The Tourism Industry

The Tourism Industry • Tourism is based on difference • Leisure activities presuppose their opposite, namely the existence of regulated and organized work. • For tourists the visited places are “free” of work, services are supplied which free the consumer from the daily burdens. • The strict time constraints imposed by working relationship are released; tourists live within a different time frame. • Tourism places are places, where tourism attractions are assumed to be unique, different from the everyday environment. • Tourists have to travel to the place of consumption • Tourists are not able to test the product in advance; Information is the only means, which can close this gap. Werthner 41 Characteristics (2) • The service - the tourism product is consumed at the time it is produced. The product is based on social interaction between the supplier and the consumer, where the quality of the product is mainly defined by this interaction. Consumer part of production. • Tourism is labor intensive, which will increase the costs of tourism services on the long term, at least compared to the other areas of our economy. • Tourism is very sensitive to changes in private household incomes (no primary need). It is in direct competition to other products in the household income basket such as books, newspapers, entertainment, but also electronic products. Werthner 42 Characteristics (3) • Tourism is an umbrella industry - containing a set of interrelated businesses, involving travel companies, accommodation facilities, catering enterprises, tour operators, travel agents, providers of recreation and leisure facilities • Tourism is an important vehicle for regional and national development planning and strategies - also in industrialized countries (see also the respective programs of the European Commission). This is due to its job creation potential and the rather low entrance barriers compared to other industries. Tourism activities can be designed in such a way, that it respects environmental, social and cultural constraints. Werthner 43 Definition Traveler Outside usual environment Yes No For less than 12 consecutive month Yes Purpose of trip other than an activity remunerated from within the place visited Yes Tourism Visitor With overnight Yes Tourist No Same-day Visitor OtherTravelers No No And: international - domestic inbound - outbound Werthner 44 source: WTO International Tourist arrivals World tourist arrivals 10 9 8 Change (%) 650 600 550 500 in Mn 7 6 5 4 3 2 1 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 450 400 350 300 250 200 And: International : domestic - 1:10 - in 1992 503 Mn internat. and 4.875 Mn domestic Werthner 45 International tourism receipts International tourism receipts 500 450 400 350 300 250 200 150 100 50 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 0 5 10 20 15 25 receipts: expenditures of international inbound visitors including payments to national carriers for international transport; include any other prepayments made for goods/services received in the destination; excludes international fare receipts Tourism receipts on 3. place in world exports (after petroleum and petroleum products; motor vehicles, parts and accessories) Werthner 46 Change (%) Bn U$ Regional market share Africa 3% Americas 20% Middle East 2% East Asia/Pacific 14% South Asia 1% Europe 60% Europe is declining. East Asia/Pacific grew from a share of 1 % (1960) to 14% (1995). Werthner 47 Economic Importance • Based on statistics of WTTC (Wolrd Travel and Tourism Council). • Takes into consideration also third party suppliers (construction, investment, telecommunication, banking) and governmental expenditures - with specific weights. • Difficulty: travel and tourism not a own category in national statistics • looks at GDP - Gross domestic product (consumer expenditures, capital investment, government expenditures and foreign trade), jobs, investments, taxes • open debate between WTO, WTTC, national and international statistical bodies Werthner 48 WTTC statistics (1) Gross Domestic Product - World 7,0 6,0 5,0 Tr U $ 11,0 10,9 10,8 10,6 Percent 4,0 3,0 2,0 1,0 0,0 1988 1989 1990 1991 1992 1993 Years 1994 1996 1997 2007 10,7 10,5 10,4 10,3 10,2 WTTC: travel and tourism - world biggest industry Werthner 49 WTTC statistics (2) Jobs by travel and tourism - worldwide 400 350 Mn of jobs 11,0 10,8 10,6 10,4 10,2 10,0 9,8 Percentage 300 250 200 150 100 1988 1989 1990 1991 1992 1993 1994 1996 1997 2007 Years 9,6 9,4 Werthner 50 WTTC statistics (3) Jobs GDP Investments Taxes 1997 262 Mn 3,3 Tr USD 801 Bn USD 716 Bn USD 2007 383 Mn 6,3 Tr USD 1,5 Bn USD 1,3 Bn USD Growth 68,40% 52,38% 53,40% 55,07% Werthner 51 Exogenous Factors - 1 (WTO) • economic and financial developments: tourism is income sensitive with different elasticity for different regions. – 1% growth in private consumption leads to no change in tourism, whereas a growth of 2,5% results in a growth of 4% in travels spending. – Exchange rates are crucial: 5% drop (or rise) in the relative cost of travel abroad results in a growth (or fall) of 6% to 10% in tourism movements. – The increased flexibility in work time will lead to more & shorter vacation. • demographic and social changes: the main