Colibri Tours – E-Business Case Study

Publication Date: June 2004

• Introduction
• Context and Favourable Conditions
• Development Phases
• Strategic Scope
• Key Success Factors
• Barriers to Adoption
• Creating Value
• Performance Measurements
• Future Prospects
• Implications for E-business Development
• Technical Notes on the Business

Introduction

Colibri Tours was founded in 1988. From the outset, the travel agency has made it a company policy to offer personalized service to individual customers and groups. As the company's reputation has grown, it has successfully entered several European markets, offering a variety of tours to satisfy the tastes and interests of the most demanding travellers.

The head office for Colibri Tours is located in Calgary, Alberta. It is a small travel agency with annual sales under $1 million. During the past year, the company saved $40 000 by servicing its customers through its Web site. This has enabled the travel agency to be in direct contact with its customers, and in so doing, to realize considerable savings on European tour wholesalers' fees.

The programs that Colibri Tours offers cover western Canada. All groups are accompanied by experienced guides which allows travellers to discover (with complete peace of mind) the marvels of western Canada, and such American sights as Yellowstone Park, the Grand Canyon, Zion National Park, Bryce Canyon National Park, and Alaska.

Colibri Tours operates year round offering programs that are geared to the seasons. In addition to its regular tours, Colibri Tours offers visitors:

• airport reception services;
• fly and drive, F.I.T. (fully independent travel), incentive, à la carte and high-end programs;
• itineraries designed specifically for the elderly; and
• sports activities.

Context and Favourable Conditions

1. Rising promotional costs at tour wholesalers' trade fairs encouraged Colibri Tours to seek an alternative solution to conducting its own promotion. The estimated $40 000 increase was considerable for a small travel agency with sales under $1 million. In addition to the increase in promotional costs, other related costs encouraged Colibri Tours to turn to the Internet in order to reduce these costs.
   
   
2. The growing size of wholesalers in Europe and North America also encouraged Colibri Tours to seek a new way of doing business. Guaranteed service (i.e. guaranteeing tour departures even if the group of wholesalers is smaller than anticipated) is a sales condition that small travel agencies like Colibri Tours cannot meet without reduced profitability.

Development Phases

Ms. Jacob, the President and founder of Colibri Tours, developed the agency's Web site. She personally undertook to learn the basics of Web site design to facilitate development and updating activities.

One crucial step was the search for a server. The first server chosen did not specialize in tourism and was not a suitable choice. The second server selected specialized in the tourism sector and was satisfactory choice, making it possible to promote Colibri Tours' Web site at an annual cost of $1 800.

Strategic Scope

1. Scope of Functionalities and Services

Ms. Jacob regards the Internet as a transaction accelerator. More specifically, several functionalities provide services superior to those obtained through traditional means:

1. Prospective travellers have access to photographs depicting the itineraries being offered on the travel agency's Web site.
   
   
2. Road maps and suggested itineraries are available on the Web site.
   
   
3. The Internet makes it possible to offer tailor-made services at lower cost while at the same time maintaining the operation's profitability. This was impossible to do using traditional technology.

2.  Market Scope

One of the key changes stemming from direct reliance on a Web site is that the travel agency deals directly with consumers instead of wholesalers. This has significantly changed Colibri Tours' positioning in the market by opening up the direct market.

Formerly, Colibri Tours' clientele was made up entirely of groups, whereas today 80 percent of its customers are individuals. This represents a radical shift in its customer profile.

Paradoxically, the travel agency's Web site has also enabled it, to a lesser extent, to attract new customers, including wholesalers. For example, a Belgian wholesaler recently confirmed a reservation for 48 people in September 2004 and the transaction was completed using the Internet.

3. Geographic Scope

Colibri Tours' clientele comes mainly from the United States, Europe and Canada. The   proportion of American customers is important because it represents tourists who are familiar with the Internet and who make more purchases online than Europeans and Canadians.

4.  Scope of Skills

The Colibri Tours Web site was developed and implemented almost exclusively in-house. The only outside expertise required was the use of a specialized server. Ms. Jacob, the travel agency's owner, designed the site and updates it regularly.

Key Success Factors

1. One of the key success factors has been the visibility generated by the search engine. Such visibility was not possible through mailings.
   
   
2. The site is simple and reflects the traditional buying logic pertaining to travel. Users can easily navigate and find their way around the site. Moreover, the photographs give the site a dynamic character.
   
