Inter-Sectoral Unit for Tourism

SUSTAINING TOURISM BY MANAGING

NEW TECHNOLOGY FOR DESTINATION MARKETING

CONTENTS

Information Technologies, Tourism and the Internet

1.1 Tourism in the Americas: Toward the Year 2000

1.2 Cyberspace and the Internet: Just a Fad?

1.2.1 Number of Internet users in 1996

1.2.2 World connectivity: number of computers Net host

1.2.3 Latin American Internet connectivity

1.2.4 Volume of business generated by the Internet

1.3 The Internet and Tourism: Size of the Market

1.3.1 Identifying potential users

1.3.2 Travelers who use the WWW: the "1996 Web Travele" Report

- General demographics

- Business travelers

- Leisure travelers

1.4 Cyberspace: Participants with Ties to Tourism

1.4.1 CRS: Computer Reservation System

- System One (Continental Airlines)

- Worldspan (Delta, Northwest, TWA)

- SABRE (American Airlines)

1.4.2 Online information services: America Online

1.4.3 Some noteworthy WWW residents

- Internet Travel Network (ITN)

- TravelWeb

Tourism in a Computerized Society

2.1 The Perspective of Users

2.1.1 Seeking information

2.1.2 Reviewing and comparing information

2.1.3 Interacting online: more information please

2.1.4 Caution!!... The question of trust and responsibility

2.2 The perspective of tourist enterprises

2.2.1 Turbulent times for intermediaries... evolve or die..

2.2.2 Local tourist service providers: Full speed ahead!

2.2.3 The new tourist product. Is this the end of standardization?

2.3 The perspective of the tourist area/destination

2.3.1 The need for complementarity

2.3.2 The virtual tourist destination concept

2.4 Competition in the Electronic Tourist Market

2.4.1 Electronic competition

2.4.2 The Web site concept

- What is a Web site?

- Business uses of a Web site

The Internet: What Is It? How Does It Work?

3.1 The Information Superhighway: Basic Concepts

3.1.1 What is the Internet?

3.2 Using the Internet

3.2.1 Connecting to the Internet

- Terminal/PCLAN Mode

- Dialup mode

- Dedicated link mode

- Connection via online information service

- Satellite links

3.2.2 Internet addresses

- Domain Name System

3.3 The Internet infrastructure

3.3.1 History of the Internet

3.3.2 The current architecture of the Internet

3.3.3 What is the backbone of the Internet?

3.3.4 Levels of Internet Access

1.1 Tourism in the Americas: Toward the Year 2000

The preliminary figures on world tourism in 1995 portend healthy and sustainable growth in this sector, in terms of both the number of international travelers and the profits generated by tourist expenditure.

So completely is this true that despite the general slowdown of the economies of the developed countries and the persistently high levels of unemployment, it appears that these recessive trends have not substantially affected expectations of purchases of international tourist services. In 1995, a record high of 567 million international tourist arrivals was reached (3.8% more than in 1994), generating income of $372 billion. (See Table 1.1)

Traditionally, North America and Europe have been--and still are--important markets for tourism in Latin America and the Caribbean.

World Tourism Organization estimates of tourist travel toward the close of the century reveal the preponderance of intra-regional markets (especially in Central and South America), but also the significant contribution of said markets. In the rest of the world, the potential of the Japanese market stands out.

Tables 1.2 and 1.3 show these estimates for the Caribbean and Central and South America in the year 2000. Generally speaking, growth rates slightly higher than those expected for the world as a whole are forecast.

The emerging markets of the Middle East, East Asia and the Pacific, the rediscovery of Eastern Europe, and the efforts of regions with traditional destinations (and a tremendous installed capacity, avid for tourists) portend the continuation and intensification of competition, particularly for those segments of the market with the time and the money to take extensive trips.

