Applications and Benefits of Tourism Information Technology in
Travel Intermediaries in Taiwan
Dr. Pauline Sheldon Shu-Hsia Yu
School of Travel Industry Management, University of Hawaii at Manoa
All types of travel information such as travel products, destinations, schedules, fares, rates, and availabilities are the lifeblood of travel intermediaries. Consequently, travel intermediaries need information technology (IT) to process all this travel information. This study attempts to examine the various IT applications and values of IT in travel intermediaries in Taiwan. Travel intermediaries in Taiwan are divided into three categories – General Travel Agencies (GTAs), Tour Operator Travel Agencies (TOTAs), and Domestic Travel Agencies (DTAs). This study explores whether the three types of travel intermediaries in Taiwan differ in their use of IT applications. The findings from a survey indicated that GTAs not only apply more IT but also invest more in IT than TOTAs and DTAs. It also found that IT investment was not significantly correlated to annual revenue growth rate in travel intermediaries. Additionally, factor analysis of the respondents identified three dimensions of values of IT in terms of overall organizational performance. They were internal business value, external business value, and financial business value. It is recommended that applications in the communication technology including Internet usage and Electronic Data Interchange still need to be developed. In order to make IT valuable, travel intermediaries should align IT applications with their business strategies. Lastly, travel intermediaries need to develop human assets in IT implementation such as training in technical skills to ensure that IT can assist them in developing competitive advantage.
Key Words: Travel Intermediaries, Tourism Information Technology
As a result of Taiwan‟s rapid economic growth, and the increasing amount of dispensable income, traveling has become a way of life for many Taiwanese people. This fosters the development of Taiwan‟s travel business. In 1999, 6.5 million people traveled abroad, about 30% of Taiwan‟s total population; and over the same period, in domestic travel there were 42.3 million, or about 2 trips by each resident in Taiwan (Tourism Bureau, 2000). This tendency has expanded the need for travel intermediaries. It is said that travel information such as fares, schedules, and availability are the lifeblood of travel intermediaries since all types of travel information comprise their products and services. Due to the increase of IT applied in tourism industry, more and more travel intermediaries are now employing this beneficial tool to provide added values to their customers. IT has become a vital competitive strategy for travel intermediaries (Poon, 1993).
Travel intermediaries in Taiwan possess different characteristics from travel intermediaries in other places such as the U.S. or Europe. First of all, travel intermediaries in Taiwan are categorized into three types according to government regulations: the General Travel Agencies (GTAs), Tour Operator Travel Agencies (TOTAs), and Domestic Travel Agencies (DTAs). Only the General Travel Agencies (GTAs) and Tour Operator Travel Agencies (TOTAs) are allowed to conduct outbound travel business. Purposely, GTAs function as travel wholesalers. GTAs plan, organize both inbound and outbound package tours and market them
through TOTAs and DTAs networks. The distinction between GTAs and TOTAs is not clear. Most GTAs also sell travel products and services directly to customers. There are a few “pure” GTAs in Taiwan. The major differences in obligations and
rights among these three categories are based on types of businesses, the minimum capital requirements, and operational requirements (Huang, Huang, & Yung, 1996).
Traveler‟s behaviors also influence the characteristics of travel intermediaries
in Taiwan. According to the statistical report of the Taiwan Tourism Bureau (2000), there were 6.5 millions outbound travelers in 1999. Therefore, almost 90% of travel intermediaries‟ in Taiwan operate outbound travel business (Yung, 1996). Nearly
80% of travelers‟ preferable patterns of travel are group package and semi-package
tour (Taipei Association of Travel Agents, 1995). Accordingly, travel intermediaries‟ business focuses more on the sale of package or semi-package tours
(air ticket plus hotel product) (Huang and et al., 1996).
The information comprises travel intermediaries‟ products and determines their existence (Sheldon, 1997, p.42). Therefore, travel intermediaries need IT to process all these travel information. Although tourism information technology has been utilized in travel intermediaries all around the world, there is a lack of study of IT applied in travel intermediaries in Taiwan. Thus, it is necessary to explore whether there are any differences between IT applications in Taiwan and the western countries because travel intermediaries in Taiwan are distinct from those of western countries. As a result, this study will be the first to outline the situation of IT utilized by travel intermediaries in Taiwan. With an attempt to explore applications and benefits of tourism information technology in travel intermediaries in Taiwan, this paper addresses the following research questions.
