ABSTRACT
Innovations in internet advances have brought diverse challenges and opportunities for the travel agency sector. This study analyzed the implications of internet advances and the competitive strategies adopted by travel agencies in Abuja. It specifically evaluated the extent to which travel agencies have adopted and use internet developments, challenges and perceived benefits of the internet advances, the competitive strategies adopted to cope with the internet advances and the extent to which the Government of Nigeria policies in ICTs facilitate travel agencies’ to cope with internet innovations. The study used a conceptual framework and Diffusion of Innovation Theory in order to relate theory to practice. A mixed approach was used, which incorporated survey design, analytical design and concurrent transformative strategy. The research used census to include all the (Nigeria Association of Travel Agent) travel agencies in Nairobi and purposive approach to select the respondents. The study focused on all the 74 travel agencies which are registered by Nigeria Association of Travel Agents (KATA) in Nairobi, the ministry of tourism and Nigeria Data Network Limited. However, 55 travel agencies responded with a sample size of 110 respondents. Data was collected by use of questionnaires, documentary analysis and semi-structured interviews. The chief ICT officer from the Ministry of Tourism and external affairs manager at Nigeria Data Network Limited responded to the interviews. Data analysis involved use of thematic, descriptive statistics and structural equation modeling to establish the relationships between the dependent and independent variables. The results of the study established that TAs in Nairobi are mainly family and independent businesses. They offer amalgamation of services and target diverse clientele as a strategic approach. They are aware of multiplicity of ICTs in existence, nonetheless, their core reason for internet adoption relates to the critical source of information necessary for business transactions. Further, the internet advances adoption depends on the need, relevance and perceived internet benefits. Internet facilitates information processing, storage, accessibility of information, increased efficiency, wider coverage, cost effectiveness and networking. The main challenges travel agencies encounter included loss of clients through disintermediation, cost of coping with the internet dynamism and also lack of ICTs expertise and lack of government support. The main strategies adopted are going online, customer relationship management, product diversification and continuous training of staff. The legal environment within which TAs operate is unsystematic and lack updated laws that would assist them cope with the technological shift. Additionally, the study established that there exists a relationship between the internet advances and the strategies adopted by the Travel Agencies, the perceived internet benefits and the strategies adopted. However, there is no relationship between the extent of internet adoption and use and the strategies adopted by travel agencies in response to the internet developments. The study proposes to the government of Nigeria through the Ministry of East Africa Affairs, Commerce and Tourism to provide the necessary enabling environment to enhance travel agencies adopt the dynamic ICT advances and the best strategies in the global value chain.
CHAPTER ONE
1.1 Introduction and Context of the Study
This chapter begins by analyzing the background to the study that led to the formulation of the research problem. This is followed by the purpose and specific objectives of the study. The hypotheses addressed in the study are basically derived from the specific objectives. Thereafter, the significance of the study, scope of the study and the limitations are highlighted.
1.2 Background to the Study
Research into the travel agency sector has mainly focused on the need for travel agents to adopt strategies and embrace technology that will enable them to cope with the ever changing technological environment (Buhalis & Costa, 2006; Livil, 2008). While such studies have been on going in the developed countries, not much has been done in most of the developing countries. Considerable research on how travel agencies (TAs) are adopting Information and communication technologies (ICTs) has, for example, been done in Europe, New Zealand and Egypt. In particular, a study that was carried out in Auckland, New Zealand among travel agencies focused on the perceptions, adoption and impacts of ICTs. The results indicated that the main survival strategies adopted by the travel agents were customer and niche market orientation but little is argued about sustainable strategies (Garkavenko & Milne, 2009).
ICT has proved to be a very dynamic field which affects travel agencies in diverse ways since the 1950s. The major advances of ICTs in the travel industry include computer reservation systems (CRS) which were initially started in 1950s by the airline industry. The first CRS was organized by a partnership between American airlines and International Business Machine (IBM), this system is now known as Sabre (Zhou, 2004). CRS was known as an in-house reservation system was then transformed to GDS (Global Distribution Systems). The sector became highly concentrated and was eventually dominated by four large, global operators which were able to operate internationally via a closely-knit network of agreements with local operators (Pederson, 2005). The four were Amadeus, Galileo, Sabre and Worldspan. Today, all these GDSs have set up their own booking engines, which are also known as the online travel agencies. Further, the GDSs have advanced into internet distribution system (IDS) that facilitates purchase of travel products online (Conyette, 2015)
The use of internet emerged in the 1990s with broad effects from one country to another (Zhou, 2004). The internet changed the market structures, shaping the entire tourism value chain. In an effort to cope and sustain business, the existing intermediaries have taken the ICT as an integral component to ensure sustainability (Egger & Buhalis, 2008). In particular, the internet has turned into a useful medium which has created business opportunities for travel e-intermediaries. Moreover, companies have reinvented themselves online (Middleton, Fyall, Morgan & Ranchhod, 2009). The tourism industry is also embracing mobile technologies with the use of devices such as hand-held computers, mobile telephones and personal digital assistance which uses the internet technology (Cohen, 2010).