Of course, any projection of trends presupposes the influence of various structural and short-term factors over which countries and/or tourist destinations may or may not have any degree of control. The performance of the tourism marketing structure is undoubtedly of vital importance to the future of tourist flows. The hypothesis of the present report is that this structure is in a process of change, brought on by dramatic technological innovations that are likely to affect how people--potential tourists--plan and purchase tourist services: the World Wide Web.⁽¹⁾

1.2 Cyberspace and the Internet: Just a Fad?

An unstoppable flood of innovative technologies is flowing from the post-industrial countries of North America and Europe, outlining the features of an emerging civilization--global in scope and based on information--whose archetype is the World Wide Web, the service that opened up the Internet to use outside the realms of academia, science, and the military.

Computers, in their capacity of communications equipment, are the heart inspiring cyberspace, a mental construct whose essence is information and whose purpose is communication between individuals, organizations and society as a whole. Its expansion should lead to revolutionary changes in the lifestyles of individuals, companies and institutions in the next century, and, to be sure, in the travel and tourism industry.

Consequently, it is important to gauge the circumstances and trends of this phenomenon, and then to infer its implications for travel and tourism. This is a difficult task, precisely because of its extraordinarily dynamic and changing nature; and sometimes it is a controversial task as well, depending on the sources used.

Table 1.4, which presents global figures projected through the year 2000, correlates the volume of PCs based on demographic and socioeconomic data, and then calculates the growth of users of various data communication services such as electronic mail, the WWW and online services.

These estimates are based on a conservative assumption: that the use of any Internet protocol requires access to a computer. However, the spectrum of cyberspace access may very soon be expanded by new technologies such as WebTV, for example (technology permitting interaction on the Net using a regular, modern television), coupled with measures deregulating the telecommunications industry--as in the United States and Brazil--which enable cable TV companies to act as Net access providers. It should be remembered that in the developed countries, the rate of television penetration into homes may be as high as 98%.

According to the information source cited,⁽²⁾ it is expected that by the year 2000, there may be more than 150 million WWW users and that e-mail may be used via 200 million accounts. Subscribers to online services and hybrids (i.e., with simultaneous Internet access) may make up a market of 30 million users.

The Internet Report suggests that computers and the Internet may be ubiquitous in the United States within a decade, and in a second group of industrialized countries in the following five years.

However, given that the projections were made in early 1996 and were based on a total of 23 million Internet users at the end of that year, it becomes clear that the projections are quite conservative, since estimates from early 1997 including other indicators such as computers and countries connected to the Internet put this figure at 46.5 million users, as discussed below.

1.2.1 Number of Internet users in 1996

A relatively conservative estimate puts the number of people in the world who used the Internet in 1996 at 46.5 million: approximately 30 million in North America (the United States and Canada), 9 million in Europe, 6 million in the Asian and Pacific regions (Australia, Japan, etc.) and 1.5 million in Latin America (primarily Brazil, Mexico, Chile and Argentina).⁽³⁾ However, considering other sources, the worldwide figure could be as high as 65 million or as low as 38 million, depending on the degree of confidence placed in the sources.

Another study estimated that there are 23.4 million households in the world with Internet access. This figure could swell to 66.6 million in the year 2000. Jupiter Communications⁽⁴⁾ believes that a large percentage of this growth will result from the increased penetration of PCs into the home, with the deregulation of international and national telephony, the development of information in non-English languages and cultures, and, most importantly, the expansion of integrated service digital networks (ISDN) in the more advanced markets of Europe and Asia. The growth of the Internet on these continents should lead to an even greater level of globalization than now exists, when the presence of North America shrinks to a little more than half of the market (54% in the year 2000) from the current 63% (1996).

In fact, North America, especially the United States, can be considered the most mature Internet market (its high rates of penetration are matched only in some Scandinavian countries and the Netherlands). This does not mean saturation--far from it. According to the source cited, in 1996 only 15% of North American households were connected to the Internet, while color TV was found in 98%, cable television in 69% and computers in 40% of households.

Indeed, according to Nielsen Media Research,⁽⁵⁾ in a survey of the presence in North American homes of electronic equipment such as computers, VCRs, video games and CD-ROMS in July 1996, it was found that the Internet had been accessed by 22% of the population (12% from work, 10% from an educational institution, 9% from home).