tourism generating countries are aging, leading to increased travel of the relatively high income group (between 35 - 55 years of peak earning years). – The groups of "singles" as well as of women are of increasing importance. – Relatively high unemployment rates in developed countries have also been taken into consideration as a negative factor. • Technology: this is not only related to IT, but also to advances at decreased cost in construction and manufacturing, especially in the transport industry. Werthner 52 Exogenous Factors - 2 • Infrastructure, equipment and facility investment: limiting factor for travel and tourism. For example, airlines will only be able to finance 40% of their investment needed for a renewal of their aircrafts. In addition, airport capacities are in many cases inadequate for supporting further growth. • Political / legislative factors: deregulation as well as privatization strategies are intended to break down barriers for entry in travel and tourism. It should be noted, that this has not yet produced the foreseen growth in the former states of Eastern Europe • Environmental issues: The growing awareness of environmental issues is putting an increasing pressure on suppliers and destinations. Environmental impact assessment will become crucial. But appropriate measurements will contribute to a sustainable development. • Safety: this constitutes a constraint for the development in specific destinations, many outbound countries in the Western hemisphere show a high sensitiveness in their travel behavior. Werthner 53 Key market forces (WTO) • changing consumer behavior: in 1995 the non-mainstream tourism represented approx. 5% of the total tourism demand, with growing tendency. • increasingly varied product development, finely targeted product marketing. • globalization: tourism is becoming a real global business, where the domestic supplier has to compete with long distance destinations. This is accompanied by a concentration process. • marketing: the success products will depend on extensive and targeted marketing, leading to the growth of new distribution channels. There will be more destination focus on image. • human resources: puts heavy emphasis on educated and trained personnel, increasing average wages and salaries. Tourism will have to compete with other service industries which have developed well suited training programs, and are offering higher salaries. Werthner 54 Prospects • There will be no slowdown in the growth of international tourism, – reaching 692 million in the year 2000, – more than 1 Bn in 2010 – and 1.6 Bn in 2020. – This represents an annual growth rate of 4.3% 1995 - 2020. – Corresponds to 7 % of the worldwide population, leaving still a potential for further growth. • Long haul tourism will increase (decreased costs, improved infrastructure, technological progress; • its share will rise up to approx. 24% in 2020, compared to 12% in 1994. Werthner 55 Growth perspectives in different regions Region Europe America East Asia and the Pacific South Asia Middle East Africa Overall Inbound Outbound + +++ ++(+)? +++ +++ +++ ++ + ++ ++(+)? +++ +++ +++ ++ +: below average - up to 3.5% per year; ++: average - 3.5 - 5.1 %; ++: above average Werthner 56 Market shares in 2020 Regional market shares - 2020 Africa 5% Americas 18% Europe 45% Middle East 4% South Asia 1% East Asia/Pacific 27% Werthner 57 Trends in consumer behavior (2) • From mass consumption with production oriented to consumer oriented • Segmented and individualized; postmodern tourist • Shorter time spans between booking and arrival, more holidays • Distinctions between work and holiday diminish • Governance of the Special / Unique • Dominance of packaged tourism - decreasing, but in 1993 in UK 63% of outbound holidays sold as packages - parallel segments • Product competition to channel competition • From consumer oriented to consumer driven - mass customization; new role of travel agents Werthner 58 Structure of tourism market Consumers Tourist NTO outlets government bodies travel agent Intermediaries RTO tour operator CRS/GDS DMO, Planners & Administration LTO incoming agent hotel chain Suppliers Primary supplier Airline other transport Werthner 59 Primary Suppliers (1) • Basic product suppliers such as accommodation, catering, or entertainment. • It is by far the biggest group, with accommodation facilities as being the largest subgroup. In 1995 there existed 12,3 Mn rooms worldwide. • Mostly SMEs. • In EU “HoReCa” sector (covering hotels and other accommodation, restaurants, canteens and catering) – 95.5 % of the enterprises are very small (0-9 employees). – Half of the persons employed in this sector work in very small businesses (1 to 9 employees). – Only about 10 % of persons employed work in large enterprises of more than 250 employees. – The HoReCa sector accounts for more than 1.3 million enterprises in the EU; is about 8.5 % of the total number of enterprises. – In Austria average number of beds per overnight facility, including only the one to five stars categorized hotels, is 37,4. Werthner 60 Primary Suppliers (2) • It is an additional feature of the tourism sector that the group of primary suppliers covers a whole set of different areas, including culture