Adrian Palmer is Professor of Tourism Marketing at the University of Ulster, Londonderry, Northern Ireland. Before joining academia he held marketing management positions within the travel industry. Recent research into buyer-seller relationships has been published in the European Journal of Marketing, Journal of Marketing Management, Journal of Services Marketing, and Journal of Strategic Management.

Patrick McCole is a Doctor of Philosophy candidate at the University of Ulster, Londonderry, Northern Ireland. He holds a first class honours degree in Hospitality Management from the University of Ulster. His major research interests focus on Internet marketing, virtual tourism destination marketing, virtual intermediaries and the role of trust in purchasing hospitality products over the World Wide Web.

Patrick McCole. Doctoral Candidate, University of Ulster at Magee, Faculty of Business and Management, School of Leisure and Tourism, Northland Road, Londonderry, Northern Ireland, BT48 7JL

Phone: +44 1504 375544 Fax: +44 1504 375323

Email: p.mccole@ulst.ac.uk

Direct marketing has often been held out as the death knell for travel intermediaries, as airlines, hotels and car rental companies communicate directly with their customers. The prospect of entering a one-to-one dialogue with customers, while retaining the sales commission for themselves has seemed an undeniable attraction to service principals. However, a review of the roles of travel intermediaries leads to the proposition that talk of such "disintermediation" is premature and the reverse process of "re-intermediation" may be more appropriate in the travel and tourism sector. Research is reported which demonstrates the benefits of using intermediaries for a specific travel package. While traditional High Street travel intermediaries may be facing serious threats, a new breed of travel infomediary is becoming firmly established.

Two related phenomena have been prominent among marketing developments of the past decade. The rapid growth of the Internet has fuelled the development of electronic commerce. Forrester Research estimated the value of inter-company transactions on the Internet at $43 billion for 1998 and predicted Internet commerce will reach $1.3 trillion by 2003, a 98% compound annual growth rate¹. A simultaneous development has been the rapid growth in Direct Marketing, defined by the Direct Marketing Association as "Communications where data are used systematically to achieve quantifiable marketing objectives and where direct contact is invited or made between a company and its customers". In the UK, expenditure on direct marketing has increased from over £450 million in 1994 to over £724 million in 1997 and the Direct Selling Association predicts sales of over £900 million in 1999².

Many observers have linked the two phenomena and suggested that the development of the Internet will inevitably lead to the simplification of channel structures as manufacturers and service suppliers choose to deal directly with the end users of their products, rather than acting through intermediaries. The term "dis-intermediation", which was originally coined in the financial services industry during the 1980’s has frequently been used to describe this phenomenon3 4 5 6. Supporters of the phenomenon have pointed to examples of the redundancy of travel agents as information technology allows travel principals to deal directly with customers, and computer manufacturers who can now enter a dialogue directly with potential and actual customers.

The reality of electronic commerce may be quite the opposite to that which advocates of disintermediation may expect. The Internet does not change the basic principles of the role of intermediaries who exist to simplify buyers' choice processes. With the Internet, selecting goods and services from manufacturers and service principals may appear to have become just as confusing as that facing a buyer using conventional channels.

This paper begins by examining the role of intermediaries, in the context of electronic commerce. It then looks at how the Internet is influencing the relationship between members of a distribution channel, specifically the role virtual intermediaries have for a hypothetical travel package. Based on existing literature, the authors propose that the development of the Internet is more likely to lead to a process of re-intermediation than one of dis-intermediation. Re-intermediation in this context is interpreted as a process of emphasising the role of intermediaries in a channel of distribution. The term re-intermediation has not been used frequently in the literature and is defined here as a process by which intermediaries become increasingly important members of a channel of distribution.

A marketing channel has been defined as "a system of relationships existing among businesses that participate in the process of buying and selling products and services"⁷. Perhaps the most significant role of channel intermediaries is to reconcile the differing needs of producers and consumers. For example, a fast moving consumer goods company may gain economies of scale by producing a large quantity of a limited range of goods, whereas consumers often want only a limited quantity of a wide range of products. An intermediary can conveniently make these available at one location. Intermediaries can help overcome this discrepancy of assortment⁸ by reducing the number of contacts required between suppliers and the end customers. Distribution and selling costs are therefore reduced for the seller and the choice process is simplified for the buyer.