The survey also found that 8% of those interviewed (17 million people) and who were over 12 years of age lived in homes with access to online information services (America Online, 58%; Prodigy, 30%; Compuserve, 18%). The vitality of the online services business can be visualized by referring to the two million users recruited by America Online in two months (November and December 1996) when it announced its new policy of unlimited access to information services, including Internet hookups, and all for only $19.95 a month, despite the problems this caused.

1.2.2 World connectivity: number of computers - Net host

Chart 1.1 illustrates the current status of international connectivity.⁽⁶⁾ With the exception of certain African countries, the entire planet already had some type of access to the Internet in 1996. The chart also shows that the electronic mail protocol was the most widespread service.

In Latin America, of course, Cuba, Guyana and Suriname registered their first network host computers on the Internet in the latter half of 1996. As a result, the Internet now covers 100% of the countries of the region.

Similarly, as Table 1.7 and its charts indicate, the number of host computers connected to the Internet in July 1996 was 12.9 million, representing a nearly twofold increase since 1995.⁽⁷⁾

That is spectacular growth, especially considering that ARPANet--the oldest predecessor--started out with only 4 computers in 1969. By 1984 there were 1,000 computers, and in July 1995, when the U.S. Government decided to stop financing the Internet and turn it over to the private sector, there were 6.6 million.

1.2.3 Latin American Internet connectivity⁽⁸⁾

The outlook in Latin America mirrors the international trend. From less than 900 computers permanently connected to the Internet in early 1992 (basically in Mexico, Brazil and Chile), the number rose to nearly 17,000 in July 1994, and then to 36,000 in July 1995. By the last count--in July 1996--the figure had tripled to more than 106,000 host computers.

The Internet's story in numbers in Latin America is told in Table 1.8. The charts illustrate developments in the countries with the greatest statistical significance.

Obviously, in Latin America, the Internet has made the greatest headway in Brazil (44%), Mexico (19%), Chile (12%), and Argentina (9%). Together, these countries account for 85% of the Net, and the addition of Colombia, Costa Rica and Peru raises the figure to 95% of the Net in Latin America.

Figures 1.2 & 1.3: Internet and WWW Growth

Figures 1.4 & 1.5: Evolution of Internet Domains

1.2.4 Volume of business generated by the Internet

The Internet can also be viewed as a business in and of itself. A report circulated on Wall Street last year valued the business created by the Internet at end-1995 at US$5 billion and estimated--for the benefit of stock market investors--that business directly related to the Internet was expected to generate as much as US$36 billion (7 times more) by the end of the century. Moreover, the boost that related businesses receive from the Internet was valued at $11 billion in 1996, which is projected to increase by an additional $43 billion by the year 2000.

Table 1.9 shows the expected performance of the key Internet sectors: Infrastructure, Software and Services, Content and Added Value.

The projections for business in sectors related to construction of the Internet infrastructure are remarkable (annual growth of 45%, particularly among Net access providers and manufacturers of equipment for data networks and security in the transmission of information). It is not surprising, then, that the number of Internet service providers (ISPs) has doubled (from 1,500 to 3,100) in less than 7 months, and that the number of Internet backbone operators in the United States has grown from 9 to the current 13 (Dec. 96).⁽⁹⁾

The second group of businesses benefited by the Internet manufactures basic software for customers and servers, as well as for the development of applications for both the Internet and online services, through consulting and applications development.

The last group supplies information to the Net and the informative added value services, and promotes interactive publications, general information, electronic shopping and transaction processing.

In December 1996, at the 96 Fall Internet World in New York, we had a chance to witness the creative fervor of over 1,000 enterprises dedicated to the business of the Internet, offering everything from computers and peripherals (12 categories) to intranets/LANS (10 categories), WAN/Internet Access (14 categories), No-Web/Software (8 categories), WebSoftware/Development (25 categories), Publications/Entertainment/Education/Accounting (9 categories).⁽¹⁰⁾ In other words, everything from T3 (45 Mbps) connectivity, distinctive to the Internet backbone, to routers, servers, modems, multiplexers, ISDN services, satellite access and thousands of new software entries in all flavors; navigators, HTML authorship, Java tools, script tools, components and applets, plug-ins, multimedia, virtual reality tools, video and audio, encryption, firewalls/security, electronic shopping, Web use statistics, filters, group software, Web administrators, Web advertising and a long etcetera.

