internet, consumers can now "fly" the skies, "cruise" the seas, "climb" the mountains, "sleep" on the hotel bed, "drive" the road, "hear" the roar of tigers and "explore" the cities, towns, and countries they want. If they like the products and services, they can purchase them right from the comfort of their personal computers. They can also keep in close contact with their homes, offices, and businesses while traveling. In other words, for the first time, the Internet has made it possible for intangible travel and hospitality products and services to be tangible.

The dynamic information provided on the Internet obviously is superior to the static information displayed in a traditional printed copy of a brochure. From a consumer's point of view, one can access information anytime, anywhere. The information on the Internet is richer, more varied, and time sensitive. From the service provider's point of view, information about service, price, weather conditions, programs, and schedules can be updated all the time and any time. Marketing information can be highlighted on the Web site and information catered to the target consumers. The Internet has struck a perfect match between the needs of travel and hospitality companies and the traveling public.


The impact of the Internet can be said to include every aspect of the travel and hospitality business, from information distribution and marketing to travel and hospitality product and service purchases. According to projections by Forrester Research (2002), the number of Americans making online travel purchases in 2002 grew to 23.3 million households. Forrester also predicted that online leisure travel sales totaled $20.4 billion in 2002 and that hotel reservations booked online reached $3.8 billion. Zhou and Lin (2000) conducted a survey on the use of the Internet versus the printed brochure. Their findings show that the majority of respondents have access to the Internet; just over half the respondents had Internet access at home, followed by 34% at the library and 31% at the office. When asked which source of information they will depend on the most for their future trip planning, about 43% reported that they would use both printed brochures and the Internet, and 37.8%, would use only printed brochures.

However, if we add those who will use both printed brochures and the Internet and those who will use only the Internet, we come up with a figure as large as 58%. In other words, nearly 60% of people will use the Internet either as the sole or as a complementary source of travel information (see Table 1.2).

Note in Table 1.2 that only about 7% of the people use a travel agent for travel advice and planning. In fact, the biggest impact on the travel and hospitality industry is in the area of travel planning and reservations. The International Air Transport Association (IATA; conducted a survey on business travelers' use of the Internet (Levere 1999). The survey showed that business travelers worldwide are increasingly embracing the Internet to research and book their flights. Almost two-thirds of the survey's approximately 1,000 respondents from Europe, North America, and the AsiaPacific region said that they used the Internet to find flight information--a 50% increase over the survey's results from two years ago.

On the suppliers' side, a number of the third-party travel Web sites have loomed large in travel information distribution and travel reservations. All these sites have strong financial and marketing clout from some of the largest corporations in the United States. Expedia ( is owned by Microsoft, while Travelocity ( is owned by Sabre, one of the largest global distribution systems. Other third-party travel reservation sites include (; a company that claims that consumers can name their own prices), (; and Orbitz. com (

Suppliers, such as hotels, airlines, rental car companies, and even cruise lines, are beginning to offer online real-time reservations. Indeed, they not only make reservations available online but also use incentives to encourage travelers to book online. For example, at one time, Northwest Airlines offered a new online booking program to small and medium-size corporations that featured incentives including free tickets and upgrades, elite frequent-flier program status, airport lounge memberships, and travel management aids. United Airlines offered a bonus of 25,000 miles to participants in its frequent-flier program who stayed at least 10 times at Regent International Hotels by December 30, 2000; each stay had to be a minimum of three nights. Travelers also had to register with Regent and pay the corporate room rate. British Airways established a Web site using London as a destination ( that contained in-depth information on the city from a variety of travel guidebooks as well as data on the newest restaurants, bars, clubs, theaters, and art exhibits. Visitors to the site could also buy airline tickets and reserve hotel rooms.

With the increased interest of travelers in online information and booking and the aggressive marketing efforts of travel suppliers to sell tickets online, travel agencies have been caught in the middle. Suppliers, starting with the airlines, began to cut their commissions as early as 1997, and this has turned out to be a deadly blow to the travel agencies.

Faced with this tremendous pressure to survive, travel agencies have used various strategies to cope with the new reality. These strategies range from early denial of the Internet's impact to attempts to free themselves from the control of the traditional global distribution systems by setting up their own central reservation systems. Travel agencies are going through a period of restructuring and reorganization. Some of the small mom-and-pop travel agencies have closed; some have been taken over by large travel companies, and some have begun to take advantage of the Internet to turn it into a profit-making opportunity. In Chapter 8, we discuss these impacts and their ramifications.


