The packaged-travel business continues to change dramatically as distribution migrates to the internet according to a new report from Cornell's Center for Hospitality Research.

Executive Summary: The internet has revolutionized travel packaging, in terms of both travel package development and distribution. Although tour packages are still assembled and sold in the traditional fashion by tour operators, customers who use the web have access not only to assembled tour products, but also to an array of travel-element bundles. These offers take various forms, depending on the approach of the many suppliers and intermediaries who sell directly to customers via the internet.

Packaging travel elements benefits suppliers by reducing the price transparency created by the internet, because the prices of those individual travel elements are bundled and therefore difficult for the package buyer to discern. Moreover, with the growth of online communities, suppliers can observe consumers' stated desires for travel and make proposals for travel packages, rather than wait for consumers to search out the packagers. 

A notable development is consumers' creation of their own packages in real time, based on changes in vendors' inventories and revenue management pricing. The efficacy of this process depends on the connectivity and computing power of the suppliers, packagers, and intermediaries. A framework presented here assesses value-creation aspects of  the following package value drivers: component quality levels, reductions in the opportunity cost of time, flexibility of time and destination choice, and risk management. Based on the value-creation assessment, the report suggests a research agenda and a checklist for package value creation.

Carroll, Kwortnik, and Rose point out that tour packages are still assembled and sold in the traditional fashion. That said, the big growth potential lies in sales to individual customers and small groups, particularly those who use the web to assemble their own custom tour packages. Carroll is a senior lecturer at the Cornell University School of Hotel Administration, where Kwortnik is an assistant professor. Rose is founder of TravelTech Consulting, a firm that identifies emerging technologies that can benefit the travel industry.

"We see both promise and problems for packaged-travel vendors," said Carroll. "The great promise of the internet is in evolving web 2.0 applications, where vendors can offer travel elements based on customers' wishes, as expressed online in social networking activities. The problem is connectivity, because true dynamic packaging requires information systems that permit real-time inventory exchange between travel suppliers and packagers."

Kwortnik added that vendors should seek to enhance customers' value perceptions by offering integrated, high value packages. "While integrated packages should help offset price transparency, we also note that any of the participants in this process can become competitors, by offering their own packages, even as they work together to create consumer value." To assist practitioners in assessing the value of travel packages, Carroll, Kwortnik, and Rose offer a detailed framework and checklist that examines the value drivers in the processes of search and shopping, consumption, and evaluation of travel packages.

The report, "Travel Packaging: An Internet Frontier," by William Carroll, Robert Kwortnik, and Norman Rose., is available at no charge from the center at www.hotelschool.cornell.edu/research/chr/pubs/reports/2007.html. The report outlines both the difficulties and the opportunities of internet packaged-travel sales.