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A cultural transferability
on IT business application:
iReservation system
Mohammad Nabil Almunawar
Faculty of Business, Economic and Policy Studies,
University of Brunei Darussalam, Gadong, Brunei

Heru Susanto

iReservation
system

155
Received 16 May 2012
Revised 7 August 2012
25 November 2012
Accepted 14 February 2013

Faculty of Business, Economic and Policy Studies,

University of Brunei Darussalam, Gadong, Brunei and
IT Governance & Information Security Research Group,
The Indonesian Institute of Sciences, Tangerang, Indonesia, and

Muhammad Anshari
Faculty of Business, Economic and Policy Studies,
University of Brunei Darussalam, Gadong, Brunei
Abstract
Purpose The emergence of innovative internet-based reservation systems (iReservation systems) is
threatening the sustainability of retail travel agencies (TAs) in Brunei Darussalam. With the
friendliness and convenience offered by iReservation systems, many customers nowadays prefer to
book their tickets and accommodations online. The purpose of this paper is to assess the impact of
iReservation systems on TAs in Brunei Darussalam. In other words, the authors are interested to find
out how TAs and customers react to iReservation systems.
Design/methodology/approach To fulfil this objective, surveys were conducted on both the
responses from TAs and their customers regarding iReservation systems in Brunei Darussalam.
Findings Most individual customers prefer to book their tickets and accommodations through
iReservation systems. However, government and corporate customers still prefer to book tickets and
accommodation by TAs. Most TAs are affected by iReservation systems either negatively or
positively, depending on how TAs respond with their sustaining strategies such as segmentation,
targeting and positioning in the market.
Originality/value It is clear that without proper strategies in facing turbulent changes in the
tourism industry, eventually traditional TAs will be disintermediated.
Keywords Travel, Tourism, Consumer behaviour, Internet, Brunei Darussalam,
Reservation consumer systems, Internet based reservation system, iReservation system, Travel agencies,
Cultural transferability, Information security, Segmentation-targeting-positioning
Paper type Research paper

1. Introduction
The advancement of the information and communication technology (ICT) especially
the internet and the web have dramatically changed the way in which data is managed,
accessed and used commercially to conduct business electronically. Today, a large
number of companies, organisations and customers are exploiting the opportunities
offered by internet-based electronic commerce solutions and many more expected to

Journal of Hospitality and Tourism

Technology
Vol. 4 No. 2, 2013
pp. 155-176
q Emerald Group Publishing Limited
1757-9880
DOI 10.1108/JHTT-05-2012-0015

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follow (Susanto et al., 2012a, b). The tourism business and technology is continuously
evolving through ICT emerging technology, and the tourism industry has undergone
profound changes from the 1970s to the present, which are forcing suppliers to renew
their products in order to satisfy the emerging demand target requirements and to remain
competitive in the global market (Berezina et al., 2011). These changes have been favored
by the diffusion of digital media and ICT, the internet revolution as a new narrow-casting
communication means (Phelan et al., 2011) and the application of all these tools to the
Travel and Leisure tourism market. Buhalis (1998) provided an overview of the tourism
evolution within the last 30 years: from the computer reservation system (CRS) in the
1970s to the global distribution system (GDS) in the 1980s, to the internet revolution in the
second half of the 1990s.
In todays turbulent and very competitive business environment, becoming an agile
company must be considered as an important strategy, not only to survive but also to
grow by taking advantage of changes. The internet technology, especially the web, has
provided a new platform in conducting business electronically. The web offers
opportunities; however, it also brings threats. For example, a local company can market
their products or services globally, however at the same time it faces global competition in
the local market. The web also offers a company to sell their products or services directly
to their customers. While this is a very good opportunity for companies that produce
products or services, it is a threat to companies that offer their services as intermediations
as is what is happening in the travel industry. For example, with the convenience and
efficiency provided by the iReservation systems offered by airline companies or hotels,
most customers prefer to book tickets and hotel rooms online as they have freedom to
interact anytime and anywhere they like, leaving TAs to worry of disintermediation as
their main function is to provide intermediations between customers and airlines or
hotels.
Brunei is a small but rich country with a population of only around 400,000, and a high
GDP per capita, US$50,000 (CIA fact book). Recently, the internet penetration in Brunei
is very high, among the highest in Asia, 79.4 per cent, just 1 per cent behind South Korea,
which is the highest[1]. There is no doubt that future users of internet-based business
applications, including iReservation systems in Brunei Darussalam will increase and
disintermediation of some TAs is highly likely. Therefore, TAs need to anticipate the
latest trend and formulate sustaining strategies to survive or grow.
Our research is an attempt to provide a picture of internet-based reservation systems
in Brunei that may become a trigger for a cultural transferability on companies and their
customers which may imply changes on how companies and their customers interact.
Cultural transferability is basically a positive change made by the stakeholders, which is
influenced by the discovery of new concepts or technologies that change from the
traditional or classical way towards simpler, smarter, more effective and efficient way
(Hammer and Champy, 1993; McKenna, 1995), and is currently happening in tourism
industry where iReservation systems are replacing the TAs.
The results of our survey are interesting. Most individual customers, particularly
Generation Y (known as the Millennial Generation or Net Generation or Gen Y) with
their computer literacy, prefer to book their tickets or hotel rooms through iReservation
systems as compared to TAs. Therefore, Generation Y is the demographic cohort
following Generation X (or called by Gen X, was born at early 1960s). Gen Y with birth
dates from the later 1970s or the early 1980s decade characterized as technologically