1) What kinds of IT do travel intermediaries in Taiwan utilize?
2) What kinds of benefits are conveyed by IT applications in travel intermediaries in
3) How do firm size and firm age influence the use of IT?
4) Is there any relationship between IT investment and firm performance after the
implementation of IT?
5) Are there any obstacles or limitations for IT implementation?
6) What are the underlining dimensions of benefits of IT in terms of overall
This section provides an overview of the theoretical foundation for this research. It includes the discussions of IT applications in travel intermediaries, benefits of IT, firm size and use of IT, IT investment and firm performance, and obstacles of IT implementation.
IT applications in Travel Intermediaries
The most broadly employed IT applications in travel intermediaries in Taiwan are GDSs. GDSs are what the groups of large multi-airlines hosted CRSs have become. A GDS takes the inventory from a CRS (or from many of them) and distributes it via travel agents and other distribution outlets (French, 1998). According to one study, approximately 75% of travel intermediaries used at least one kind of GDSs in Taiwan (Association of Fair Business Deal in Department of Executive, 1997). The GDS market is dominated by three major systems – Abacus International,
Amadeus, and Galileo (Travel Trends News Taiwan, 1998).
Internet is perceived as a method to transfer information freely and widely. Internet users can access different as well as detailed travel information or even make travel transactions through Internet bookings at any time and place. On the supplier‟s
side, the Internet not only provides another chances to post travel products and services but also the ability to reach as many potential customers as possible. Besides, advantages of Internet marketing include economic benefits and impressive database because it not only improves the sales and saves cost but also the customer information acquired from the Internet can be restored and traced. Those information can enhance the suppliers to understand the demand of the Internet users and then to customize products and services on the basis of customer‟s needs (Chang, 1998; Lin, 1998). Intranet employed in travel intermediaries can enhance the internal communication and make them more efficient. As well, different departments or branches can share and utilize the same information and database under the construction of Intranet. As a whole, an Intranet integrates the all components within a company (Proll, Roland, & Ebner, 1998). An Extranet is defined as private network that operates similarity to an Intranet but is directed at customers or suppliers rather than at employees (Alter, 1999). Travel intermediaries can design Extranet in order to connect their partners such as suppliers and customers. This connection can facilitate the process for reservation or delivery the services to customers. As a result, customers are promised to receive the up-to-date and first-hand travel information. In addition, it also improves the communication among suppliers, travel intermediaries, and travelers (Proll and et. al., 1998).
A growing numbers of tour operators and travel agencies are developing Database Management Systems such as customer, suppliers and products database. A customer database is viewed as a core company asset, being able to be used for customer retention strategies and relationship building, helping to create products and services that reflect consumer needs (Alford, 1999; Richer & O‟neil-Dume, 1998).
Product and supplier databases in travel intermediaries facilitate the gathering and utilization of information as a basis to improve services (Clemons and Row, 1991). On the other hand, travel intermediaries also need computers to automate their back office functions, so that staff can save time from the traditional and tedious paperwork for reporting and accounting, and release time for personal customer services. Back office software is available from numerous GDS companies and third party vendors (Sheldon, 1997). Electronic Data Interchange (EDI) is defined as „the electronic
transmission of structured business documents in a predefined, machine readable format between trading partners‟ internal computer systems (Ritz, 1995). EDI is adopted by a number of industries and facilitates the handling of documents, both within a firm and between firms in a given industry. It has many benefits to do with efficiency and also reduces paper and mailing costs. The tourism industry is using it in selected areas for selected documents but as yet has embraced it fully (Sheldon, 1997).