   
3. Transactions using the Internet are completed quickly. Ms. Jacob offers service 12 hours a day to her customers who are price shopping and wish to obtain prompt confirmation of their reservations. By offering this support, Colibri Tours provides considerable availability.
   
   
4. Ms. Jacob personally greets visitors at the airport. This touch-and-feel approach, as she calls it, helps offset the impersonal nature of the Internet and to enhance the service provided.
   
   
5. Colibri Tours does not provide prices on its Web site, thus avoiding a major source of conflict stemming from the considerable difference between the prices offered to individual consumers and those offered to wholesalers. This approach also makes it possible for them to avoid facing last-minute discounts offered by hotelkeepers and losing credibility with travellers.

Barriers to Adoption

1. The choice of server was an important decision for the travel agency. The first server chosen did not specialize in tourism, thus limiting the travel agency's potential visibility.
   
   
2. The travel agency must promote itself.

Creating Value

1. Novelty

Access to a Web-based travel reservation form considerably enhances the travel agency's efficiency, and enables it to conduct lower cost transactions with travellers.

The value created from e-business initiatives is found in large part in the cost savings, especially the cost of promoting Colibri Tours' services.

2. Complementarities

Value is also created, although to a lesser extent, from the impact of scale between the travel agency's traditional operations and its Web-based operations. Indeed, personalized telephone service and a personal welcome at the airport round out the services offered on the Internet (such as photographs of the tours offered and the possibility of filling out an online reservation form). Some 80 percent of reservations are now handled using the Internet and only 20 percent, by telephone.

Performance Measurements

Colibri Tours now serves over 80 percent of its customers using the Internet. This technology also enables the travel agency to reach customers the world over. The Internet allows the travel agency to communicate at lower cost with its customers.

The Internet has greatly altered the way Colibri Tours establishes contact with its clientele. Previously, it obtained 80 percent of its clientele through promotions conducted in conjunction with wholesalers' trade fairs. At present, such trade fairs account for only 20 percent of its clientele. Telephone contact with customers helps mitigate the risk that consumers perceive in making reservations using the Internet. Only a minority of buyers need to be reassured by telephone.

The Internet has also enabled Colibri Tours to achieve 30 percent productivity gains. Its Web site allows it to save a great deal of time with regard to customer contact and follow-up.

Future Prospects

Colibri Tours hopes to pursue its growth while at the same time striking a balance between the company's objectives and its president's quality of life objectives. The travel agency's key mission is to maintain a balance between professional life and personal life. As noted earlier, offering service on a
12-hours a day basis to meet the demands via Internet of individual customers requires considerable availability from the travel agency. The installation of a home office allows Ms. Jacob to respond to customer requests early in the morning and late in the evening. Given the time difference between western Canada and the source of a request for a travel reservation, many customers request confirmation within one hour of making the request. Consequently, Ms. Jacob must constantly check the requests submitted.

The energy and effort devoted over the past five years to this process mean that e-business is now an integral part of the operations of Colibri Tours, a small travel agency that has been in business for 15 years.

Implications for E-business Development

Ms. Jacob has some advice to offer future entrepreneurs who wish to engage in e-business.

1. Be patient! The process of building a Web site and the choice of a server are among the most important steps involved in establishing a presence on the Internet. The learning process involved is often more important than the initial results obtained.
   
   
2. An entrepreneur must be determined and have a clear vision of the objectives to be attained using the Internet, in addition to being thoroughly familiar with his/her business. E-business is not a substitute for a lack of knowledge and insight with respect to business practices.
   
   
3. Cost savings in respect of promotion and broader visibility largely justify investments in e-commerce and Colibri Tours could no longer operate without relying on this technology.

Published in Partnership

This case study was prepared by CEFRIO as part of the project
"New E-business Models and SME Development", a project undertaken in cooperation with Industry Canada, the National Bank of Canada, TELUS, CANARIE and Canadian Heritage.

The research team included Mrs. Louise Côté, Professor from HEC Montréal, Mr. Vincent Sabourin, Professor from the Université du Québec à Montréal, and Mr. Michel Vézina, Professor from HEC Montréal. The research team completed this case study at the end of January 2004. The opinions expressed in this case study do not necessarily reflect those of Industry Canada and/or Canadian Heritage.

For more information, please go to the CEFRIO Web site — The Authority on Information Technology Appropriation — at: www.cefrio.qc.ca/english/indexAccueil.cfm.