savvy and immersed in online behaviours, more involved in such online activities as
text messaging, social networks, podcasts, and blogs (Consumer Behavior Report,
2008; Lester et al., 2006; Nusair et al., 2013).
The main reasons of this preference are the efficiency, flexibility and convenience
offered by iReservation systems. However, government and corporate customers still
prefer to arrange their travels through TAs as they need services offered by them. It is
interesting that some TAs also take advantage of iReservation systems from low-level
income customers as they do not have credit cards to book tickets directly from
iReservation systems. In general, those TAs that rely their income from ticketing services
are currently under serious threat of disintermediation. To survive they have to develop
a proper marketing mix strategy by combined their product, price, distribution and
promotion to attract customers through segmentation, targeting and positioning strategy
and focusing on niche markets.
The rest of this paper is organised as follows, related works on critical resources
(resource dependence theory (RDT), transaction cost economics (TCE)) and web
application emerging technology are discussed in Section 2. iReservation systems
functions, features, and advantages are discussed in Section 3. Section 4 contains the
methodology of our research. We present our findings in Section 5 and discuss them in
Section 6. Finally, Section 7 presents our conclusion and recommendation.
2. Related work
2.1 Critical resources
The potential of the internet as a commercial medium and an electronic market place
(market space) has been documented in a variety of publications (Ratnasingham, 1998;
Schroer and Solis, 2012). Therefore, applications that take advantage of the internet as
a global market place have become an important part of a new approach on global
marketing strategy, as they provide sample opportunities for companies to grab more
customers, beyond their traditional or domestic market. However, high customer
expectation poses a serious challenge to companies, including TAs, as they have to meet
customers requirements and make exceptional impression upon customers demand
(Anshari et al., 2012). How can TAs sustain their businesses and compete in the new
environment where iReservation systems are becoming dominant applications?
In the old environment TAs are dominant business entities that control flow of
information from suppliers (airlines or accommodation providers) to their customers.
However, iReservation systems have changed the rule of the game resulting in TAs
losing their control and this control is passed onto customers. The consequence of this
change can be explained with the RDT as well as TCE.
RDT and TCE argue that external environment influences the performance of the
organisation and its business processes. RDT mentions that the key to organisational
survival is the ability to acquire and maintain resources (Pfeffer and Salancik, 1978),
it has become one of the most influential theories in organisational theory and strategic
management. It is believed that organisations depend on the environment to enact
multiple strategies as function to combat contingencies (Hillman et al., 2009). Therefore,
RDT recognizes the influence of external factors on organisational behaviour and
how to control environmental uncertainty and dependence. Those dependencies and
power differentials are created as a result of unequal resource exchange (Bob, 1995).
Changes may take place in the organisation because of the demands of interested

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parties (customers). Pfeffer and Salancik (1978) discuss a range of responses the
organisation might demonstrate. These responses range from refusal or avoidance of
demands, through management, adaptation, or compliance with such demands. The
ability of the organisation to successfully employ a particular response and maintain its
existence depends upon such factors: the resources available to it, uncertainty in the
environment, dependence upon demand of interested parties and proper processing of
information (Sheppard, 1995).
Consequently, identifying the critical resources in the TAs industry are the critical
factors for TAs to sustain in a turbulent business environment. We can predict that if a
TA cannot obtain the proper mix of resources it needs, eventually it will fail to maintain
the business. Fortunately, an organisation can minimize its external dependencies
effects and increase their likelihood to survive by:
.
re-positioning market segmentation by selecting profitable and controllable
market demand (Pfeffer and Salancik, 1978);
.
internalizing/minimizing dependence effects through merger or diversification
(Thompson, 1967); and
.
establishing external linkages to manipulate exchange relationships, such as
through board of directors interlocks (Pfeffer and Salancik, 1978).
ICT especially the web technology is an important resource to create more efficient
business processes. It is also a powerful channel for organisations to develop or enhance
interactions with customers to strengthen business-customer relationships (Hinchcliffe,
2006). Greenberg (2009) mentioned that web emerging technology drives social change that
affects all businesses. It triggers a revolution on how people communicate by facilitating
intensive peer-to-peer collaborations and easy access to real time communication.
Therefore, customers must be viewed as a critical resource in any business organisation.
With the advancement of web technology, customers are becoming aware and empowered
in a way that they have the ability to communicate and relay information through their
personal networks in the internet with their colleagues on any issue instantly, including
information about products or services that they purchased (Anshari and Almunawar,
2011). The web emerging technology has four main basic advantages: personalization,
digital democracy, communication and low cost effective marketing. Through web
emerging technology, an interactive atmosphere is created where (potential) customers
can access information instantly. Moreover, businesses may learn about customer taste,
trends and behaviour that lead to boost their promotion, advertising, and marketing
strategies to sustain their market (Susanto and Almunawar, 2012).
Meanwhile, TCE concerns with the environmental uncertainty that affect the
organisation. A number of marketing and management empirical studies on
customer-supplier relationships have used the TCE paradigm to explain the relationship
governance decisions (Dwyer et al., 1987; Anderson and Weitz, 1989; Brown et al., 2000).
For instance, TAs customers are uncertain about the type of customer-provider relationship
to pursue and when particular forms of customer-provider relationships are appropriate.
Macher and Richman (2008) summarized that transaction costs arise most fundamentally
because of the limit of human cognition. Consequently, there are at least three main sources
of transaction cost. First, individuals are limited in their ability to plan for the future. Despite
best efforts to deal with the complexity and unpredictability of the world around them,
individuals lack the knowledge, foresight or skill to accurately predict and plan for all the