Where tangible goods are involved, intermediaries can add value by breaking bulk. This might involve purchasing in large quantities from a manufacturer and then selling smaller, more manageable volumes of stock on to customers, thereby overcoming a discrepancy of quantity. In many cases, intermediaries can have superior knowledge of a target market compared to manufacturers and can add value to the producer's goods by tailoring their offerings more closely to the consumer's specific requirements. The added value role of intermediaries can also come about where they handle after-sales services, making them closer to the customer and allowing the manufacturer to relinquish control of this activity.

Probably the most significant gaps that occur between consumers and producers in a channel of distribution are those of location and time. A location gap occurs due to the geographic separation of producers and the consumers, which an intermediary helps to bridge. This is particularly a problem for manufactured goods, although less so in the case of inseparable services. A time gap takes place between when consumers want to purchase products and when manufactures are best able to produce them.

The selection of intermediaries is influenced by a number of factors, including: buyer behaviour, the resources of the producer, characteristics of the product, the competencies of intermediaries, and the competitiveness of the market. An understanding of the expectations of the end customer is critical. Expectations can be based on local availability of a product, attitudes towards particular types of outlet, the availability of choice in one location and the availability of after-sales service.

Producer-related factors influence channel design, including the level of distribution sought within a market, and the resources that are available to a producer to bring their products to market. Also critical is what the producer believes to be its core competence. If, for instance, it sees this as being the design and production of innovative goods, it might be better to invest in this area and leave distribution to a specialist intermediary. Producers differ in the desired level of channel control that they seek.

Product attributes can be important in influencing channel structures. Highly perishable products require relatively short channels. Where a product is highly complex, personal contact between producer and buyer may be considered essential to avoid the risk of errors occurring while the product is handled by less knowledgeable intermediaries. For high volume, low value products, typical of most fast moving consumer goods, direct distribution is simply not a practical option9.

Intermediaries and producers often have different perceptions about their own roles in a channel of distribution. The typical intermediary's self-perception is summarised by Hanmer-Lloyd¹⁰ and is based on their independence, an emphasis on choice and "ownership of the customer". They are closer to customers and therefore might be seen as being more important to the customer than the identity of the producer.

In contrast, a producer's view of intermediaries is often based on recognition that the end-users of the product are the producer's customers, not the intermediary's, and the knowledge of the product and customer is lower for intermediaries compared with producers.

Intermediaries have played an important role in the service industry from the early 1900s. It was in 1919 that Keynes¹¹ pointed out that "the inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep." Over time it is true to say that the telephone has increased in importance, but this took many decades. In the meantime, a vast network of intermediaries (wholesalers, retailers etc.) appeared, as they were able to deal more efficiently with the specialised needs consumers.

The advent of freefone telephone numbers in recent decades has meant that customers are now more able, willing and familiar in dealing directly with firms. The advent of industrialised call centres has made it possible for consumers to order and purchase just about everything directly from the manufacturer - be it clothes, wine or insurance. But for some companies this has brought about an increasing financial burden in setting up and maintaining call centres. This has been particularly true in the tourism industries, due to the complex nature of many travel products and the heterogeneous nature of consumers' travel needs. The airline sector in particular has often found that paying a commission to a travel agent was a better/cheaper alternative than becoming the intermediary for many other travel products that consumers required in addition to the flights. Consequently, airlines have promoted the use of travel agents, especially for leisure consumers.