Research is an important function and planning in the hospitality and tourism industry. Morrison (1996) defines marketing research as "the function which links the consumer, customer, and public to the marketer through information." In essence, research is about collecting information about your own business, your competitors, and your customers and making sense of the information gathered for the purpose of making intelligent business decisions.

The Internet, as pointed out earlier, is a vast collection of information. Some of this information is static information that does not change over time, but some of it is dynamic ("hits," or information that can change over time such as ticket price, number of online visitors, and weekly promotions). Both static and dynamic information can provide valuable information for businesses if properly collected and analyzed.


The Internet, despite its wide adoption and rapid development, is still in its infancy. The technology that has brought about the Internet is undergoing rapid changes. Every new development in technology gives rise to new opportunities and solutions to the hospitality and tourism industry. New technologies, such as broadband communication, wireless application and artificial intelligence, will certainly change the landscape of conducting business in the hospitality and tourism industry.

These technologies are already making inroads into the hospitality and tourism industry. For example, Datalex (, a leading provider of information technology--based solutions to the airline and travel industries, is among the first technology providers to make a live airline reservation using WAP (Wireless Application Protocol) technology on a Nokia 7110 cell phone. The reservation was made from the company's office in Dublin, Ireland, using Datalex's Internet travel reservations system, BookIt!, on a server located in Atlanta, Georgia. Datalex developed the interface using WAP, WML (Wireless Markup Language), and its Java-based BookIt! server. Datalex's technology will be provided to travel and cellular network companies to help them develop the global cell phone market, estimated to be over $1 billion by the year 2005 and to grow to $80 billion by 2010 (Datalex 2000).

In the years to come, hotel guestrooms will be wired with high-speed Internet connections at little or no charge to guests. In fact, many hotels have already done so. The Wingate Hotel provides high-speed Internet access to its business travelers free of charge. Small hotels are also making use of this technology to attract customers. The Willows Lodge in Washington State, with only 88 rooms, offers free high-speed Internet connection in every room. Even cruise lines are adding wireless Internet connection to their cabins. Using wireless technology and personal digital assistants (PDAs), consumers will be able to check in before they arrive at the airport or hotel.

E-commerce, the buzzword of today's economy, will be integrated into the activities of every travel and hospitality business. As a matter of fact, most of the dot-com start-ups represent new brands of products and services that in many cases are duplications of the established brands, but with a new medium: the Internet. Those established brands were slow to start in terms of using the Internet, but they are catching up quickly. They are spending hundreds of millions of dollars to compete with the new Internet brands and to improve their efficiency.

The new century will also witness new challenges and issues that come along with the new opportunities and competition. Adopting new technologies without dramatically increasing the cost of doing business will be a challenging task for every commercial manager. The issues of e-commerce security, privacy, and intellectual property rights are likely to loom large as the Internet becomes part and parcel of people's lives. We are living in an interesting time. The hospitality and tourism industry, like it or not, is right in the center of it. As an industry, we have survived through difficult times. How well the industry will thrive depends on how well the industry rides the waves of the new technologies in the new century.


Online Transactions


Peer-to-Peer system



Open Architecture Networking

Platform Independent

Interactive Information

Customized Information


Traditional Marketing Media





The Internet has undergone tremendous growth since it was invented, especially with the advent of the World Wide Web. The Internet is changing the way consumers access travel information, plan their trips, and purchase the products and services. The hospitality and tourism industry is always among the first to adopt new technology and innovations. Thus, it is not surprising that the industry is among the top markets in the use of the Internet. More and more people are using the Internet for travel information, planning, reservations, and booking.

The impact of the Internet on the hospitality and tourism industry is far reaching, especially in the area of travel information distribution, marketing, planning, and booking. As the technology keeps changing, new innovations and solutions are being added daily to take advantage of this new medium. It is important to understand that the Internet is a global phenomenon. For hospitality and tourism companies, the Internet can be used as a means for communication, commerce, marketing, and information distribution and research.







CASE STUDY: (, one of Asia's leading online travel marketplaces, announces the completion of system integration with Pegasus Solutions, a leading provider of hotel industry e-commerce and transaction processing solutions (Nasdaq: PEGS). Asiatravelmart. com users can now enjoy real-time confirmation of availability to more than 44,000 hotels worldwide via the Pegasus online booking engine. This strategic relationship allows users to make bookings directly with each participating hotel's central reservation system (CRS), such as that of Hilton, Hyatt, Sheraton, Utell, and many more. Details such as room descriptions, rates, and availability are instantly posted online.

