Repositioning travel agencies on the Internet

Abstract

Traditionally, retail travel agencies have acted as intermediaries between primary creators/suppliers of travel products and the consumer, largely as a function of taking upon themselves the transaction costs for the consumer to find and select appropriate travel facilitators. Internet-related technologies dramatically change transaction costs in communication-based activities and raise both challenges and opportunities for this business sector relating to issues of the nature and value of intermediation. Two major threats currently perceived are the disintermediation of retail agencies by primary producers, and the emergence of new virtual intermediaries. The potential for structural changes in the travel sector highlights the need for travel agencies to actively select between business models which can best support an effective online strategy. The lowering cost of information and communications technology calls into question the sustainability of many existing implicit online models. To aid in the creation of new forms, we use the series of seven models derived by Burn and Barnett1 to describe the range of virtual organisational structures and apply these in the travel industry. The value of each of these forms lies in there being an appropriate response to the communication and transaction needs within a given nexus of market forces and opportunities. It is argued that the characteristics of traditional travel agencies are not yet aligned with the demands of the new travel economy. A rapidly changing business environment, largely brought about by the Internet, will require companies to quickly develop new affiliations and alliances, have access to new products and be creative in their marketing. It is suggested that an awareness of the range of organisational forms, together with an appreciation of their potential for application, will aid successful adaptation by travel companies within a changing business environment.