Contemporary academics are naïve to accept the inevitability of dis-intermediation. For airline and many other service principals, this is not a feasible option and does not allow established companies to focus on their core product offer. The Internet will be successful in the travel and tourism sector by integrating technological-driven strategies into already established business-driven strategies. The Internet is being integrated into society in much the same way as has the television, but the Internet has a distinct advantage when it is coupled with the relationship marketing paradigm. When observed from an economic exchange perspective, the travel and tourism sector is well adapted to take full advantage of the Internet, particularly because of the fragmented nature of consumer preferences which facilitate a one-to-one marketing strategy. Intermediaries are positioning themselves so as to take advantage of specialised niches, which in turn is giving rise to the term re-intermediation. Re-intermediation therefore is the process by which virtual intermediaries on the Internet are positioning themselves and designing specific business-driven strategies toward specialised niches, and providing the means through which bookings can be made online at reducing costs and with real time reciprocation of information.

The fundamental distribution channel in the travel industry is made up of three important players – principals, intermediaries, and customers. Principals provide travel services to end-users. Intermediaries pass information about these services onto potential customers and try to influence targeted customers to use their channel. They also facilitate in customising the principal's services to the end-user's needs and handling paperwork and after-sales enquiries. An early move to create an electronic distribution channel was provided by Global Distribution Systems (GDS), which represented a closed, dedicated connection of terminals displaying travel information about airlines, hotels, car rentals, cruises and other travel products. Used almost exclusively by travel agents, the GDS created a linear distribution chain. In present day terms, however, the GDS has been reduced to just one component of a much larger system of networked travel information with advances in communication and software. The four leading global distribution systems are Sabre, Galileo, Amadeus, and Worldspan. Increasingly, Internet based travel companies, online access providers and other virtual communities appeal directly to consumers and travel agents, thereby circumventing the traditional GDS. The World Wide Web has made this possible. GDSs are being transformed into Global Distribution Networks (GDN). This is the larger ‘ecosystem’ in which the constituents of a distribution system unite and is dramatically affecting how travel products are distributed in the travel industry. This emerging distribution channels facilitate the multi-dimensional flow of information and transactions – with any intermediary in the channel able to distribute travel information and complete a transaction directly with customers12.

Traditionally, ‘electronic shelf space’, was found in two places: either the travel agent’s desktop or at the reservation centre of individual suppliers. The service principals were connected to travel agents via the GDS, which created a straightforward variable cost structure to sell travel products. The inventory was essentially on consignment to the GDS at a predetermined price, regardless of market fluctuations after the product allotment was made available. The end consumer, travel agents and suppliers had two forms of communication – the GDS or the telephone. With the evolution of the Internet, the ‘shelf space’ has grown exponentially and has become much more complex, and indeed crowded. Many service principals, tour and travel companies, virtual agents and travel agents maintain websites and conduct business over the Internet. In addition, some web sites offer various levels of travel information and advice, many of which are linked to one or more of the above booking agents. Despite these plentiful examples of metamorphic channel structures there tends to be much discussion of dis-intermediation in the hospitality and travel industries.

Travel intermediaries have for some time used Call Centres and Universal Switch Providers. Universal Switch Providers are communication devices that translate, convert and exchange information between Property Management Systems (PMS), Central Reservation Systems (CRS) and airline GDS. Universal switches assist travel suppliers by providing them with one stop shopping access to assorted GDS suppliers. Hotel suppliers currently are the main beneficiary of switch providers, and numerous opportunities exist for additional universal switch players for hotel as well as other travel suppliers. The addition of the Internet, which qualifies the debate of re-intermediation, has been integrated into select hotel distribution strategies that combines with PMS, CRS, and GDS to form the GDN. Theoretically, any player in a value chain can take a customer from an intermediary. Nevertheless, the inherent change in business structures and processes themselves are making intermediaries more proactive at leveraging strong existing virtual communities by adding new products and services to the value chain. In many ways, the travel industry is a good example of an industry profoundly transformed by technology.