Hardware employed in travel intermediaries includes PC, CD-ROMs, and different types of ticket printers. Travel intermediaries use personal computers for word processing, database management, accounting tasks, accessing CRS for booking, fax clients, and spreadsheets. Some additional functions comprise data communication such as accessing distant databases, fax transmission, and email; training programs; and viewing data from CD-ROMs. The application of CD-ROMs enables travel intermediaries to sell travel products more effectively. As it is known that travel products are intangible, the presentations of CD-ROMs give clients a
chance to virtually experience the products (Sheldon, 1997). Additionally, Automated Ticket Printer, ATB-2 Ticket Printer, and even Satellite Ticket Printer allow corporations to receive tickets immediately without waiting for mail deliveries Benefits of IT on Firm Performance
Impacts of IT on firm performance were measured by both subjective and quantitative measurements of overall performance. Goren and et al. (1994) assessed firm performance on the basis of the subjective measurement including market share, profitability, return on investment, market/product development, product/service quality, customer relationship, ability to compete globally, productivity, and quality of decision. A number of quantitative indicators including revenue growth rate, profit, and return on investment are used for measuring a firm‟s performance (Smith and Mackeen, 1991). Therefore, impacts of IT on firm performance can be evaluated by both quantitative and subjective measurements. Benefits of IT mean that IT can enhance firm performance in terms of quantitative and subjective measurements. IT Investment and Firm Performance
Studies about IT investment and firm performance showed different results. A number of studies suggested that large investments in IT in firms were not associated with substantial gains in productivity (Loveman, 1988; and Roach, 1993; Turner, 1985). This is called “IT paradox or productivity paradox”. However, other studies concluded that there was a positive relationship between IT investment and firm performance (Brynjolfsson, 1993; Groen and et al., 1994; Kivijarvi and Saarinen, 1995; Powell and Dent-Micallef, 1997; Sennand and Lee, 1996;). However, the study from PIMS (1984) which indicated that if the firm has a strong strategic position, investment in IT will enhance performance. If the firm has a weak strategic position, significant investment in IT will be less effective.
Firm Size and Use of IT
Firm size has been the most frequently examined structural factor in studies on the organizational context of IT use, because it is assumed that larger organizations have more resources and more aware of economic and strategic incentives, like policy instruments and market power. Some studies certified the assumption that large firms are more likely to adopt IT (Delcone, 1981; Wang, 1997; Yap, 1990). Obstacles for IT Implementation
When implementing IT, companies encounter some obstacles such as cost concerns, lack of expertise, lack of support from management level, and troubles in updating and maintenance. A shortage of IT specialists to undertake the develop IT will hinder the IT implementation in one organization (Cane, 1992; Mata, Fauerst, & Barney, 1995; Ross and et al., 1996). Mata and et al. (1995) studied that managerial skills for strategic IT applications can sustain the competitive advantage in one organization. Hence, the management level should not only support the IT applications but also understand how to align IT with the business strategies. Mutch‟s (1995) study about IT and small tourism enterprises expressed that cost was an important factor when applying IT. Besides, lack of expertise was considered the key limitation when implementing IT.
It is known that there is a lack of research on IT applications in travel intermediaries in Taiwan; therefore, a survey research was employed here in order to obtain data regarding applications and benefits.
Subjects and Survey procedure
There are approximately 1,750 travel intermediaries in Taiwan, which will be the population in this study. Among them, 82 are GTAs, 1553 are TOTAs, and 107 are DTAs, excluding branch offices. To generate 95% confidence in the results, a sample of 350 is drawn. In order to get data and respondents from three types of travel intermediaries, stratified sampling is employed. Then, systemic sampling is applied to choose subjects from each stratum. Subjects are selected from the 1999 membership directory of the Travel Quality Assurance Association according to the sampling criteria mentioned above. After the sampling procedure, the numbers of each stratum are decided. There are 74 subjects from GTAs, 238 from TOTAs, and 38 from DTAs. It is presumed that GTAs applied more tourism information technology in their operation according to the author‟s previous work experience and opinions of the professionals in the industry. Therefore, the researcher decided to investigate almost all GTAs. The population proportion of the other two types of travel intermediaries are reflected in their sample size.