The advances of internet have shaped the travel agencies business practice fundamentally, causing various strategic responses. The overarching aim for many travel agencies in the wake of new and rapidly changing ICT is to transform their businesses appropriately for gaining a more competitive. The airline, hotels, car rental chains and tour operators are increasingly encouraging clients to make booking directly through the use of their own sales outlets, mobile telephony and the internet (O’Conner, 2008). The main reason for such changes is to cut on their distribution cost, which is an integral aspect of strategic approach.
The internet innovations have altered the traditional intermediary role travel agencies played in distributing tourism products and services. New form of internet technology has brought dramatic shift to travel agencies’ business whereby the booking process is gradually phased out as commercial transactions are increasingly channeled through appropriate websites (Davidson & Rogers, 2006). According to Papatheodorou (2006) and Buhalis and Costa (2006), only players that can add value will be able to survive in the long run as intermediation is rapidly replaced by e- business models, and that is why the current study attempted to investigate the response of travel agencies to the internet developments.
With the increasing pressure, internet has brought strategic measures into the service providers. Measures like the introduction of zero-commission policy (no percentage payment given to TAs on airline sale) by airlines is being replaced by service fee. This has better assurance for ticket sale and is a strategic approach towards cutting the distribution costs. Today, the airlines are adopting disintermediation (by passing of TAs) as a major driver towards change in an endeavor to link themselves directly to their customers (Doganis, 2006). The introduction of e-ticketing, commission caps and cuts and increased use of the ICTs by the airlines are major changes intended to substitute travel intermediaries with digital technology, hence reducing the distribution cost (Frew, 2004 and Page, 2009).
Advances in the internet have affected the travel and tourism industry, particularly in the area of automation and networking of distribution channels. The most radical change brought by ICTs is ‘disintermediation’, whereby tourism service providers are striving to sell their products directly to clients (Garkanenko & Milne, 2009; Wang, Li, Duan, Yan, Hi and Yang, 2007). Despite the disintermediation threats, most travel agencies are still thriving in their businesses, making this research critical to establish the nature of the competitive strategies they are using. While generally travel agencies all over the world are managing to adopt various strategies, very little is known in specific countries and urban settings. Travel agencies have continued to endure the ICTs challenges through restructuring and reorganization of their businesses (Zhou, 2004).
The extent to which travel agencies have embraced the recent innovations in the internet and repositioning themselves by offering their services online produces plenty of information, which however, requires an empirical analysis. For instance, in 2004, a number of mergers and acquisition took place to consolidate on-line players. The biggest on-line travel groups that emerged were: Expedia, Travelocity, Priceline, Lastminute, Ebookers, Orbitz, among others (Buhalis & Costa, 2006).
According to Sigala, Lius and Murphy (2007), the on-line intermediaries are challenging the profitability of suppliers and traditional intermediaries forcing them to reconsider their competitive positioning and business models. For example, Expedia is an on-line travel agency which is linked to world span. It pioneered in changing the business model used to sell travel on-line. It has adopted two major models, that is, merchant and dynamic model (Sigala et al., 2007; Buhalis & Costa 2006).
According to Papatheodorous (2006), horizontal and vertical integration are some of the key strategies that are being used by the on-line travel agencies. On-line travel agencies use horizontal integration to expand their market share and market coverage and are able to gain a competitive advantage. Vertical integration is used to expand value chains and proposition through a comprehensive portfolio of both intermediaries and tourism service providers.
Lubbe (2005), pointed out that strategies that are being adopted by South African travel agencies include; consolidation of travel companies through franchising, consortiums, and restructuring of their revenue model, that is, from commission base to service fee base, increased use of technology and transformation of their business into niche markets.