The travel industry has traditionally used a distribution network which essentially relies on third parties. In recent years, travel agencies made use of a specialised technology infrastructure and specific knowledge to justify their value-adding role in a channel of distribution. Very often, intermediaries have been created by an information asymmetry. New technologies improve the diffusion of information to everyone, thereby reducing the power of existing intermediaries. The use of a public shared infrastructure rather than a proprietary network removes a strong advantage from conventional travel agents. New technologies are progressively rendering this infrastructure obsolete as providers begin to understand how to deliver information directly to their customers, through phone, fax, electronic mail, and increasingly, through multimedia interactive systems. This has the potential to lead to dis-intermediation. The pressure of new technology, combined with increased customer demands and hyper-competition is requiring companies to re-define their strategies, products, and processes. Re-intermediation will ensue if traditional intermediaries reposition themselves and focus on business-driven strategies such as a cost advantage strategy, product leadership strategies and customer focus strategies as opposed to technology-driven strategies13.

The most important structural change that could be brought about by the Internet is disintermediation wherein principals bypass the intermediary and sell directly to end-users. Sometimes, a producer will decide to dispense with intermediaries altogether. In one high profile case of a manufacturing company, the electronics manufacturer Amstrad (UK), has been vociferous in its criticism of computer retailers and subsequently chose to withdraw its products from high street outlets14. Against this, there have been comments on the limited capabilities of most manufacturers to succeed by selling directly to the end consumer15. Similarly, disintermediation is not always a feasible option in the travel industry. Principals cannot afford to upset their major customer – the travel agent. Airlines, for example are providing incentives to conventional travel intermediaries by increasing the travel agents' commission on complex travel arrangements in return for their losing the quick, easy and repetitive ticket business, which is increasingly being handled by technology. Suppliers cannot easily and efficiently replicate a variety of services that intermediaries perform for both service principal and consumers. Many service principals lack the efficient systems to fulfil orders at the individual level and have limited capability to offer the complementary products that increase customer satisfaction.

Re-intermediation in the Travel IndustryThe re-intermediation of services in the travel industry has been made possible by the expansion of business-to-business information exchange via the Internet and enabling value-added networks to deliver convenience and efficient services to the end user. Re-intermediation is simply the opportunity to create new value between consumers and service principals on the Internet. These typically fall into three categories: logistics, information, and service. Outside of the travel sector, the Internet has been used by a number of companies, for example the electronics retailer Tandy (Radio Shack) to replace physical outlets with a virtual presence on a website, through which purchases can be made16. Several UK suppliers of books, music, computer games and flowers already have the logistical support to develop their business on the Internet. In the longer term, fast moving consumer goods suppliers may use this channel to regain some of their lost power in channel relationships17.

Customers may not find it efficient or effective to go to different providers directly to get information and then compare it. There has been discussion on the role of a new type of intermediary: the infomediary18 19 20 whose value-adding activities can be categorised under the traditional 4 Ps of marketing – product, price, promotion and place. This intermediary gathers information about customers and uses it on customers' behalf to get a better deal from a supplier. They might screen commercial messages for customers; represent their interests (say, golfing and gardening) and extend to marketers who want access to information about them; and then find vendors who can deliver the best product at the cheapest price (perhaps in the form of a 10% discount offered by the supplier in return for access to the infomediary's client list). If this happens, then infomediaries become powerful distribution channels in there own right, effectively "selling" customers to marketers.

An ingenious example of value added a service focusing on the price factor is that by Priceline.com (http://priceline.com). This virtual agent has one of the most recognised brands on the Internet. The site gives customers the chance to save money by doing something they cannot do anywhere else: naming their own price. The site allows customers to bid for domestic airline tickets (USA only), international airline tickets, hotel rooms, new cars, home mortgages, home refinancing and home equity loans. The site provides a platform to access a bid and emails the user when the search engine has found a matching operator that will accept a given offer. IntelliTRIP™ (http://www.trip.com) enables consumers to simultaneously query multiple airline websites for fares. By providing integrated direct access to travel supplier sites, intelliTRIP™ ensures travellers have the most complete inventory of travel services from which to make their decision. Another example is the destination marketing website for New Asia, Singapore (http://www.travel.com.sg). This provides value-added service and induces ‘flow’21 through the latest flash technologies and interactive multimedia on all aspect of visiting the destination. A virtual agent provides advice on itineraries and things to do whilst in Singapore.