and agriculture as well. • Together with their SME characteristic that is identified as being important for maintaining and creating job, this explains the specific role of tourism for regional development. • Main disadvantages: – have normally little know how about marketing and technology, – little knowledge about market developments and – rather limited access to distribution channels. For example, over 85% of European accommodation providers are not listed on airline CRS/GDS that serve travel agents worldwide. – Whereas other sectors of the tourism industry can be seen as early adopters of new technologies, this sector is normally lagging behind. Werthner 61 Airlines • Technologically most advanced sector in the tourism field, with growing importance due to the tendency to long haul tourism. • Between 1980 and 1992 scheduled traffic grew by 92%, and the capacity by 94% with falling prices (due to deregulation, growing capacities, increased competition) • Use advanced Yield Management methods. In the USA the number of rates increased from 400.000 to 7 Mn in the seventies. • Airlines were among the first companies creating worldwide electronic networks, for the means of selling and distribution, for internal management and operations. • Economic problems in this area. For example, the average load factor on international services fell from 64% in 1989 to 59% in 1992, which is below that level at which airlines can break even after interest payment . • In this sector we also include other technologically advanced companies: – Other types of transport suppliers (car rentals, railways, maritime industry) – Enterprises such as credit or media companies (transaction or content). • Conceptually, huge and powerful suppliers the same group as the SME structured overnight facilities. Werthner 62 Hotel chains • This group is situated both on the intermediary as well as the supply side since many chains represent marketing and operation units, where the accommodation is owned by a different unit. • This market is dominated by US multinational corporations, which in 1992 owned 13 of the top 20 chains. • These chains focus on the higher priced market segment, with wellestablished reservation centers. • They have learned to cooperate. In 1989 70 major hotel brands established THISCO as a computer switch to provide a common electronic booking interfaces to their hotel central reservation systems worldwide. • With 18 Mn reservations per year and 3.2 Bn USD in room revenue generated, they represent 60% of the worldwide market share. Werthner 63 • The main function is to purchase and to assemble a large number components produced by the principals, and to sell these as packaged products. • They act as whole-salers, performing nearly as virtual enterprises since the value they add to a product is the aggregation process. • They conduct the main marketing and distribution activities and have part of the financial risk of unsold stocks. • One of the main advantages for suppliers is that tour operators have a good market access, well known brands and that the financial risk can be passed on, at least partially. • It is the advantage of the tour operator, and of the consumer, that by the bargaining power of tour operators lower prices can be achieved. • In Europe, in 1992 one third of total travel expenditures fell into this category. In Germany and in the UK roughly half of all holidays sold were packaged. • In specific destinations the percentage of packaged holidays is not that high (in Tyrol, Austria, nearly 70 % of the tourists are “direct” bookers). • Tour operators show several important features: they own brands well known in the tourism sector and they have the knowledge about product aggregation and marketing. • They experience a fierce competition and have a rather limited control over the quality of the product. Werthner 64 Tour Operators Travel agents • Travel agents act as a distributor, broker or retailer on behalf of the suppliers, their main contact with the supply side is the tour operator. • Their income is done on the base of a commission, a percentage of the product price. These are designed in such a way that travel agents should prefer specific operators and/or systems. • They are the main point of contact for consumers. • They are small and medium enterprises, being under pressure by commission reduction strategies of both airlines and tour operators. • They are part of the international electronic distribution network constituted by the CRS/GDS. By the means of these systems they may also access products of tour operators, perform reservation as well as billing tasks. • The use of these systems has increased their productivity and sales (In Germany travel agents introducing the German START system, they could lower their traditional communication costs by 22%, while increasing their turnover by 17%). • But linking to a specific distribution channel also creates dependencies. Werthner 65 Computerized Reservation Sytems/Global Distribution Systems • CRS/GDS are product of the 1960 • Main electronic interface on the travel and tourism market (“switch” between suppliers and intermediaries on side and travel agents on the other side). • As the result of a permanent concentration