The survey was conducted after the pilot testing during a period of six weeks from May 3 to June 11, 2000. Survey questionnaires were mailed out enclosed with self-addressed and post-paid envelopes to a total of 350 travel intermediaries in Taiwan. The survey used mail survey with personal delivery survey in order to enhance the response rate. After three weeks of the mail out, 46 responses were received and eight were returned to sender as non-delivered. Among the 46 responses, four surveys were invalid because of incomplete answers. In order to increase the response rate and make the survey more accurate, a personal survey delivery was administrated for the subjects who did not reply to the mail survey. The interviewer physically visited the travel intermediaries selected from the sampling for three weeks. The interviewer went to selected travel intermediaries and asked either the general manager or the IT manager to fill in the survey questionnaire. For the personal delivery survey, 109 responses were received. Combining the responses from mail survey and personal survey delivery, a total of 151 responses were obtained resulting in a response rate of 45% (n=338).
Survey Development and Measurement of Variables
The questionnaire consisted of five sections totaling 22 questions. The first section asked whether travel intermediaries utilize various applications of tourism information technology in terms of software, the Internet usage, and hardware. The second section was data about IT investment and the spending in IT to the total budget in travel intermediaries. The third section comprised benefits of tourism information technology in terms of firm performance. Firm performance is measured not only by the annual revenue growth rate but also the overall performance such as product/service quality, productivity, market share, communication efficiency, and so on (Wang, 1997). A total of 12 items measuring the overall performance are rated on a five-point scale: 1 (very poor), 2 (poor), 3 (OK), 4 (good), and 5 (very good). The fourth section included different obstacles for implementation of IT. The obstacles include cost concerns, lack of expertise, no suitable applications, trouble in updating and maintenance, lack of support from executives, as well as another category for respondents to write additional obstacles. Finally, the fifth section was a profile of
travel intermediaries. From this section, data regarding types of travel agencies, major business, years of running business, number of branch offices, number of employees, degree of computerization, and training programs for IT can be acquired. Originally written in English, the questionnaire was translated into Chinese Mandarin.
The values of IT are measured in terms of a firm‟s performance, including return on investment, productivity, revenue growth rates, return on investment, profits and etc. On many occasions annual revenue growth rate was the most frequently used measure quantifying the economic return on investment in IT. On the other hand, respondent‟s subjective measurement of over all performance can be introduced to capture the intangible perspective of a firm‟s performance (Wang, 1997). In this way, the IT value measures on overall organizational performance, was based on the literature and previous research regarding the IT benefits in order to create the measurements. Finally, two methods for measuring firm performance in this study were decided. One is quantitative measurement using annual revenue growth rate; the other is qualitative measurement on the basis of previous literature and research, which comprise 12 items for the overall organizational performance.
Previously, measures of firm size that have been considered include total number of employees, number of branch offices, total assets, and annual turnover (Harris & Katz, 1991; Wang, 1997; and Yap, 1990). In this study, number of employees and number of branch offices are determined as measurements for firm size. Additionally, as travel intermediaries are categorized into three types on the basis of regulations in requirements of capital, security deposits, number of certified managers, and office size. Types of travel intermediaries can be utilized as a measurement for firm size.
Data Analysis Methods
All the primary data obtained from the survey were analyzed with the use of the Statistical Package for Social Science (SPSS) version 8.0 for Windows software. Descriptive statistics such as frequencies, means and standard deviations were calculated for the data. Statistical techniques for significance and correlation or association such as T-test, One-way ANOVA, Post-Hoc test Pearson Correlation were be used to answer the research questions. Besides, factor analysis is utilized to find out whether there are some dimensions existed for the benefits of IT in terms of firm performance.
In order to answer the research questions, four hypotheses are derived and different statistical techniques are used to test these hypotheses. H1: There is no significant difference between types of travel intermediaries and IT applications or IT Investment.
The number of IT applications asked in the questionnaire is 24, which are comprised 13 in software, 5 applications in Internet usage, and 6 applications in hardware. Moreover, the data of IT investment in the year of 1996 to 1998 are also obtained from the survey. One-Way ANOVA test was employed to examine this hypothesis. Table 1 showed that there are significant differences in IT applications in terms of software, Internet usage, and hardware among three types of travel intermediaries. Additionally, the outcome indicated that investment in IT is significantly different among three types of travel intermediaries; however, there is no
significant difference in their IT budget to the total budget among three types of travel intermediaries (See Table 1). Therefore, H1 is rejected.