In the age of postmodern consumerism, some customer segments seek convenience and are willing to pay intermediaries to conduct much of their early searches. In other words, they wish to reduce their search costs. The Internet is home to hundreds of service principals offering services directly. As in other industries, there will be a need to differentiate among these offerings, and strong brand names are beginning to prevail. Re-intermediation is at its most powerful in the postmodern perspective. In postmodernity, the world is witnessing the emergence of the ‘customising consumer’. Re-intermediation is harnessing the elements of market offerings and crafting a customised consumption experience out of them, thus enabling the final consumer to become a protagonist in the customisation of his world. Branded intermediaries are paralleling the re-intermediation of services. Through branding, suppliers add value to their products, building advantages over competitors through images and reputation. Based on open specifications, the Internet is growing exponentially in a decentralised way and has already reached a critical mass of users. Those who are effective in conducting business on the Internet must offer additional features and benefits enabled by Internet technologies. For intermediaries, these features include selection, information, targeting, direct connection, and new business models. The emergence of virtual intermediary brands must also provide customers with enhanced value in terms of saving money and time to motivate the switch to online transactions. While some companies benefit from innovative marketing, others provide superior convenience. Preview Travel, for example, conducts a majority of its business during weekends and evenings when most traditional travel agencies are closed. When UK airlines capped commission in 1994, threatening travel agencies’ largest source of revenue, the Independent Travel Network became one of the first companies to book trips over the Web. Despite the far greater sales volume of competing airline web sites, the company has secured a place in this web ticketing business by being there early and building a name.

Based on transaction cost theory, the type of intermediary that offers the best ratio of benefits to costs for principals and consumers will eventually win out over rivals. The benefits for consumers include assistance in search and evaluation, needs assessment and product matching, risk reduction, and product distribution/delivery. The benefit for the principal include creating and disseminating product information and creating product awareness, influencing consumer purchases, providing customer information, reducing exposure to risk, and reducing the unit cost of distribution. The intermediary's function helps to balance and integrate the conflicting interests within customers and producers, although it is interesting to note a shifting emphasis among travel intermediaries from acting as the selling agent of the principal to acting as the buying agent of the buyer.

Technology is a critical factor in measuring, controlling and reducing travel distribution costs. At the same time, new technologies bring added customer value, as new products, new processes and new strategies become possible. Some of these can be seen in the marketing area. With one to one marketing and mass customisation for example, suppliers now have the ability to understand each customer’s needs, target them individually and deliver custom made products. This can lead to information overload for consumers, whose buying processes are made more complex. Re-intermediation, in this light, can be seen as an extension of the relationship marketing paradigm, with the key focus being on simplifying consumer buying behaviour in the search for travel choice sets. Two considerations are vital for re-intermediation strategies here. Specifically, in the travel industry, the leisure segment is attracted by a convenient way to access information, low prices and personalised advice or the collection of past experiences. Business travellers are more likely to be attracted by getting more control of their travel expenses, long-term pricing arrangements, a quick and easy way to make repeat travel arrangements for corporate travel, and enforcing corporate-wide travel policies while respecting every traveller’s preferences. Re-intermediation is enhanced by the provision of value added services as opposed to routine transactions that are characteristic of the traditional tourism distribution system. Choice therefore is an important aspect of the re-intermediation of travel services. An increase in choice does not necessarily create a whole new set of intermediaries to help keep things ‘simple’ for the consumer. The evaluation and purchase decision phases in consumer buying are important phases, and an increase in choice is psychologically costly for consumers. When decisions become ‘psychologically costly’ consumers seek to restrict their choice sets. The virtual intermediary has the potential to be well positioned to take advantage of limited search behaviour and a trusted brand will encourage repeat visits. Advances in technology will influence the competitive landscape. These include wider availability of high bandwidth networks, intelligent agents which do intelligent pricing comparisons, the emergence of Internet kiosks in public areas and the increasing number of people having access to such systems and interactive television.

Re-intermediation defines the customer as an active link in the continual process of value creation. This is a fundamental shift in the role of marketing: from manipulation of the consumer to genuine customer involvement, from telling and selling to experiencing and sharing knowledge and emotions through specific channels. Re-intermediation is making consumers the actors for whom information is developed rather than the object or targets of study.