In Nigeria, Galileo Nigeria recently joined the web forces and developed a booking engine known as ‘Going Safari’ (Galileo Nigeria, 2008). However, there has been little academic research on the travel agency sector focusing on how travel agencies are responding to the internet advances. The travel agencies’ response to internet innovations in Nairobi remains an understudied issue and is important for this research, with a view to establishing how they are responding to internet innovations as well as how government policy facilitates the TA sector within the ICT area.
1.3 Statement of the Problem and Justification
This research focused on travel agencies’ response to internet within three critical issues. First, although there has been ICT advancement and particularly the internet for sourcing and information dissemination, booking, financial transactions and marketing among travel agencies, there are very limited studies in Nigeria indicating the extent to which the TAs utilize and the competitive strategies adopted by them. The implications of the internet innovation upon travel agencies business remain understudied, making it hard to understand the industry’s trends, competitiveness and repercussions within the Nigerian context.
Second, internet has triggered diverse response among the travel agencies without corresponding research to delineate competitive strategies adopted. Analyzing how travel copes with the internet innovations remains challenging due to unsystematic research, thereby creating incoherence.
Third, the Nigeria Tourism policies and ICT policies that are directly related to travel agencies such as policies on private sector involvement, marketing and ICTs, remain conceptually misunderstood especially due to limited analysis. Despite the government of Nigeria recognizing the importance of involvement of the private sector as an engine to economic growth as outlined in Vision 2030, existing research does not address the tourism policy in the context of technologies such as on-line services and ticket-less travel. Generalization that internet is “phasing out” the travel agencies has to be qualified by concrete research which can inform the inadequacy of ICTs policy in content and specialization. In light of the above issues, the research sought to determine how the travel agencies are responding strategically to the challenges internet poses.
1.4 Purpose of the Study
The purpose of the study was to scrutinize the competitive strategies utilized by the travel agencies in the light of internet progression and its implications, in order to provide necessary informed knowledge on how to gain a more competitive advantage.
1.5 Objectives of the Study
The research was based on the following objectives:
1.5.1 General Objective
The general objective of this research was to examine the implications of internet advances and the competitive strategies adopted by travel agencies in Abuja.
1.5.2 Specific Objectives
- To evaluate the extent to which travel agencies have adopted and use the internet developments.
- To investigate the challenges and perceived benefits of the internet advances on the travel agencies.
- To analyze the competitive strategies adopted by travel agencies to cope with the internet advances.
- To examine the extent to which the Government of Nigeria policies in ICTs facilitate travel agencies’ to cope with internet innovations.
1.6 Research Hypotheses
The null hypotheses usually indicate that there is no relationship between the variables that are studied. The hypotheses are derived from the first three objectives, which were statistically tested. The following null hypotheses were tested in the study.
H01: There is no significant relationship between internet advances and the strategies adopted by travel agencies.
H02: There is no relationship between the extent of internet advances adoption and the strategies adopted by travel agencies.
H03: There is no relationship between the perceived benefits and the strategies adopted by travel agencies.
1.7 Research Question
- What are the challenges experienced by travel agencies due to internet advances?
- How do the Government of Nigeria policies in ICTs facilitate travel agencies’ to cope with internet innovations?
1.8 Significance of the Study
The result of this research will enable the travel agencies to understand the existing internet innovations and effectively utilize its potential. The travel agencies especially in Nairobi will gain a competitive edge with increased knowledge. Small and medium scale travel agencies stand particularly to benefit with regard to how they can make use of Internet innovation relevant in the tourism industry in order to remain in business and become even more relevant to the industry. The research may also establish the opportunities of the adoption of internet advances in the operations of travel agencies in Nigeria and provide necessary information on the dynamic character of internet which can form an important basis to adopt viable strategies. The research findings may also give an informed situation of the government ICT policies and be a good ground for necessary reforms to improve the quality of travel agencies. The study will also add value to the body of knowledge, especially in academia. Ultimately, the outcome of the research will serve as a blue print for entrepreneurs to chart the right course of action for the development of ICT facilities and infrastructure in the travel agency activities in the tourism industry.
1.9 Limitations of the Study
Preliminary investigation in the process of developing this research showed that the respondents especially among travel agencies shared relevant information openly, which contributed to the completion of this research. However, there was a possibility that some would be reluctant to reveal their competitive strategies due to competition threat. It is hoped that the responses were a true reflection of what they practice. Further, there were limited documentations on the Nigerian context.