process four major systems, e.g., Amadeus, Galileo, Sabre, Worldspan, have been established. • Their shareholders are mainly airlines, since the management of airline seats and their distribution constitute their origin. • Today they also contain other products such as other transport means, accommodation - mainly from hotel chains -, and tour operator products. These products are integrated by links to the respective reservation systems of intermediaries or suppliers. • Their development shows failures to establish co-operative infrastructures on a broader scale, which was tried several times. For example, Amadeus and Galileo have been initiated as competing European systems after talks failed to reach consensus on just one system. Werthner 66 CRS/GDS (2) • Good example of competing electronic marketplaces - most referenced examples that early adopters of information technology can occupy a strategically dominant position . In 1992 these systems had over 98% of the entire market. • The emergence of the CRS coincided with the deregulation of the US airfares. Subsequently prices were lowered on many routes and the airlines improved their yield management operations, i.e. they flexibly adjusted pricing (and schedules and routes). • This led to an increasing complexity (and intransparency) of fares. • It has been expected that the number of flights booked via travel agents would be diminished by the CRS, however, the opposite effect happened. Because of the increasing complexity of airfares more passenger turned to a travel agent to book their flights. • This shows that electronic markets may lead to disintermediation but at the same time they may also induce increasing intermediation, depending on the price volatility and transparency and added value the (new) intermediaries can provide. • These systems represent a very influential part of the market. Sabre Travel International, for example, employs 1.800 persons, covers 45 Mn of prices, contains 650 airline companies and performs 2.000 transactions per second. • They have dominant positions in specific market, e.g., Amadeus/START in Germany. Werthner 67 Destination Management Organizations (DMOs) • The tasks of DMOs are manyfold: – they are responsible for destination management, – planning activities, – marketing/branding of the entire destination, – training and education, – and they are very often also engaged in the daily operation. – Their objective is to promote a destination's tourism by maintaining the social, cultural, economic and environmental basis, having thus also a political function. • They are often genuine governmental institutions. • They have to represent all suppliers in a democratic way, without preferencing a single group. • Normally they are paid by tourism related taxes. • And: normally excluded from reservation activities. Werthner 68 DMO (2) • Marketing a tourism destination is not simple - a destination is a very complex product : – Marketing only one of the influences on tourism. It is difficult to assess the impact of marketing on the arrival of visitors. Destination organisations cannot control the other factors, but must respond to them. – Many other organisations which do marketing. The marketing expenditure of a NTO makes up only a small part of the total tourism marketing expenditure in the country. Destination organisations cannot control, only try to influence the marketing by third parties. – Limited influence over the supply of products. Destination organisations also have very limited control over the kind, quantity and quality of tourism services. – Only a large budget will make an impact. In an image-creating promotional strategy may be waste of money if the marketing objectives cannot be achieved. • All these factors make it very difficult to assess how effective the marketing activities are Werthner 69 DMO (3) • Though the specific institutional implementation may differ from country to country, nearly all destinations have DMOs. • Special support especially for the SME structured tourism industry where smaller suppliers have limited financial opportunities. • Impementation: a kind of a hierarchical network – starting at the lowest level with the local tourist boards, – regional level within the regional tourist board – national tourist board with its international outlets. • From a formal decision making point of view, none of these bodies has a real direct influence on the other ones • The governance model is based on cooperation and negotiation • Leads also to rather slow and very often non very transparent decision processes. Werthner 70 • Tourist boards can be seen as a non-computerized information system – gathering information about the local, regional or national tourist product and distributing this information worldwide. – On the other hand they also have to deliver information to the local suppliers, informing them about current trends, the general market situation and national and international competition. • IT raise some important questions: – DMOs are, with some notable exceptions, not prepared for this development, – The dynamics of the on-line market questions their functional limitation to marketing tasks only: the consumer, once identified the proper