The research which is reported below aims to evaluate the benefits of re-intermediation that is happening in the travel industry. The literature review has identified a number of implications that can be summarised as follows. Traditional intermediaries are being forced to re-structure their business processes around customer-driven strategies. This is a characteristic of re-intermediation. Service principals that re-structure their business processes in light of Internet technology do not, per se, constitute the re-intermediation of service. They are simply providing the same fundamental service through a different vehicle of communication. Re-intermediation is manifested in the proliferation of Websites that offer consumer convenience in travel shopping through the use of sophisticated profiling and intelligent agents. It simplifies the buying process. Re-intermediation is evident through the provision of value added services that are available through intermediaries and re-intermediation will continue in parallel to the innumerable micro segments that are appearing in contemporary marketing. The proposition of this research is that:

This research sough multiple sources of evidence to support the proposition that re-intermediation is likely to be a more significant force in the design of channels of distribution for travel and tourism than dis-intermediation. The analyses were two fold in that the proposition was explored by assessing the emergence of virtual intermediaries offering value added services and secondly, by assessing the cheapest and most convenient package available by booking online from both sources.

It was noted above that some types of products and markets are more suitable than others for the development of direct marketing relationships between producer and consumer. To test the proposition that the development of the Internet is more likely to encourage re-intermediation rather than disintermediation, a type of travel service was selecetd that satisfied the following conditions:

These criteria appeared to satisfy a number of sectors both within the travel and tourism sector, and other sectors as well. A panel of experts were consulted on where the re-intermediation of travel services is most prominent. It was unanimous that the airline sector was an important area, and in particular its potential to provide added value in terms of complimentary and necessary services such as accommodation and car hire to fulfil travel needs. The airline sector has been an early adopter of innovation in the past with the development of central reservation systems and equity holdings in hotel properties linked by information technology. In addition, this sector has been an early exponent of sales through the Internet, encouraged by the intangible nature of the product on offer, which reduces the problem of handling tangibles. The specific destination and travel package required was selected due to the authors’ knowledge of the destination and the inherent complexity in reserving flights for such long haul travel destinations. Research focused on a "mystery shopper" who sought to travel on a round trip from 1 October – 7 October 1999. The research was to be carried out from a consumer’s perspective and thus service principals and intermediaries were given equal opportunities to provide the necessary information and convenience for the end user in this particular case.

This study investigated search activity for the following travel package:

2. A hotel in Singapore. A reservation at a Holiday Inn in the Orchard Road district of Singapore was sought, booking directly with the hotel and using various intermediaries.
3. Car hire in Singapore. Using a sample of car rental companies and intermediaries. the cheapest standard manually operated automobile was sought.

All airlines, hotel and car rental companies who were able to supply components of the above package, and had their own website were included in the sample. The major carries that operated from Birmingham to Singapore via European hubs included British Airways, KLM, Air France, Lufthansa, Sabena, and Swissair.

The sample of intermediaries comprised the ten leading Internet travel intermediaries ranked by Forrester Research22. In rank order, they included Yahoo!, Travelocity, Expedia, Southwest, Excite, AOL, Netscape, American, Delta and Infoseek. There are three airline carriers in this classification and as they do not conform to the strict definition of an independent intermediary, they were not included in the analyses.

The provision of value added services offer companies the chance to integrate their business procedures into the tourism distribution system. As identified earlier, offering end users the convenience to conduct and reserve a travel package online fuels the development of re-intermediation in the travel industry. The research sought to identify and classify the precise nature of value added services that were available on websites that permitted online booking of the travel package required from both the service principals and intermediaries. Table 1 provides an overview of the value added services that were found during this research.