The integration was fully completed in a record time of two months ahead of the projected schedule. The strategic agreement was signed between the two parties in November 2000, and implementation of the Pegasus online booking engine was completed in early January 2001. According to Alex Kong, chief executive officer of, the fulfillment of this extensive project within a mere two months demonstrates the level of's technical excellence and the presence of a strong team with world-class expertise. "I am extremely proud of my great team of dedicated professionals who worked very hard in realizing the connectivity in such a short period with the Pegasus user-friendly interface. We remain committed to delivering our vision of providing the best e-travel experience to our customers. Asiatravelmart. com has reaffirmed our leading position once again with the completion of this major project, which empowers users with direct access to critical travel information in real time, anytime, online, in making informed decisions," Kong said. The connectivity also offers instant confirmation for all hotels with the unique confirmation number that the hotel's CRS generates to users. Users also enjoy the flexibility of making last-minute or same-day bookings and even cancellations at any time. Booking is guaranteed with proof of credit card ownership by submitting details online. is Asia's number one online travel marketplace. It provides a unique platform and environment for travel buyers and sellers from around the world to trade their travel-related products and services over a secure Internet connection. is a one-stop travel shop for hotels, air tickets, tour packages, transfers, meals and car rentals. It offers more than 110,000 products from over 40,000 travel suppliers in more than 180 countries, providing users with the convenience of making travel reservations 24 hours a day at wholesale prices. is among the first in the world to provide an electronic ticketing facility where travelers can plan or buy flight tickets at 30% to 60% lower than normal prices and print the ticket vouchers off the Web site. It is also Asia's first online travel site to offer mobile-commerce services through WAP technology. can be accessed at


1. How is the early completion date of's integration an advantage?

2. What do you think is the most alluring aspect of Why?

3. How is important to the tourism industry in Asia?

4. If you were an advertising adviser for, what would your suggestions be to promote the Web site? To promote business in general?

SOURCE: Karin Wacaser, Vice President, Corporate Communications, Pegasus Solutions, Inc.


1. Why did the Internet grow so rapidly?

2. Why is the hospitality and tourism industry a major driving force for the rapid growth of the Internet?

3. What are some of the major characteristics of online travelers?

4. Describe the characteristics of the Internet.

5. What makes hospitality and tourism e-commerce such an appealing function of the Internet?

6. Why is the Internet an excellent communication medium for the hospitality and tourism industry?

7. List some of the evidence that use of the Internet by travelers is increasing.

8. Which sector of the hospitality and tourism industry was impacted most by the Internet? Why?

9. Why is the Internet a valuable place for conducting hospitality and tourism research?

10. List some of the challenges for the hospitality and tourism industry in the 21st century.


Buhasz, Laszlo. (2001). "Travel Net Use Overview."

Cortese, A. (1997). "A Census in Cyberspace." BusinessWeek, May 15, 83-84.

Datalex. (2000).

Forrester Research. (2002).

Global Reach. (2003).

Levere, Jane L. (1999).

Morrison, Alastair M. (1996). Hospitality and Travel Marketing. 2nd ed. Albany, NY: Delmar.

Travel Industry Association. (2003).

Travel Industry Association (TIA). (2003). "Online Travel Booking Jumps in 2002 Despite Plateau in Online Travel Planning." Press Release. 12/9/02.

Verity, J. W., and R. D. Hof. (1994). "The Internet: How It Will Change the Way You Do Business." BusinessWeek, November 5, 80-88.

Zhou, Z. Q., and Li-Chun Lin. (2000). "The Impact of the Internet on the Use of the Printed Brochure." Proceedings of the CHRIE's 2000 Annual Conference, July 19-22, New Orleans.

Zongqing Zhou, PhD

Associate Professor

College of Hospitality and Tourism Management

Niagara University
Worldwide Internet Users by Language

                    2002 (1,000s)     POPULATION (%)     POPULATION

English                  230               36.5             280
European                 224               35.5             328
Asian (including         179               28.3             329
Chinese                   68               10.8             170
Total world              619                                940

SOURCE: Compiled by the author, from Global Reach,

Information Sources for Future Travel Planning


Printed brochures and the Internet       335          42.8
Printed brochures                        296          37.8
Word of mouth                            184          23.5
Internet                                 116          14.8
Travel agents                             54           6.9

SOURCE: Zhou and Lin (2000).


Online past-years travelers, 1996-2001.

1996   27
1997   42
1998   65
1999   78
2000   90
2001   95

SOURCE: Travel Industry Association of America,
Traveler's Use of the Internet, 2001 Edition.

Note: Table made from bar graph.
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Author:Zhou, Zongqing
Publication:E-Commerce and Information Technology in Hospitality and Tourism
Date:Jan 1, 2004
Next Article:Chapter 2 Internet fundamentals.

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