product, wants to buy it. – Consumer ask which product is best for their needs, they do not want just information about “objective” product attributes, but also some specific advice (Problem in Austria). – Tourist boards start partnerships with private companies, or they set up their own companies dedicated to these tasks. – This raises the question of a changed financial model and of competition with private companies, doing similar tasks. Werthner 71 DMO (4) Dynamic Network • Dynamic links and configurations, enabled by common practice, IT and product interfaces. • Many links are possible (for example): – suppliers - incoming agent - tour operator - CRS/GDS - travel agent - consumer – suppliers - LTO - consumer - supplier - consumer. Customer Tourism market as a flat Web of related companies. Dynamic linking in production/use and communication Werthner 72 The Tourism Product Carrier Additive service components (information in travel bureau, room service, ..) Accomodation + Restaurant Destination‟s infrastructure physical components Tourism product as a set of components + service components integrative additive set Set of products, integration by service components and information Werthner 73 market knowledge (m) Product aggregation (1) di = g(m, c, ai) di ai ai = f(pi, qj) pi qj channel knowledge (c) products pi basic product i dj qj aj aggregated product j pi rk rk aggregated product i tourist Werthner 77 Product aggregation (2) pi, qj, rk, product type dependent attributes of basic components such as location, arrival and departure date, hotel category, price, ai = f(pi, qj) attributes of the aggregated product as a function of the basic component attributes (entire time period of a packaged product or the package price), di = g(m, c, ai) additional attributes of the aggregated product which take into consideration the market segmentation and the different distribution channel, resulting into different prices and product descriptions. • The same basic components may be combined to different products, which are sold by means of different intermediaries and distribution channels, which highly influences the product descriptions. • The aggregation process normally crosses company boarders, in that case the mapping function is described by the means of a contract between the supplier and the intermediary entity. Werthner 78 Product aggregation (3) • Normally even complexer: a room may be sold as a two or a three bedroom, with different prices. The basic product can be seen as a function of some kind of basic service or infrastructure. • Different configuration options related to different product descriptions and serving different needs. • Resulting into different expected or augmented products. Though at the final end the same basic components are consumed by the clients their expectations may have been different and, thus, also the related degree of satisfaction. • Mass customization and consumer driven markets need basic components with well described attributes in order to link them dynamically. • Product configuration possibility is an important prerequisite in markets with increased competition. Werthner 79 Product aggregation and product categories Holiday treated as one package Package tours or inclusive tours Breadth of flexibility Holiday treated as multiple components More individual package tours Type of package holidays Tailor-made or itinerary-built tours Tour operator respond with new products as well as IT solutions (Kärcher). Werthner 80 Dynamical aggregation and IT - limits individualized expeditions 0% theme-oriented holidays packaged tour single components last minute offers itinerary-built tours special products standardized 100% 0% information need 100% But not in absolute terms, depends on consumers knowledge. Werthner 81 suited for IT commodity products product set Strategies of Suppliers and Consumers • Customers react - according their preferences in terms of risk taking, flexibility, one-stop-shopping, aversion of lock-in situations etc. by – early viz. late timing for their service purchases, – selecting all-inclusive offers in advance viz. ad-hoc purchases of service components (food, entertainment etc.) on the site and on demand. • Tourism principals and intermediaries pursue a differentiated set of strategies characterized by timing and bundling of offerings: – early-booking incentives viz. last minute offerings; – bundling of offerings from one (all-inclusive offerings) or multiple principals (integrated destination offerings). Werthner 87 Specific role of information (1) • Services (non-material and bilateral goods) focus on the relationship between the supplier and the consumer. • Production integrates consumer - new concept called prosumer, a combination of producer and consumer, emphasizes the increasingly active role of consumers in the process of service provision. • Service goods are promises about something that will be done in future. • Both sides are confronted with uncertainty. • Customers cannot sure about the quality and the price of the products offered (and even if service will be accomplished). • Supply side is not sure about the consumer, about their number and behavior. (important since the consumer has to participate in the