The results from table 1 are surprising. Only two airline carriers allowed online booking for the required travel package. None of the other airline carriers identified provided online booking facilities in this particular instance. As identified earlier, many segments of end users seek ‘one stop’ convenience, where an entire package can be booked online. The airlines are not facilitating this increasing need, which is resulting in other intermediaries being set up to take advantage of this niche. Of those airlines that did facilitate online bookings, only flights could be reserved which meant that the consumer would have to go elsewhere to book other elements of a particular package required. The value added services offered by the airlines that facilitated online bookings were disappointing, considering that the same services have been offered by conventional travel intermediaries since their inception. The lack of value added services provided by airlines might lead to disincentives in the future for reserving long haul package tours online with service principals. Perhaps most surprising of all was the lack of initiative shown by British Airways in not providing connecting details from Birmingham to Singapore with intelligent search engines using connecting flights operated by its strategic alliance partners.

The virtual intermediaries, on the other hand, are taking advantage of the opportunities offered to them by the world wide web in connecting with various global distribution systems to provide a valuable service to end users. With the exception of AOL and Excite, the virtual intermediaries identified by Forrester Research are providing innovative value added services. The interface with each intermediary was user friendly when conducting searches for travel packages online. The virtual intermediaries appeared to be more customer-oriented than the airlines' websites. This was evident through the provision of external links, micro-segmentation of customers to suit different types of holiday, maps, guides, virtual communities where direct feedback of travel experiences are posted, and above all the intelligent use of virtual agents to help the consumer conduct searches and purchases online with relative ease.

Table 1: Value Added Services and Re-intermediation in the Package from Birmingham International to Changi, Singapore, from 1 October for three days.

Table 2 provides a broad overview of the prices available for the particular travel package from both the service suppliers and intermediaries. The service principals (airlines) that facilitated the use of online e-commerce provided information and prices on their services only. They did not provide any information on booking hotels and cars in this particular destination.

The intermediaries, on the other hand, provided much more information in addition to many more value added services. With the exception of Netscape and Infoseek, there is not much variation in price between intermediaries. The search for the particular brand of hotel in the Orchard Road district of Singapore provided the same results. The Holiday Inn Parkview was listed in all searches and there were no price differentials. There were minimal pricing differentials between car rental companies, and Netscape was the far the cheapest in this respect. Microsoft Expedia however was the only virtual intermediary that did not give a listing for cars at Changi International Airport, Singapore.

Out of thirteen possible means to reserve the particular package online, only four sites fulfilled the objectives. These four sites were intermediaries' sites, not related to service principals. In rank order of best availability for the travel package are Travelocity, Yahoo!, Netscape, and Infoseek.

What is most interesting about the results are that the majority of intermediaries were powered by global distribution systems. Sabre predominated in this respect (see table 1). The results provided from both Yahoo! and Travelocity are identical (fluctuations arise because of exchange rates). Although powered by the same GDS, their

Table 2: Comparison of Intermediaries' Offers with Service Principals based on Cheapest Price Differentials on a Travel Package from Birmingham International to Changi, Singapore from 1 October for three days

respective platforms and interfaces are different. The main differentiating factor in this respect is the brand. The airline carrier KLM and Expedia provided the same search results for flights from Birmingham to Singapore. The major difference was price; KLM quoted £1429.50stg and through fare finder, Expedia quoted £717stg for the same flights. Further, although Netscape, Infoseek, Yahoo!, and Travelocity are powered by the same global distribution network, the price differentials between them are significant. With the exception of Travelocity and Yahoo!, and Expedia and KLM, no other flights were identical.

Although this research is exploratory and limited in scope, this paper provides support that re-intermediation is evident in the distribution system of the travel industry. This is evidenced in the growth of websites offering travel-related services to end consumers via the World Wide Web. In addition, service suppliers are not providing the same value and in the case of this research, are not facilitating the use of e-commerce in purchasing travel products. That is not to say that airlines are not providing a valuable role in the distribution of services. In the case of EasyJet (http://www.easyjet.com), there are incentives to book services online that includes fare discounts. From the selection of airline carriers identified in this research, British Airways, Swissair, and Sabena, although not facilitating online commerce for a round trip from Birmingham to Singapore, have effective interactive websites. Nevertheless, the true value of these websites were not as global and as informative as intermediaries', thereby not offering consumer convenience for a complete travel package (flight, hotel, and car) that could be booked online. This is where virtual re-intermediation has the potential to dominate the travel industry. By providing not only value added services, virtual intermediaries also provide intelligent searches that eliminate much of the searching a consumer has to undertake in order to reserve a package, or the most cost-effective components of a package. Therefore, with the exception of Sabena, although the airline carriers identified in this research all provide online e-commerce on alternative routes, none provided the ability to reserve other services that often accompany travel. ‘One stop’ shopping and customer convenience was therefore not possible, whereas it was with the virtual intermediaries.