1.10 Delimitation of the Study
The study was conducted at Abuja. The focus was specifically on all travel agencies that are members of Nigeria Association of Travel Agents (KATA). The key respondents included directors and ICT responsible staffs. The research focused on how the travel agencies are responding to internet advances, the extent to which they have adopted the internet innovations, their implications and the competitive strategies TAs have adopted. Further, existing government ICT policy framework relevant to travel agencies business was analyzed.
1.11 Theoretical Framework
The adoption and use of internet advances is a critical ground for TAs to gain a more competitive advantage. The advances affect the strategies and TAs business operations. Small business owners and managers play an important role in facilitating this change because they typically hold the decision-making power (Karanasios & Burgess, 2008). Awareness and perceived benefits of a technology are particularly to create knowledge upon which the TA can make informed decision on adoption of ICT (Alam & Noor, 2009).
This research was informed by Diffusion of Innovations Theory (DOI), which is an important basis for travel agencies to explain how they cope with internet innovations and the competitive strategies adopted in order to remain relevant. Diffusion of Innovations Theory explains that innovation tends to move sequentially starting with slow penetration, followed by fast-paced adoption and eventually slows down once more.
According to Roger (1999), diffusion of innovations comprises a “broad social psychological and sociological” theory which describes the adoption patterns of innovations, and gives basis to predict “whether and how a new invention will be successful.” This theory is useful to explain the “potential application to information technology ideas, artifacts and techniques.” The DOI shows a logical process through which various technological innovations evolve, which includes knowledge, persuasion, decision, implementation and confirmation. The following table shows the stages through which a technological innovation passes:
Table 1.1: Technological Innovations Stage
| Knowledge | Exposure to its existence, and understanding of its functions |
| Persuasion | The forming of a favourable attitude to it |
| Decision | Commitment to its adoption |
| Implementation | Putting to its use |
| Confirmation | Reinforcement based on positive outcomes from it |
Source: Adapted from Rodger (1999)
According to Standing and Vasudavan (2000), studies which have examined the diffusion of innovation highlight five general characteristics upon which the diffusion of innovation theory can be studied, namely; Relative Advantage, Compatibility, Complexity, Trialability and Observability. Table 1.2 provides details of these characteristics.
| 12 | |
| Table 1.2: Characteristics of Innovation Theory | |
| Relative advantage | The degree to which it is perceived to be better than what it supersedes |
| Compatibility | Consistency with existing values, past experiences and needs |
| Complexity | Difficulty of understanding and use |
| Trialability | The degree to which it can be experimented with on a limited basis |
| Observability | The visibility of its results |
Sources: Rogers (1999)
1.11.1 Criticism of the Diffusion of Innovation Theory
The Diffusion of Innovation Theory was used in the early twentieth century in Europe focusing on individuals as “decision makers”, but since 1960s, it focused on the organizations as units of adoption (Apperson & Wikstrom, 1997). DOI theory focuses on five characteristics that influence the adoption of an innovation. However, according to Reino, Alzua-Sorzabel and Baggio (2013) additional features such as acceptability (willingness of staff to address gaps for new innovations to match new technological adoption) and affordability (Capacity to cope with new innovations putting pressure on TAs budgets) are essential. As the internet evolves, the TAs are constantly evolving new ways and therefore, theoretical reflection is important based on the dynamic, fast pace and technical challenges.
1.12 Conceptual Framework
The conceptual model focused on ICT advances in TAs, particularly the internet, the challenges and benefits that emanate from internet advances, the government ICT policies and competitive strategies adopted by the TAs. The framework has an important basis for application to examine the nature of response by TAs in Nairobi as a result of internet innovations and implications (Figure 1.1). The variables in the framework included Independent, dependent and intervening variables.
Independent Variables
The main independent variables in the study included ICT developments/advances that is CRS, GDS, internet advances in TAs, perceived internet advances benefits by TAs, these benefits included; enhanced communication within the firm and between firms, information processing and storage and ease of accessing information. Challenges affecting TAs businesses which encompass disintermediation, lack of government support, commission caps & cuts, emergence of E-Travel agencies, lack of skilled staff Extent of internet adoption and use was also an independent variable. The indicators included, the mode of communication, the type of internet advances adopted, application of the internet, mode of accessing and the frequency of use of the internet by the TAs.
Dependent Variable
The dependent variable in the study was the competitive strategies adopted by the TAs in response to ICTs development. The strategies included going online, increased use of technology, product diversification, niche markets, focus on consumer, consolidation.
Intervening Variable
Government policies in ICT were the intervening variable in the study. This variable links the independent and the dependent variables. Adoption of ICT advances and strategies may be influenced by a number of factors, many of which are beyond the control of the TAs. Government ICT regulation is considered important in this study.