production). • Situation of asymmetric information between market participants • Non-complete and late information produce uncertainty • But, information reduces uncertainty. Between both is a positive trade-off. Werthner 88 Specific role of information (2) Uncertainty appears along two dimensions: • Price: – The consumer (aware of different prices for the same product) does not know which supplier has the best price. – This increases with the number of suppliers for the same product. – Supplier‟s problem: have to pay for accessing the market (identify the respective segment or distribution channel) - related to information costs. – The costs for looking for information should be lower than the related benefit. – Search costs are not objective, one cannot be sure to have identified the lowest price. And one cannot be sure whether the identified price won‟t change within the next future. – It is up to the own judgment whether to continue or to stop the search procedure. – In addition, in a single purchase one will accept higher prices since the opportunity costs are higher than in repeated market transactions. Werthner 89 Specific role of information (3) • Prices will change in the case that many participants perform search procedures and evaluate different suppliers • This puts pressure on the supply side. This will raise the number of and the willingness for innovation, the creation of new products. • Assuming that IT leads to price transparency, it will accelerate competition and favor innovation. Werthner 90 Specific role of information (4) • Quality: product quality is related to specific features or attributes – experience qualities: these qualities can be completely evaluated only after the consumption of the product and are strongly related with the experience of the customer. Tourism products are typical examples. Related to expected and augmented product. – confidence qualities: These can not be completely evaluated neither before nor after the purchase, the consumer does not possess the know how nor the time to do that. Promises such as “doing a vacation as never before” fall into this category. – search quality: these are feature such as price information which can be evaluated by means of search, which may stop when a consumer is satisfied or the costs become to high. Since tourism products contain also physical components, features of these components such as the geographical situation or the category of a hotel, are typical search qualities. Related to expected and augmented product. Werthner 91 Specific role of information (5) Assessment of service quality source: Schertler 95 possible not possible Timing of quality assessment before purchase after purchase search quality experience quality experience or confidence quality confidence quality Werthner 92 Specific role of information (6) • Informational market imperfections may lead to so-called information impactedness (Williamson 85), based on behavioral assumptions about market participants: – bounded rationality: this is not only due to limited knowledge of humans but also due to limited opportunity costs in looking for information, – opportunistic behavior: this kind of behavior may be caused by the informational market imperfections, participants seek to optimize their benefit, even in the case that they may discriminate others, • and external factors: – uncertainty/complexity: uncertainty may be the result of the opportunistic behavior of other market participants (espec. due to its dynamic features the market developments cannot be overlooked, thus, increasing complexity, – specificity: before agreeing about a contract the situation is characterized by competition with all its imperfections. Once an agreement has been reached, both participating partners can gain an advantage by repeating transactions (assuming that the service was performed in a satisfying manner). Werthner 93 Specific role of information (6) Behavioral assumptions Bounded rationality External factors Complexity / uncertainty Information impactedness Opportunistic behavior Specificity Werthner 94 Specific role of information (7) • A priori unspecific situation can lead to a posterior specificity • Both market partners try to maintain their bilateral relationships in the case of repeated transactions. This increases with the specificity of the product. • The change of partners may also induce additional costs. • A specific form of information asymmetry arises: although each partner has access to the entire knowledge, it might be too costly to disclose this information to other market participants. Werthner 95 Specific role of information (8) • In tourism high information seeking costs • Specific intermediaries for coordination in order lower the information transaction costs • The informational market imperfection is one of the reason of rather long value chains in the tourism market: – DMO: they provide transparent access for both sides with at the same time certifying the quality of the given information, thus, they increase confidence. – tour operator: since tourism products consists of several basic components from different suppliers tour operators act as a single point of access, thus, lowering drastically the information search costs