One reason for this may be for purely financial reasons, and perhaps it is not profitable to operate such a service to consumers who may not end up travelling with the company they use to reserve travel packages. Another reason is that maybe suppliers are not skilled enough to operate as both a supplier and an intermediary, and prefer instead to focus on core competencies in operating the airline rather than acting as information brokers for the travel industry. These issues deserve further research, and are beyond the scope of this paper.

The proliferation of the World Wide Web has fuelled the growth of virtual intermediaries. The ability of the World Wide Web to link into global distribution has been harnessed by companies, which consequently, has lead to the re-intermediation of services. This was evident in this research, with Lufthansa being powered by Galileo, and Netscape, Infoseek, Yahoo!, and Travelocity all being powered by Sabre. The key distinguishing factors are therefore branding and the ability to leverage customer relationships through various marketing strategies.

An implication of this research is that it is difficult to define whether airlines and intermediary price quotations are based on the cheapest possible fares, or the cheapest availability of fares on a a particular flight. It is difficult to assess this implication without actually booking online. This is where the role of a travel intermediary adds value. Travel intermediaries can easily assess the availability of travel facilities and categorise travel packages based on both availability and price together with information synchronicity.

Direct booking of travel services is not always a feasible option for service principals due to the complexity and sensitivity of channel partners, in addition to the extra costs incurred by maintaining specialised call centres. The re-intermediation of travel services is a recent phenomenon, and its success is due to the proliferation of the Internet into society. At present, only 4%²³ of destination holidays are reserved and purchased over the Internet. Consumers have a tendency to use the Internet as a means to gather information, but not actually using it to reserve services. The adoption of the Internet as a transaction facilitator is still in its infancy due to the increasing importance of trust in consumers’ minds. Consumers are still using the more conventional telecommunications route to fulfil purchase needs.

Nevertheless, with Internet proliferation, splintering of audiences and the rise of a heterogeneous, IT literate society, marketing is experiencing a revolution. Channels of distribution are experiencing the biggest revolution, with direct marketing and relationship marketing being incorporated into many distribution systems. More specifically the value distribution chain of travel services has been subject to much hype surrounding the danger of dis-intermediation, when in fact the complete reverse change of re-intermediation is becoming evident. The impetus surrounding the continued prominence of virtual travel intermediaries lies in the provision of value added service together with a centrality of relevant intelligent information, and, most importantly the infrastructure to support online reservations. This research has examined the already established intermediaries that facilitate travel services that can be reserved online. There remains the continuing development of travel intermediaries on the Web that are so specifically targeted that it would be unprofitable for large service principals to devote resources to such packages over long periods of time. With the continued deregulation of travel services, there are relatively low entry barriers and co-operative opportunities for partnerships that are purely devoted to delivering travel packages. The traditional intermediary still has its place, as do the websites of varied service providers, but as consumers get even more demanding, the need for information and reservation convenience comes to the fore. The inherent complexity, and diverse range of experiences that are needed for any individual travel arrangement, together with the heterogeneous nature of contemporary consumers continues to be an attractive prospect for virtual intermediaries that link travel packages over the Internet. In addition, the pace at which technology is evolving creates other means of direct entry in any distribution channel. The introduction of WebTV, and travel kiosks further introduces reservation convenience into everyday life.

The result of this research provides sufficient evidence that re-intermediation is a powerful force in structuring the distribution channels within the travel and tourism sector. Re-intermediation is happening in the service industry, and the role of the travel agent, albeit in a virtual format, can only compliment the way travel services is distributed in the future.

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