Table 1: IT Applications and IT Investment by Types of Travel Intermediaries
Types of Travel Intermediaries-Mean Scores One-Way ANOVA Test
General Travel Tour Operator Domestic d.f. F Ratio Sig. Agencies Travel Agencies Travel Agencies
2 57.7999 .000* Software
Mean Scores 7.4 4.6 3.11
Std. Deviation 1.62 1.75 1.78
2 15.013 .000* Internet Usage
Mean Scores 2.92 1.62 1.33
Std. Deviation 1.43 1.39 1.54
2 27.649 .000* Hardware
Mean Scores 3.67 2.42 2.17
Std. Deviation 1.12 0.97 0.51
2 46.948 .000* IT Applications
Mean Scores 13.98 8.65 6.61
Std. Deviation 3.57 3.43 3.26
2 15.868 .000* 1998 IT Investment
Mean Scores $1,885,870 $312,216 $73,888
Std. Deviation $2,475,808 $980,012 $40,604
2 19.891 .000* 1997 IT Investment
$1,546,444 $225,876 $60,000 Mean Scores
$1,855,398 $636,598 $25,884 Std. Deviation
2 18.978 .000* 1996 IT Investment
Mean Scores $1,773,777 $163,058 $79,333
Std. Deviation $2,372,927 $309,732 $92,598
2 1.854 .160 Percentage of IT Budget
Mean Scores 6.362 4.694 3.741
Std. Deviation 5.264 6.02 5.052
Note: Total IT Applications=24 (Software=13,Internet Usage=5,Hardware=6)
*The mean difference is significant at the 0.05 level (One-way ANOVA Test)
H2: There is no relationship between firm size and IT applications or IT Investment.
Firm size is interpreted by the number of branch offices as well as the number of employees. After running the bivariate Pearson correlation between firm size and IT applications, the results revealed that a significantly and moderately positive relationship exists in firm size and IT applications. Besides, the outcome explained that there is a pretty high positive relationship between firm size and IT invetsment. However, there is a slight relationship between firm size and percentage of IT budget (See Table 2). As a result, H2 is rejected.
Table 2: Correlation of Firm Size and IT Applications / IT Investment
Number of Branch Number of Mean Std. Deviation Offices Employees
.479** .642** 5.31 2.27 Software
.492** .531** 2.00 1.54 Internet Usage
.516** .679** 2.79 1.15 Hardware
.556** .697** 10.10 4.39 IT Applications
1998 IT .744** .752** $805,681 $1,766,072 Investment
1997 IT $649,544 $1,330,730 .821** .808** Investment
1996 IT .738** .731** $719,515 $1,615,674 Investment
Percentage of .183** .212** 5.117 5.719 IT Investment
1.44 56.21 Mean
2.61 72.72 Std. Deviation
**Correlation is significant at the 0.01 level (2-tailed).
H3: There is no underlining dimension of IT benefits in terms of overall firm performance.
Factor analysis was utilized to examine whether there were some structures or dimensions among the items for measuring the overall firm performance. In factor analysis, the extraction method used was principal component (Eigenvalue above 1), and oblimin method was used for rotation. Table 3 explained the grouping of the three factors and alpha form reliability test for each factor is shown. After reviewing the three factors, each factor is named as Internal Business Value, External Business Value, and Financial Business Value.
Table 3: Structure Matrix of Factor Analysis
Factor I: Factor II: Factor III:
Internal External Financial
Business Value Business Value Business Value
0.920 Market Development
Product Development 0.918
Internal Communication Efficiency 0.829
Decision Making Quality 0.822
Competitive Advantage 0.734
Product/Service Quality 0.901
Customer Relationship/Satisfaction 0.857
Interorganizational Communication 0.671 Efficiency
Return on Investment 0.970
Market Share 0.770
Eigenvalues 6.848 1.305 1.138
57.065 10.877 9.485 % of Variance
0.9117 0.8354 0.8875 Alpha
Extraction Method: Principle Component Analysis
Rotation Method: Oblimin with Kaiser Normalization
H4: There is no relationship between IT investment and firm performance.
Firm performance is measured not only by quantitative but also by qualitative methods. Hence, the firm performance is interpreted by annual revenue growth rate as well as twelve qualitative statements. The Pearson correlation test was employed to test H4. The result showed that there is no relationship between IT investment and annual revenue growth rate. Besides, the outcome from the Pearson correlation which examines the relationship between IT investment and three factors of the overall organizational performance indicated that a slightly positive relationship exists in IT investment and overall organizational performance. IT investment is correlated higher with Internal Business Value than External Business Value and Financial Value (See Table 4).