contingencies that may arise (Simon, 1957). Second, even if perfect planning were possible,
contracting parties have difficulty developing a common language to describe actions and
states of the world, especially for matters with which they have little prior experience (Hart,
1995). Third, assuming that the parties can plan and negotiate for a fully contingent contract,
it often remains difficult for them to communicate their plans in such a way that an
uninformed third-party (e.g. a court) could reasonably enforce them, and conversely, it is
difficult for a third-party enforcer to verify what the parties claim in the event of a dispute
(Lewis and Sappington, 1991).
Transactional uncertainty in TCE generally refers to unanticipated changes in
circumstances surrounding an exchange (Noordewier et al., 1990), and is typically in
reference to changes in the environment to future events (Anderson and Weitz, 1989).
Measurement constructs of environmental uncertainty that have been employed in
empirical TCE analyses include demand uncertainty (Heide and John, 1990),
technological uncertainty (Walker and Weber, 1984; Balakrishnan and Wernerfelt,
1986) and supplier uncertainty (Walker and Weber, 1987), while measurement
constructs of behavioural uncertainty often attempt to measure and evaluate partner
performance (Anderson and Weitz, 1989; Heide and John, 1990; Stump and Heide, 1996).
TAs in Brunei have been experiencing external environmental uncertainty, therefore
TCE is also used to analyse the situation, for instance, demand uncertainty is the number
of customers who will go for pilgrimage yearly. Technology uncertainty is another
challenge for TAs, since they have to make sure the technology used is available or
currently used by prospective customers. On the other hand, they have to face the
supplier uncertainty since they rely on the availability of seats, accommodations and
related travelling matters with other parties. The next section discusses the web
technology in greater detail, as it is a critical resource to the travel business in this
information age.
2.2 Web application emerging technology
ICT is the lifeblood of travel industries as most of their products and services are
heavily dependent on information. Computerised reservation systems have been a vital
part of airlines to allow their distributors (travel agents) to make reservations
efficiently (Cobanoglu et al., 2006, 2012). It is important to note that ownership of a
computerised reservation system has improved the performance of airline and the
system has become an important asset for further innovation (Duliba et al., 2001). For
example, the American airlines computerised reservation system, SABRE, has
provided a huge advantage for American airlines (Hopper, 1990).
However, computerised reservation systems like SABRE, have two major practical
limitations (Anckar and Walden, 2000). First, small and medium travel agents are
unable to cope with the system; they are side-lined by the system. Second, direct access
from customers is almost impossible.
The advancement of web applications on the internet has created opportunities to
overcome the limitations mentioned above. iReservation systems are developed to
overcome the limitation of conventional computerised reservation system. It is a part of
the evolution process of adoption of the internet as a business environment. Therefore,
web-based reservation systems (iReservation systems) can be adopted by any travel
agent regardless of their size as well as customers with little or no cost, making
iReservation systems the disruption against the old computerised reservation systems.

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One of the main features of iReservation systems is to provide direct transaction

between suppliers and customers. This capability raises a concern on the role of
traditional intermediaries such as TAs. Disintermediation of TAs within the travel
industry is highly likely as stated by various studies (Buhalis, 1998; Killion, 2009;
McCubbrey and Taylor, 2005; Tse, 2003).
Prior to the introduction of the web until the mid-1990s, the traditional TAs grew
dramatically in the USA (Killion, 2009). However, once reservations through the web
became popular, many TAs were unable to sustain their businesses. The significant
decline of travel agents cannot be attributed solely with the impact of the web since
around the same time, the commissions given to TAs were reduced (Morrison, 2002).
However, the reduction of commissions most likely was the result of the increase of
airlines and hotels confidence to reach their customers directly through the web.
Customers of travel industry use distribution channels (travel agents) to help them
find the destination, make reservations and make payments (Pearce and Schott, 2005).
Traditional TAs have the expertise to provide services to fulfil these three functions.
Customers have the option to fulfil the three functions through TAs, mixing between
TAs and internet, such as finding destination using the internet and making
reservation and payment through TAs or fully making use of the internet to find
destination, making reservation and payment as these three functions can be
performed through the internet.
McCubbrey and Taylor (2005) discuss the prediction of the disintermediation of TAs and
the sharp contraction of traditional TAs in the USA from 22,785 entities in 1993 to 13,283
entities in 2007. This prediction was proved to be quite accurate and disintermediation
occurred in traditional TAs in the USA. However, a new intermediation mode, web-based
intermediation or infomediation occurred and became increasingly popular. This indicates
that iReservation systems either direct or indirect through infomediation are becoming
popular and the traditional TAs are under great pressure to sustain.
The emergence of new travel services and products, along with a fast growing
demand in travelling related products and services and the advancement of the internet
has enabled businesses in the travel industry to enhance their competitiveness and
performance as well as examining their customers perceptions to anticipate their
preference. However, the iReservation systems pose a threat of disintermediation to
traditional travel agents (Law et al., 2004).
Barnett and Standing (2001) stated that the potential for structural changes in the
travel industry has created the need for TAs to review or reform their business models
to support their online strategies.
Vrana and Zafiropoulos (2006) conducted a study on Greek travel agencies
attitudes on internet adoption. The study emphasized the current state of internet use,
agents attitudes towards internet applications, the relative maturity of the web sites
and the perception of internet marketing by Greek travel agencies. It found that many
travel agencies do not fully utilize the internet as small numbers of transactions were
completed online. Their web sites are merely to provide static information, an early
stage of adoption of the internet for business. These attitudes raise the concern that
many traditional TAs do not have proper online strategies, therefore they may have
difficulties to compete with global players that provide infomediation.
However, a recent study on consumer criteria for selecting travel reservation
web sites was conducted by Gabriel (2011). The results of the study grouped into