for their consumers. At the same time they also lower the market information costs for suppliers. – travel agent: they lower uncertainty for the consumers, and they are closing the spatial gap to the place where the service is offered. They lower the market information costs for the supply side. Werthner 96 Time dimensions Information type static information „availability“ information reservation and booking data Time-sensitivity low middle high These information types refer mainly to search qualities. Time sensitivity important aspect for architecture of IT systems, where to store which information since transmission related with cost. Werthner 97 Information needs in phases Information Needs Phase information agreement control adjustment operation / settlement pre trip during trip after the trip * * * * * * * * * * • Any changes within the time span (decision - consumption) has to be communicated to the consumer. • Information about consumers has to be communicated to the final supplier or representatives of tour operators, in the case of a packaged holiday. • Design criterion for IT applications, either the system distributes the information properly, or the consumer may “carry” it (the form of a chip card application). Werthner 98 Travel phases and potential IT impact post trip return H Origin L Destination H pre trip H M travel to site on site Werthner 99 Model of Planning and Decision Making (1) From Supply Side Formulation of Objectives Information Gathering & Model Building Forecasting Extrapolation Planning Distribution Evaluation Reservation - Booking Marketing Cycle Planning, Decision and Implementation of Action Evaluation & Reformulation of Strategies 100 Werthner Model of Planning and Decision Making (2) • information collection stage: information links leading to suppliers - different strategies for finding the proper information (electronically: direct retrieval of information or searching, scanning and information wandering) • Implementation of Actions: product creation, aggregation, and distribution, delivers back policy to the information network. • Model Building: arrangement of a formalized business model in terms of information structures capturing faithfully the market "reality" and integrating all economic parameters of relevance. • Forecasting/Extrapolation: set of tools for assessing the company‟s as well as the market‟s performance against varying economic assumptions and business strategies • Planning: takes also into consideration the different distribution channels available. Different time range: – Short term: such as yield management methods - optimize price based on observed trends and a priori defined performance criteria – Long term: product creation and investments Werthner 101 Information types • two main components for the supply side: – pre-sales information: description of the suppliers‟ basic offer (accommodations their description, lodging capacity, kind of infrastructure/facilities), and – post-sales information: timely summaries and statistical aggregates about the operative business, e.g., customer frequencies, effective demand structure, utilization of capacities, etc. • Pre-sales information covers – long-term component: supplier‟s production structure, determined economically mainly by bound capital and fixed costs resulting thereof, – short-term component: variable components of service such as in-person services offered, days/hours of operation, price lists, contractual conditions Werthner 102 Information types (2) • IT point of view - the management of both types is quite different: – Pre-sales information: • hard to unify semantically (hard task of harmonizing the price information delivered by different suppliers in different destinations), • a rather static type of information and, hence, mostly independent of the operative business • The main challenge with respect to pre-sales information is the task of semantic data integration (definition of a common vocabulary, the meaning of terms and the relationship between them). – Post-sales information (the other way round): • primary feed-back loop transmitting operative business data (resource utilization) • highly dynamic and must be recorded on a continuous basis which implies the provision of a means for dynamic linking of reported performance data. • should fulfill several marketing-relevant criteria (fit the structure of the actual tourism offer). Werthner 103 Information sources and tools Phase Source on-line market data, statistical sources, questionnaires performance monitoring on-line performance market analysis and market data segmentation forecasting and historical performance extrapolation data, market data product planning and market data, „own“ creation infrastructure distribution channel market data selection information distribution negotiation and selling performance data Task information gathering Tools electronic search tools , i.e., scanning, browsing, retrieving statistical tools, market portfolio, statistical tools econometrical models, simulation optimization models, simulation optimization models, simulation decision models (game theory) information and modeling analysis and forecasting planning and decision implementation and operation Werthner 104