1.3 The Internet and Tourism: Size of the Market

In October 1996, the Travel Industry Association of America published the results of a study, pointing out that in the United States:

Almost half (47%) of frequent travelers (those who travel 5 or more times a year) use the Internet, and approximately a third of frequent leisure travelers consult the Internet.

The same study revealed that 19% of all adult travelers used online information services, compared to 6% of the total population of North America.

The interests of travelers accessing the Internet include: looking for references and maps, places to visit and things to do, as well as itineraries and prices.

On the other hand, Jupiter Communications, a New York firm specializing in market research, defined the travel industry as one of the fastest growing segments on the Internet, and pointed out that:

Travelers accounted for half of all WWW transactions in 1996.

It is projected that travel and tourism sales in 1995 will exceed US$1 billion (compared to $23 billion in all other sectors), and that this trend could push tourist spending on the WWW as high as US$3 billion in the year 2000.

However, putting things in perspective, this does not mean that the Net is closing the traditional marketing channels. It must be remembered that the SABRE Group, owners of Travelocity, alone processes over $40 billion (mostly ticket sales); that the air transportation sector is a US$150 billion business; and that total travel industry sales are estimated at up to US$300 billion annually.

1.3.1 Identifying potential users

Who uses the Net? A glance at the general profile of Internet users can provide information about the type of people currently using the Internet. The results of a Georgia Institute of Technology survey begun in 1994 and repeated twice a year since then were used for this purpose.⁽¹¹⁾ The most recent findings (based on more than 15,000 respondents in the 6th WWW User Survey) are:

General demographics

Three years of research have revealed that the major demographic variables (sex, age, income, etc.) have stabilized, as shown in the corresponding charts.

It is interesting to note that the percentage of new Internet users decreased significantly to 36%, compared to 60% last year. This would suggest that Net growth is slowing. However, new technologies such as WebTV or Internet-phone could increase in popularity and diversify Net access.

The average age of respondents is 35, somewhat higher than in the previous survey, although the proportion of women leveled off at 31% of the total.

The average income is US$60,800. The ranges are: under US$29,000, 19%; US$30,000-US$50,000, 23%; and over US$50,000, 41%. The percentage of Europeans with incomes below US$10,000 is high (20%), probably because they are students.

83% of the respondents lived in the United States, a growing percentage compared to past years. Less than 1% lived in Latin America.

Many users work in a computer-related field (26%) or in education, although managers and professionals account for a large share of the market (33%).

The most common Net access site is the home (64%).

The WWW and buying decisions

Use of the WWW for shopping and making purchases has increased significantly. In the travel and tourism field, 49% of respondents said that they use the Net to obtain information, and 20% made purchases or reservations (twice as many as the year before).

Regarding the advertising medium considered in making buying decisions, WWW sites have more credibility than direct mail, although newspapers and magazines are still the most popular sources.

Figure 1.6: Internet User Profile

1.3.2 Travelers who use the WWW: the "1996 Web Traveler" Report⁽¹²⁾

Between May 1995 and April 1996, the CIC Research & Ten IO executive summary--an extensive survey of 17,500 individuals (86% in the United States, 6% in Canada and the remaining 8% in the rest of the world) that captures responses throughout the year for purposes of profiling the behavior, preferences and characteristics of Internet users who travel--brought the following to light:

Roughly 4 of every 10 respondents said that they were "very interested" in planning travel and making reservations on the Internet. This factor alone should bring about significant changes in the travel industry. This activity and the Net seem made for each other. The profile of Net users is almost the same as the one for the market of potential travelers.

Everything suggests that more and more travelers will make their buying decisions in cyberspace.The critical elements are the Internet's capability to speed online transactions and, to a lesser degree, the attitude of potential buyers.

The new ability potential travelers have to purchase and do business directly with service providers could have devastating effects on travel intermediaries. The smallest hotel, no matter where in the world it is located, is now accessible to any traveler, and the promoter of any tourist destination can update its information instantaneously.