these categories: reliability, adequate information, ease of use and reassurance. In

general, consumers need to be assured that the web site is reliable and their personal
information is being handled adequately. Customers look for relevant information
related to their need for travelling such as destination or, simply, the comments and
opinions of fellow travellers. The web site must have an intuitive user-friendly interface
and be equipped with advance search. Is it important to assure that secure technology
for transactions is in place (Susanto et al., 2012a).
An interesting study on possible disintermediation of TAs in Thailand was conducted
by Kaewkitipong (2010). Although disintermediation of TAs in travel industry is real,
especially in the USA and Europe, disintermediation of TAs in Thailand is not as
extreme as in the USA and Europe although many small and medium size hotels have
offered direct reservations through their web sites. The study concludes that despite
attempts of suppliers (hotels and airlines) to cut intermediaries by selling directly to
customers through their own web site, total disintermediation is unlikely to occur. With
proper strategies, TAs will survive or even grow. It is important for TAs to improve
marketing strategies such as their service to customers as well as creating strong
relationships with suppliers (airlines and hotels).
3. iReservation systems
An iReservation system is the system that provides online facilities to the customer
making their airlines tickets, hotels and holidays package reservations. This system is
now widely used, most airlines and hotels nowadays have this system on their web sites
for reservation purposes. This creates an opportunity for direct interaction between
airlines or hotels with their customers providing convenience and efficient services
and creates further opportunities to offer other services online.
Similar to traditional TAs in other parts of the world, TAs in Brunei Darussalam
are facing disintermediation as most travel suppliers offer iReservation systems and
the majority of the population are connected to the internet. To stay in business, TAs
need to have a suitable marketing management strategy such as segmentation,
targeting and positioning as their unique selling points to survive through offline or
online mediations.
Travel industry is an important industry in Brunei. TAs provide services to access
details about holiday packages, flights, accommodations and excursions. In addition,
TAs have the expertise to provide relevant information to help their customers fulfil
their needs in travel related services. There are many different types of TAs operating
in Brunei, which can be classified into three categories. First, TAs that provide holiday
related services, helping and advising customers to find destinations. Second, TAs that
focuses on serving and advising corporate and business people to plan and book
airlines tickets and accommodations for their business activities such as meeting,
conference, and marketing or other business related activities. Third, TAs those focus
on pilgrim, providing Hajj and Umrah packages[2] for Muslims.
TAs officers are trained to be experts in giving advice on destinations worldwide,
arranging for transportation, hotel accommodation, car rental, and tours packages, as
well as organising travel insurance on customers holiday, and advising them on
custom regulations, required papers, passport and visa, and currency exchange.
In recent years there has been an increase in the number of online TAs, but online TAs
are also struggling as airlines and hotels have taken a direct approach to winning customers

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Figure 1.
iReservation system and
TAs communication and
information flow

by using the internet. Since major airlines and hotels operating in Brunei offer web-based
reservation systems, where customers can directly reserve seats or rooms, bypassing TAs
(Figure 1), we are interested in finding out how TAs in Brunei react to the new business
environment and how customers change their preferences in this environment.
4. Methodology
With all the promises and benefits offered by iReservation systems, the research attempts
to analyse the impact of iReservation systems to the TAs survivability and preference of
the customers. For this purpose, we singled out potential features offered by iReservation
systems to provide online service and prove these features in a survey. Questionnaires were
developed based on the extracted literature (Gabriel, 2011; Mill and Morisson, 2002; Barnett
and Standing, 2001) studies as discussed in previous section. We conducted a survey on
customers to find out their preference and tendency toward iReservation systems.