Table 4: Correlation between IT Investment and Firm Performance
1998 IT 1997 IT 1996 IT Std. Mean Investment Investment Investment Deviation
1998 Revenue 13.47 7.78 .240** Growth Rate
1997 Revenue 0.149 10.98 6.1 Growth Rate
1996 Revenue 0.71 11.67 7.11 Growth Rate
.356** .373** .365** 2.64 Internal Business
3.42 .259** .268** .198* External
.289** .307** .246** 2.53 Financial
**Correlation is significant at the 0.01 level (2-tailed).
* Correlation is significant at the 0.05 level (2-tailed).
Results from the data analysis indicated that GTAs not only apply more IT but also invest more in IT than TOTAs and DTAs. However, no significant differences were discovered in both IT applications and IT investment between TOTAs and DTAs. Firm size in terms of number of branch offices and number of employees is highly correlated with IT applications and IT investment. In other words, the larger the firms, the more IT applications and investment. However, firm size is not significantly correlated with the percentage of IT budget to total budget in travel intermediaries. No significant difference was observed in the ratio of IT budget to total budget among three types of travel intermediaries. Firm age is slightly correlated with IT Investment.
No relationship was found between IT investment and annual revenue growth rate. This result supports the findings from previous research concluding that IT investment does not enhance the economic performance of organizations. Additionally, a slightly positive relationship was found between IT investment and overall
organizational performance. Additionally, travel intermediaries in Taiwan perceive that IT conveys benefits in three dimensions, which are internal business value, external business value, and financial business value. IT investment is correlated higher in internal business values than financial and external business value.
According to results shown above, GTAs utilize more IT applications and make more investment in IT than TOTAs and DTAs. The finding also indicated that GTAs perceive that their overall organizational performances are better than TOTAs and DTAs after they implement IT. This results may derived from that GTAs apply more IT applications and invest more in IT.
It was found that travel intermediaries who have not started computerization have more obstacles in IT implementation than those that perceive themselves as “partially” or “completely” computerized. However, no significant difference in
obstacles of IT implementation was discovered between “partially computerized” and “completely computerized” travel intermediaries. Additionally, travel intermediaries offering IT training programs are not significantly different from those not offering IT training programs in terms of obstacles of IT implementation.
In conclusion, the study indicated the same results in travel intermediaries in Taiwan as the previous research showing that larger firms tend to apply more IT applications and invest more in IT than small or medium-size firms (Yap, 1990 and Wang, 1997). Furthermore, investment in IT is not significantly correlated with annual revenue growth rate. This finding supported the finding that IT investment growth and business revenue growth was not related (Smith and Mackee, 1991). Besides, more investments in IT do not predict an increase of overall organizational performance. Significant correlations have been found (e.g. firm size and IT applications, firm size and IT Investment and so on). The reader should not conclude any direction of causality from the results.
Communication technology, which includes Internet usage and Electronic Data Interchange are not yet widely applied by travel intermediaries in Taiwan. Therefore, applications in these two fields still need to be developed. Since it is projected that Internet users will increase to 400 million by the end of year 2000, travel intermediaries must learn to apply Internet usage.
The results also showed that most travel intermediaries employed IT only to improve productivity or to automate their operations. Also, investment in IT was not found to significantly or highly correlate with annual revenue growth rate and overall organizational performance. Consequently, travel intermediaries should examine how IT can be used for strategic progress. In order to make IT most valuable, travel intermediaries should align IT applications with the business strategies. For example, customer relationship strategy can be enhanced by the development of database management systems. Internet marketing is a method for market development. This higher level usage of IT can not be successful without including management the process. Mata and et al. (1995) studied that managerial skills for strategic IT applications can sustain the competitive advantage in one organization. Not only should management support IT applications but also it should understand how to utilize IT to achieve the business strategies. Besides, management should create the organizational culture for belief in IT use. In addition to developing and maintaining a technically competent IT organization, IT managers also should seek to develop close