According to Organization for Economic Co-operation and Development (2008), the Government ICT regulations should facilitate and create favourable environment for the TAs to adopt competitive strategies and embrace innovations. It should also address regulatory reforms to reduce the ICT cost and develop standards and international framework for e-commerce for ICT use.
Relationships between the Variables
The framework recognized that ICTs innovations are very dynamic and have had a major influence on the strategies adopted by TAs. The evolution of internet influences on the TAs business operations. The nature of their business causes them to adopt and use the internet innovations that are relevant and also to counteract the challenges that come with the advances. Buhalis and Law (2008); Ip, Rosanna and Law (2010), indicated that the ICTs innovations not only generated a new paradigm-shift, but have also changed their operational practices. Further, innovations have caused the traditional TAs to lose business and their competiveness.
The Government of Nigeria plays a major role in promoting the TAs in the adoption of ICTs advances and the best strategies in the global value chain. The government ICT regulations are responsible for development of advanced and high technological infrastructure related to ICT use, reduce ICT costs, develop standards and international framework relevant for ICT adoption.
The TAs adopts various strategies in order gain a more competitive advantage and to remain relevant. They have also developed competitive strategies to counter the challenges that come with the internet. Buhalis (2003) confirmed that proliferation of ICTs in the travel industry has caused a wide range of strategic approaches.
The internet innovations brought diverse challenges and opportunities in the TAs businesses. However, the internet innovations adopted and used by TAs were mainly based on the perceived benefits accrued from them. Similarly, Alam and Noor (2009) and Abou-Shouk, Megicks and Lim (2013) recognized that TAs adopted ICTs based on a comprehensive understanding of the future ICTs perceived benefits that would lead to competitive advantage rather than mere operational benefits. Perceived benefits are also linked to the Diffusion of Innovation (DOI) used in this study, which indicated that one of the determinants of an innovation is the relative advantage ensued from it.
ICT Developments (Innovations)
1.CRSs
2.GDSs
3.Internet
- Travel portals
- IDS
- Informediaries/Cyber mediaries
- Social Media
- Community sites
- Web 2.0
Perceived ICT
Benefits
Challenges
- Disintermediation
- Lack of government support
- commission caps & cuts
- Emergence of E-Travel agencies
- Lack of skilled staff
| Extent of Internet | |||||||
| Adoption and Use | |||||||
| • Mode of communication | |||||||
| • Internet advances | Strategies adopted by | ||||||
| adopted | TAs in Response to ICTs | ||||||
| • Application of internet | • Going online | ||||||
| • Accessing the internet | • Increased use of | ||||||
| • Disseminating and | technology | ||||||
| sharing of Information | • Product diversification | ||||||
| • Niche markets | |||||||
| • Focus on consumer | |||||||
| • Consolidation | |||||||
Government policies
Figure 1.1: ICTs Innovations, Impacts, Level of Adoption and Strategies
Source: Author
1.13 Application of the Theory
The Diffusion of Innovation theory explains the adoption model of innovation. It explains the potential application to technology ideas and techniques. The theory systematically explains how innovation evolves and the need to adopt them. Any innovation brings diverse implications that would lead to adoption of tactics. In this study, the proliferation of internet cause divergent implication to TAs and they need to adopt the internet advances and strategies in order to remain significant. The theory determines the applicability of the various technological innovations stages and five characteristics crucial in adoption of internet advances and competitive strategies in TAs. Firstly, it is prudent for the TAs to be aware of the internet advances and to understand how the innovations are used. Secondly, the TAs needs to form a favourable attitude towards the advances. Thirdly, commitment towards adoptions and use is necessary in terms of setting apart annual financial allocation, frequent research and investing on the relevant advances. Fourthly, the implementation stage indicates how the TAs uses the internet in their business. Fifthly, reinforcement is based on benefits accrued and the challenges that emanate from the adopted innovation.
The relative advantage indicates that adoption is based on the benefits achieved from it. Compatibility is based with the consistency with the TAs needs and relevance. Complexity demonstrates that the challenges that comes with the adoption of the innovation, while trialabilty is the experimentation of the adopted innovation before fully adopting it in future. Finally, observation is whereby the TAs are capable of achieving a more competitive advantage. The additional characteristics that are acceptability and affordability as pointed by Reino et al. (2013) influences the extent of adoption and use of the internet innovation.