Moreover, we used the purposive sampling methods (Ahmed, 2009) as discussed, in which
they were intentionally selected from travellers, regular passengers, frequent fliers, and
their families. Majority of the respondents are local Bruneians, who frequently booked their
holiday packages and airplane tickets through TAs and iReservation systems. Therefore,
they represent a fair share of the general public. The time taken to complete the
questionnaire on average was 10 minutes. Some respondents required as long as 15 minutes.
There were quite a large number of customers who participated in our survey; 520 persons
were randomly selected, 60 per cent of them are employed and the rest (40 per cent) are
students, housewives and retirees. Table I depicts the respondents of our surveys.
Second group of participants were main travel agents staff and management around
the country. Semi structured interviews (Diefenbach, 2009) were conducted for travel
agents and the duration to complete the interview was approximately 30 minutes. There
are not many registered travel agents in Brunei, less than 30; however, we successfully
managed to get 24 travel agents to participate in our survey. For each selected travel
agent, we contacted a key person(s) who has knowledge on operations and strategic
management of his/her company. The main objective of the survey is to find out travel
agents views and responses on iReservation systems and their strategies in facing the
threat of disintermediation.
In general, acceptance for the interviews and survey was high. The data were
analysed to find out the effect of internet, especially web-based reservation systems, on
travel agents in Brunei and their strategies to overcome the threat of disintermediation.
The survey results were analysed statistically and we also use the theory of social
networks (Greenberg, 2009), RDT (Pfeffer and Salancik, 1978), and TCE (Macher and
Richman, 2008) to interpret the findings.

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5. Finding: TAs and customer perception on iReservation systems

5.1 Findings from travel agents
It is interesting to find that some TAs takes advantage of iReservation systems
available in the market by offering services to their customers, especially low income
customers who do not have credit cards. Customers are charged BND20 to BND30 as a
service fee (depending on destination) on top of the total price charged by the airlines.
For those TAs that focus their market segment to government or corporations
(80 per cent of their customers are from corporates or government and only 20 per cent
consist of individual customers), they do not see iReservation systems as threats
Proportion (%)
Respondents
24 travel agents
520 customers
Age
,20 years
20-40 years
.40 years
Income
, BN$500
BN$500-BND3,000
. BN$3,000

6
81
13
22
64
14

Table I.
Respondents profile

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Figure 2.
Three types of TAs with
their unique customers
and their impact by
iReservation system in
Brunei Darussalam

(Figure 2, with the mark). The main reason is that these TAs have secured a unique
segmentation/niche market, hence the emergence of iReservation systems do not affect
their businesses. Another niche market is Hajj and Umrah packages segmentation.
Therefore, TAs that specialize on these packages or other unique segmentation are not
affected by iReservation systems since customers need specialized services offered in the
packages (Figure 2, with 0 mark).
iReservation systems severely hit the business of TAs that do not have unique
market share as the above cases. They are losing customers and consequently earn less
profit (Figure 2, with 2 mark). As a result, to stay in business they need to improve
their marketing strategy such as segmentation, targeting and positioning in order to
create their unique selling points, which may include superb services, product
diversification and niche market to sustain their roles as intermediations.
An obvious effect of iReservation systems to TAs is the diminishing market share to
sell tickets or accommodations since they have to compete directly with travel suppliers
(airlines and hotels) that sell their products directly through their iReservation systems.
However, in some cases iReservation systems help TAs provide faster, efficient and
profitable services for customers, especially for those who are unable to purchase ticket
directly (many customers do not have credit cards or computer illiterate).
Although customers can directly make reservations through iReservation systems,
TAs provide some advantages over iReservation systems, among others are:
.
Priority. Currently conventional airlines still put more priority to TAs as compared to
the iReservation Systems. For instance, 80 per cent of the available seats of the airlines
are given to TAs, while 20 per cent are allocated to iReservation systems.

Reliability. There are times when an iReservation systems server is down for
maintenance or for one reason and others. During this time, customers cannot
make online reservations. However, travel agents are able to provide ticket
reservations through the Abacus system.
Consultancy. There are customers who wish to go on a vacation but they do not
know which destination suit them best. TAs provides advice and tour packages
for them.
Group bookings. Normally, iReservation systems have a limitation on the number
bookings at one time. For example, Royal Brunei Airlines imposes a limit of six
persons per booking. The Abacus system allows a maximum reservation of
nine persons per group. For instance, if TAs are asked to make a group booking
of ten persons, there are two methods available, first through the Abacus by
making two transactions: are servation of nine persons and another reservation
for one person. Alternatively, TAs call airlines directly to book ten persons.
Tours. TAs also offer tour services in a package to attract more customers. By
providing tours, they have a competitive advantage since tours are normally not
available in the online reservation system.
Payment mode and cancellation. An iReservation system only accepts credit or debit
cards for payment. As for TAs, both cash and credit/debit cards are acceptable. TAs
offer customers both convenience and security, as one of the main concerns of
customers are breach of security issues on transactions (Susanto et al., 2011b, 2012d;
Berezina et al., 2012). Normally no refunds are allowed for the cancellation of a
booking using iReservation systems; however, a refund is provided in the case of
cancellation of booking via TAs, although a cancellation fee will be charged.
Last minutes bookings. iReservation systems allow individuals to make a
booking at least one to two days prior to departure, however TAs offer last
minute bookings prior to departure, this service is more suitable for businessmen
who have to travel for urgent meetings.