General demographics

Sex and Age.- 65% of the respondents were men with an average age of 35 years. The remaining 35% were women averaging 33 years of age. The Internet is definitely more popular with young people: 65% of the total are under 40.

43% of those interviewed were professionals or technicians, but this percentage tended to decline during the year, suggesting that the Internet is becoming a place where everyone participates.

50% of those interviewed (80% in the United States) earned more than US$59,000 a year. In North America, annual average income is US$33,000.

Business travelers

In the business travel segment, interviewees said that they had taken 4.4 domestic trips and 1.2 international trips, on average, in the last 12 months. The typical international traveler is a male (61%), 43 years of age, a technician or professional in 90% of the cases, with an average income of $108,000, who spent US$3,480 on his last trip.

A total of 5.4 million travelers of this type were estimated in 1994.

The business travelers had been using the Internet for more than a year and said that they were in cyberspace close to 11 hours a week. They believe that the Net is essential or very important (35%) for obtaining travel information, while a little less than half said that they were interested in making online reservations.

Leisure travelers

The leisure travel segment averaged 2.3 domestic trips and less than one (0.8) international trip per year. The typical international traveler is a male, 44 years of age, with a higher education and an annual income of more than US$84,000.

Their last trip involved an expenditure of US$2,200, and 15% said that they planned to visit Latin America.

For 1994, this market was estimated at 7.7 million travelers.

The reservations for their last trip were made: by a travel agency (56%), by an airline (28%), by a travel office (7%), and online (6%).

1.4 Cyberspace: Participants with Ties to Tourism

The travel industry has always been distinguished by its propensity to adopt computers and communications technology early on, particularly in the field of marketing.

For example, in 1959 American Airlines and IBM announced the launch of their Semi-Automated Business Research Environment, better known today as SABRE, a system which, in 1964, had already spread from coast to coast and was the largest real-time data processing system in the United States after the federal government's SAGE system.

In early 1976, Delta Airlines, which had installed its first internal computer reservation system in 1968 (TWA PARS), joined SABRE in a program to install the first terminals in travel agencies. In 1985, EasySABRE, a version aimed at PC users, debuted on several online information systems, including Compuserve and Delphi.

Consequently, as cyberspace is also inhabited by long-time residents who are now brushing off their credentials and converting their programs to the Internet protocol, a brief review of their most salient features is in order.

1.4.1 CRS: Computer Reservation System

At present, four computer reservation systems dominate the connectivity landscape in the marketing structure of the travel and tourism industry, linking thousands of points of sale (travel agencies) with powerful centralized computer systems.

They are: SABRE, Worldspan, System One-Amadeus and Apollo/Galileo. Of course, almost all have already migrated to the WWW and now offer--in addition to their traditional connectivity arrangements with travel agents for transportation reservations--powerful tourist information systems geared toward end users: travelers and corporate travel offices.

System One (Continental Airlines)

Established in 1981, System One offers and markets itself as an Information Management Service (IMS) for travel agencies, corporations, their suppliers and the general public. Its corporate headquarters are in Houston, Texas, and their operations center is in Miami, Florida. In Latin America, it has sales and technical support offices in Mexico and in almost all the Central American countries.

In April 1995 it incorporated AMADEUS, creating a sales network with 32,000 travel agencies throughout the world. In Mexico, Central America and the Caribbean it has approximately 9,000 points of sale. The essence of its vision, to be an IMS, extends beyond information, airline reservations and other services to include, among other things, the most complete and most extensive database of travel and tourism service providers, with a configuration that enables its subscribers to share resources and network with one another for marketing purposes.

In the business travel market, it is about to launch Travel Management Solutions (TMS), an innovative tool for the management of pre- and post-travel information.

Of course, one of the key aspects of its strategy is to open the Internet market to its affiliates by serving as a vehicle for their virtual presence on the Net. Accordingly, it has been migrating toward a new TCP/IP infrastructure combining the advantages of the flexibility of a wide-area network (WAN) and connectivity through the high-speed digital transmission of data to facilitate the integration of graphics, video and text. Its conversion is expected to be completed in 1997.

Worldspan (