Falling Through the Net

Laura Jäger
The Role of Small and Medium Tourism Businesses in digital Value Chains

Dr Christopher Foster is a lecturer and researcher at the University of Sheffield. His research focuses on technologies and innovation in developing and emerging markets, with a particular interest on how Information and Communications Technologies (ICT) can support development of low income groups. Amongst other sectors, he looked at the tourism industry in Kenya and Rwanda. In the Interview with Tourism Watch he gave us insights to what extend small and medium tourism businesses in profited from this development.

Tourism Watch: How is digitalisation changing the value chain in tourism?
Dr Christopher Foster: Digitalisation is dramatically changing the tourism industry. The speed with which digital tools and online activities are adopted is even higher than in many other industries. Within the last years, digital communication and online activities have moved to the core of many tourism operations. Not only international corporations, such as large hotel chains, but growing numbers of small tourism enterprises, such as hotels or local tour operators and independent taxi drivers, now have access to the internet and at least to some degree have adopted digital instruments.
 
If we look at small scale agriculture for example, farmers may still be able to operate without having access to a mobile phone or the internet. For tourism businesses having access and the skills to use digital technologies is much more important if you want to reach beyond local customers.
 
TW: Bringing information and communications technology (ICT) to and improving connectivity in the Global South raised high hopes for better market access and integration into global value chains. According to your research, has this been the case?
CF: Only to a certain degree. With the installation of fibre optic cables in East Africa, internet connectivity got a lot better and cheaper. On one hand, this has facilitated the expansion of larger international tour operators and hotel chains into East African markets and allows them to better manage and control local suppliers. Due to cheap and reliable forms of digital communication local East African SMEs do not just compete with one another, but with global players as well. In our research we found, that large international tour operators were able to cut out some Kenyan and Rwandan ground handlers and intermediaries as they are able to communicate with the service providers directly online.
 
TW: Are local SMEs able to profit from digitalisation?
CF: Smaller Kenyan and Rwandan tourism businesses with higher levels of digital skills and adoption were able to establish strong direct business relations to the international tour operators in the sending markets gaining stable streams of revenue. Our researches showed that even businesses with lesser technical skills were able to improve their efficiency by gradually turning from analogue modes of communicating with guests and/or agents to digital communication using mobile phones and emails. Particularly those businesses that were operating in niche markets, such as e.g. Gorilla safaris in Rwanda or community-based tourism, benefited from setting up their own website or social media account enhancing their visibility for potential guests. According to our studies, they were able to reach new customers, who found these SMEs through web searches or social media recommendations and later reached out to the businesses by email or phone in order to make enquiries or book a trip.
 
TW: What role do big international platforms, such as booking.com, play?
CF: In East Africa, the tourism value chain is less fragmented as in other destination countries. Particularly high-end tourists from Europe and the US tend to book and prearrange trips with international operators from their home countries. Therefore, they may play a smaller role than in other markets, such as South East Asia, where more people travel more independently.
 
Although online travel agents (OTA), such as booking.com or hotel.com are becoming gradually more popular in the region, we found that it was mainly the larger hotels that were able to integrate into these types of global value chains. Small and medium tourism businesses struggled to use them. For many of these SMEs, the platforms’ technical demands were simply too complex. While some of the hotels and lodges we interviewed used paper-based or excel spread sheets in order to manage their bookings, global online platforms require an integration of their booking systems into a website. Furthermore, their policy or provisions seemed rather non-transparent for many SMEs. Some medium sized hotels tried using such platforms, but found revenue streams too inconsistent and struggled meeting demands of OTAs. Last but not least, there is very little interaction between the online platforms and the local providers – as they are based on remote communication, payments and distance information flows. We think that the big generic OTAs can invest more in identifying and responding to local needs and concerns to expand small hotel access.
 
TW: In your opinion, what are potential ways forward?
CF: Despite the fact, that most of the SMEs have some form of internet access and relatively good technological skills, I am quite pessimistic that all SMEs could and should integrate into the generic OTA platforms at all costs. I see much greater potential for local and targeted solutions over the next five to ten years. For example, the South African Platform NightsBridge is very successful amongst SMEs in South Africa. They provide an easy to use tool for booking and have simpler models for commission and payments in place. Therefore, they are able to achieve a better coverage than many global platforms. By better bridging local SMEs and international tourists’ needs, similar platforms might allow access into new international markets.
 
Prior to online communication, some tour operators e.g. specialized on hiking in Rwanda or community-based tourism initiatives in Kenya had very little visibility. ICTs have helped to put them on tourists’ maps and reach customers, that are not the main stream platforms’ target group in the first place. Focussing on unique products and nurturing business and customer relations through direct online communication can be a potential viable strategy.
 
Last but not least, I see a lot of potential in the new and emerging tourism markets from Africa and Asia. The number of tech-savvy tourists from these markets could be an interesting group that SMEs can reach through ICTs.
 
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