Given the several advantages above, TAs have to strengthen their advantages and improve
their services to secure their market share to avoid a possible disintermediation.
5.2 Findings and facts on customer behaviour and perception
Most respondents (90 per cent) prefer purchasing airline tickets directly through
airlines iReservation systems, since they provide a faster, more convenient and
cheaper way to buy tickets as compared to TAs. In addition, most airlines reservation
systems are user-friendly, easy to use and provide step-by-step assistance to make a
reservation. It is interesting to find that 75 per cent of the respondents believe that
iReservation systems will replace TAs in the future. The main reason is the increasing
internet literacy of the Generation Y. For Generation Y, the internet is becoming part of
their life; hence in the future most likely a traditional third party such as a TA will
diminish. In addition, with many iReservation systems complying with the security
standard (Susanto et al., 2011a), customers have confidence to make payment through
electronic online system (e-payment). Consequently, there is no doubt that iReservation
systems have made significant impact upon society, particularly for frequent travellers
and TAs in Brunei.

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Figure 3.
Proportion of customer
respond on TAs advice
after iReservation systems
were introduced

Figure 4.
Proportion of customer
respond on iReservation
system perception

Although most respondents prefer to make reservations through iReservation

systems, we found that 58 per cent of them are still need TAs to help them arrange
their travels due to their limitation of ICT knowledge and the credit card barrier
imposed by the government recently. However, quite a big number of the respondents
(42 per cent) said that they no longer need the service of the TAs after the introduction
of iReservation systems (Figure 3), therefore this finding indicates a serious threat as
disintermediation of TAs.
As for the reasons of preference, most respondents pay attention to all aspects
supporting iReservation systems: convenience, security and trust. The majority of the
respondents (53 per cent), stated that existing iReservation systems are convenient for
them to make reservations. However, the feeling of insecurity and complication in
using the system are rather high among respondents (Figure 4).
Respondents tend to support and use iReservation systems, although these systems
have many weaknesses. Those who are hesitant to make transactions online are

mainly concerned about the security and privacy of online transactions systems,
including iReservation systems. Thus, securing information and customer transactions
is extremely important to ensure that the information is well protected (Susanto et al.,
2011c) since information security is not just a simple matter of having usernames and
passwords. Meanwhile viruses, worms, hackers, phishers and social engineers threaten
organisations on all sides. Hackers or sometimes we call them unidentified users are
likely to cause huge losses for an organisation, such as by theft of customer data and
spying on business strategy for the benefit of competitors (Susanto et al., 2012c).
Quite a large number of respondents said that iReservation systems benefit customers
because they normally offer cheaper tickets as compared to the price set by TAs (Figure 5).
Individual customers are adopting iReservation systems, and if corporations and
government move to the same line, most TAs in Brunei will be disintermediated. Recent
limitation and restriction of credit cards usage by ministry of finance Brunei Darussalam
has helped TAs to sustain their businesses. In summary, TAs definitely need to discover
smart strategies to compete with the iReservation systems in order to sustain in the future.

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6. Discussion
There are some interesting facts that we encountered. Many TAs claim that their market
shares are not affected. This indicates that the revenues of those TAs have not declined
after iReservation systems being operated by airlines or hotels. However, a large number of
customers (60 per cent) said that they prefer to make transactions through iReservation
systems. Hence, there is a market gap that occurs between TAs and customers (Figure 6);
this gap is quite an interesting finding. According to our analysis, most likely the demand
and market size are expanding, hence the gap that occurs between previous TAs market
shares with an increase in the current market size is absorbed by iReservation systems.
The following formula and Figure 6 explain this situation:
X
total market
iReservation system TAs
X
GAP
actual market 2 TAs
iReservation system is total booking by online system.
TAs is total booking by travel agents.

Figure 5.
Proportion of customer
respond on iReservation
system perception

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168
Figure 6.
Market growth and gap
between TAs and
actual demand

Figure 7 shows a future scenario. Trends indicate a shifting customer habit, which was
originally traditional, customers need TAs to help them; the adoption of iReservation
system was still limited. However, with the increasing adoption of iReservation
systems by customers, especially individual customers, and at the same time the
market is growing, the new share is being absorbed by iReservation systems. In the
next few years, we can expect that the market share of TAs will shrink and the market
share of iReservation systems tend to expand as iReservation systems will be more
developed and adopted. This trend happened in the USA and Europe, and most likely
will happen in Brunei as well. It is important for TAs to prepare online strategies to
sustain; otherwise they have to face disintermediation.
However, if we refer to the TCE theory, re-engineering in TAs is an
economic-management and social event as well as a strategy through which
customers demand and providers supply is in a balance. It is obvious that TAs have
interdependencies with their loyal customers, this will support the sustainability of
TAs. Loyal customers are highly influenced by amity and their satisfaction from
services provided and the friendship generated between the two parties,
producer-customer, in the long previous interdependencies, in context of social
relationship.
TAs can anticipate the uncertainty of the demand by capturing the conversation
within the social networks. Therefore, TAs customer loyalty is about attracting the
right customers, getting them to buy, buy often, buy in higher quantities, and spread
the good news to bring more customers. TAs can build loyalty by:

Figure 7.
Future scenario between
TAs and iReservation
system

keeping in touch with their customers to express caring using various means
such as email marketing, thank you cards, and informative or alert messages;
rewarding customers for choosing TAs over the competitors (iReservation
systems); and
finally, building a stronger relationship by truly giving and figuring out how to
make customers more success, happy and joyful.

The following are advice will greatly affect TAs ability to build loyal customers:
.
one step booking for multiple destinations with multiple airlines at one time;
.
convenience of services provided during the booking process;
.
availability of information and advice, especially for the first time traveller to a
place; and
.
Safe transactions process, using various ways (such as cash, debit cards, credit cards).
Loyal customers are a common phenomenon in businesses, especially if the target
market is very specific (niche market). In the case of TAs in Brunei, loyal customers
within a niche market are government, companies and customers of pilgrim packages
(Figure 5; layers 1 and 2). At the moment and in a foreseeable future these loyal
customers are not affected by iReservation systems.
TAs should explore the recent development of social network technology to
strengthen the relationship with their customers through inter active online tools.
According to Nusair et al. (2011) and Greenberg (2009), customers nowadays make
conversation in the social networks. Consequently, they are now well-informed and
have more control in getting the information, and do not solely rely from sellers (in our
case are TAs). Therefore, the TAs are suggested to adopt social networking technology
in their exchange strategy to understand the demand of their customers.
However, in general, some portions of the market share of TAs will be taken by
suppliers through their iReservation systems. The process of shifting some portions of
TAs market share to suppliers through their iReservation systems is happening and
will reach a balance after sometime. In this process some TAs will be disintermediated,
however many TAs that have loyal customers or niche markets will survive (Figure 8).
Loyal customers and niche market must be part of TAs strategy to survive in Brunei.
This can be done through the segmentation, targeting and positioning (STP) strategy
while improving services to keep the existing customers and to attract the new ones
(Kotler, 2002).
STP shows the chronological dependency of the different activities. Segmenting is
the process of dividing the market into segments based on customer characteristics
and needs. Targeting process is the analysis that leads to a list of segments that is most
attractive to target and have a good chance of leading to a profitable market share.
Positioning is the process by which marketers try to create an image or identity in the
minds of their target market for its product or brand (Kotler, 2002). Therefore, to
survive a TA has to create a unique selling point and a brand image that is memorable
and valuable to its customers. The survey indicates that 58 per cent of respondents still
need services from TAs. Therefore, TAs have to address their customers need and
improve their services better than expected by customer to have a proper marketing
strategy to sustain their business.

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Figure 8.
Potential customer and
loyal customer behaviour

The four pilars of marketing mix variables can be used to analyse on how a TA can grab
a unique market. The four pilars of marketing mix are product, price, distribution and
promotion. Product includes travel packages, pricing choices and travel experiences
supplied by TAs and trips organised by iReservation systems. Price refers the total price
of the travel. Distribution is the way products marketed. Promotion is the way how to
attract customers to purchase products offered.
An obvious advantage of travel packages offered by TAs over travels arranged by
iReservation systems is the travellers or tourists experience during their trips as they
normally receive additional services designed for the packages. For example, beside
arrangements of flights, hotels and local transports, these services may include visits
to interesting or historical sites, cultural shows, recreations and entertainment.
In terms of price, for point to point travels TAs have difficulty in completing with
iReservation systems as prices listed by iReservation systems are directly set by their
providers, cutting the cost of intermediaries. However, a price for a travel package can be
designed in such a way through collaborations with airlines, hotels and local travel
services to attract customers. By taking advantage of group travel discount offered by
the collaborative providers, a package price will be attractive since it may be cheaper than
if a customer arranges the travel individually through available iReservation systems.
Furthermore, TAs can arrange several prices, creating a hierarchy of prices depending on
type of services provided aiming to segment the market for specific demand targets. The
segmentation can be created based on quality and type services as well as exclusiveness
and variety of destinations. The more TAs address specific demand targets, supplying
thematic travel packages and stays in exclusive destinations from popular tourism sites,
the higher its position in the market. Using the STP strategy mentioned above, TAs may
need to change their market orientation from expanding general mass-market share to
grab a specific niche market.

TAs should use the web as an additional channel to distribute and promote their
products and they have to design their web sites to attract their customers and let them
transact easily. They should design a system better than or at least as good as
iReservation systems offered by airlines or hotels. They also need to learn and make use
of web generation emerging technology tools that can help them promote their products
through web of mouths besides providing other services through these tools.
If we look from RDT theory, TAs can survive depending on their ability to grab
resources needed from the environment to run their business. RDT theory offers a
strategy that can be used to establish external linkages to manipulate exchange
relationships. By looking into the responses from the survey results in the previous
section, it is pivotally important for TAs to formulate strategies to survive. The RDT
infers that a TAs strategic options are determined to a great extent by the environment.
Since TAs are determined by the environment for resources, they need to perform
strategies that allow them to acquire resources. For instance, people who have grown up
with the internet and do-it-yourself sites, the idea of a travel agent may seem outdated.
However, it does not mean that TAs will fail to join this group of share.
According to the RDT, TAs may respond these changes by adopting diversification
strategies on their services. TAs can extend their services by adopting web emerging
technologies into their online services. The online service through the web emerging
technologies is no longer a static platform of business interaction, it offers more than
business interaction such as social networking to create mutual understanding for
multiple parties through online media. Diversification of businesses can offer varieties
of products and services.
The RDT also suggests that TAs can minimize the effects of external dependencies
and thus increase their likelihood of survival by selecting more profitable and
controllable market share to avoid disintermediation. The strategy is to develop a
specialty or offer exceptional service to those uncomfortable with booking their own
travel. For example, those TAs that can secure business on Hajj or Umroh or similar
packages, or those that can secure business to serve the travelling needs of the
government and the private sector, which regularly assigns their officers to travel for
business or other purposes, will survive (Figure 5, layers 1 and 2). The government
policy to impose the credit card limit and usage will help TAs to secure the market for
low income customers. Note that the Hajj takes place once a year for about four weeks
and the Umrah takes place anytime (except during the Hajj period). The main target
markets of these packages are Muslim individuals or families. Interestingly, for the
case of Hajj and Umrah, from customers point of view, they rarely use e-travelling in
arranging their packages; instead, they interact directly with their chosen TAs, make
reservations and pay the package in cash. Therefore, selling tickets no longer seems to
be good business for TAs nowadays since airlines offer direct selling to their customer
via their iReservation systems. TAs have to make good and attractive packages and
offer superb customer service that can attract individual as well as corporate
customers and also take advantage of advancement in the web technology to approach
and engage their customers.
The RDT also proposes the idea of establishing external linkages to manipulate
exchange relationships (Pfeffer and Salancik, 1978). TAs must maintain and expand
external linkages for public and private organisations. Government, medium and large
enterprises in Brunei normally make airlines and/or hotel reservations through TAs.

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Some TAs sign agreements with companies to provide required services, tickets and
accommodations as well as other packages requested.
The availability of a web site anytime-anywhere for free is the most appealing
source of information for customers. Personal communication is also important since it
comes from trusted sources (friends, families or relatives). These two important sources of
information, the web and word of mouth can be integrated in a web-based social network
(web of mouths). With the immensity of adoption of web-based social network, it is
important for TAs to start considering web-based social network in general as part of
their online strategy. As a result, where people informally interact and communicate
through web-based social media, like Facebook and Twitter, should be considered as a
marketing strategy to enhance word of mouth that can be easily deployed.
7. Conclusions and recommendation
A. Conclusion remarks
The internet is a medium for organisations to extend their activities beyond traditional
boundaries that were characterized by space and time constraints, leading to accessible
global reach of customers directly anytime-anywhere. iReservation systems are
web-based reservation systems that allow customers to access reservation systems of
airlines or accommodation providers directly by clicks of a mouse or touches of a finger.
The adoption of iReservation systems by airlines, hotels and customers are high,
threatening travel agents as the systems allow suppliers and customers interact directly.
Adoption of iReservation systems by customers, especially individual travellers, in Brunei
is also high, threatening the competitiveness of travel agents. To remain competitive,
travel agents need to secure a niche market and have differentiation on their services and
products. The Brunei Governments policy to limit credit card usage of lower income
individuals helps travel agents secure the market segment of lower income individuals.
However, with the rapid advancement of technology, there is no doubt that travel
agents will face more challenges in the future. In general, TAs need to develop a strategy
to win the customer, for example applying segmentation, targeting and positioning
strategy to attract customers, they also need to provide much better services than
iReservation systems or have differentiation strategy by composing several services
and products which are difficult to offer through iReservation systems.
B. Recommendations
As mentioned by many respondents TAs needs to offer more and better package deals.
It is important for TAs to be proactive, sensitive and adaptive to changes that happen
rapidly in the dynamic business environment to stay competitive in the market. The
complexity of the travel industry is an opportunity for TAs to stay in the business,
however they need to overcome the environmental changes and uncertainty as
discussed in TCE, and adopt new strategies to gain the market share. They should also
extend the operation hours, give more freebies and discounts should be given to lure
customers, as customers habit on gaining freebies and rock bottom discounts.
Extending services is part of the suggestion derived from the RDT paradigm. Travel
agents should maintain good relationships with existing clients and most importantly
the potential clients to gain more sales, for instance by giving excellent service or
introducing online customer service in order to have more access and easy reach by the
customers. They should also embrace that although internet technology can provide

benefits to them, they need to be aware of what downfalls it could bring. The
development and use of the internet has created opportunities for customers and
suppliers to interact and transact. It also provides the same opportunity for TAs, but
unfortunately, at the same time it is also a big threat that needs proper online strategies
to neutralize.
Obviously security is an important issue for iReservation systems. Anyone that
offers iReservation systems need to convince customers that their system is secure and
provides warranty for secure transaction on customers data and their payment details.
Notes
1. www.internetworldstats.com/stats3.htm#asia
2. Hajj is a pilgrim to Mekkah, Saudi Arabia, for about 30 days, once a year and Umrah is also a
pilgrim to Mekkah, Saudi Arabia for about seven to ten days at any time outside the Hajj
period.
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Corresponding author
Heru Susanto can be contacted at: susanto.net@gmail.com

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