The rapid growth of Web Reservations International (WRI) can be viewed as an example of how technologies can transform a certain area of economic activities. In this case, one should speak about the budget youth and independent travel market which passes through the period of rapid development (Savills World Research 2013). This particular segment becomes important at the time when the growing number of travelers cannot afford the services of hotels oriented towards the needs of middle-class clients. This paper is aimed at examining the way in which this organization became so competitive and the challenges that it can face in the future.
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Overall, it is possible to say that WRI has been able to find a niche in the tourist industry. In particular, this organization serves the needs of price-sensitive customers who are usually very versed in the use of information technologies. These people may live in different countries or even continents. Furthermore, one can argue that effective information management is vital for the growth and sustainability of organizations which serve the needs of travelers whose purchasing power is not very strong. In addition to that, the businesses, which operate in this sector of the tourist industry need to remember that their attitudes of clients can change profoundly as they grow older (Hecht & Martin 2006). Therefore, businesses like WRI need to understand the changing lifestyles of their target audience. They should also be ready for disruptive innovations that can pose new challenges to them. These are the main issues that should be elaborated in greater detail.
Analysis of the major strategic issues
It should first be noted that WRI revitalized budget youth and independent travel (BYIT) market by creating a website for hostel reservation (Johnson, Whittington, & Scholes 2011). To a great extent, they were able to bridge the gap between service organizations and potential clients. In the past, these stakeholders were virtually isolated from one another. At present, this company provides information about 24.000 budget hotels and hostels located in more than 180 countries (Johnson, Whittington, & Scholes 2011).
Judging from their success, one can say that the technological developments continue to influence this industry. Currently, in many European cities, the owners of hotels and hostels attempt to increase customers’ awareness about their services (Mihalcescu, Sion, & Marginean 2011). Hospitality organizations that are oriented towards the needs of young people work closely with companies like WRI. As a rule, the managers of these businesses recognize the usefulness of online technologies as a marketing tool (Mihalcescu, Sion, & Marginean 2011; Terrero 2009). One should keep in mind that several decades ago BYIT market was practically non-existent because it was extremely difficult for service organizations and travelers to find one another. Therefore, the impact of companies like WRI cannot be underestimated.
Apart from that, one should speak about online social networks which enable users to share their travel experiences with one another. For example, they have an opportunity to evaluate the services of a particular hostel or a restaurant. In turn, travel agencies incorporate social media into their marketing campaigns (Joshua & Cairncross, 2011). Furthermore, there are other websites which are closely linked with social networking websites.
For example, one can speak about such a company as Airbnb whose services are similar to ones offered by WRI. Overall, researchers say that the contemporary tourism industry has to accept that user-generated content is an important factor that shapes travelling decisions of people (Joshua & Cairncross 2011, p. 26). Hospitality organizations find it much more difficult to conceal their flaws or unethical behavior (Joshua & Cairncross 2011). The main impact of technological advancement is that they make BYIT market more interconnected. This is one of the issues that should be taken into consideration.
One should also focus on the strategic capabilities this organization acquired with the help of information technologies. For example, it is possible to speak about the ability to differentiate their services in terms of pricing. In turn, researchers believe that the cost-efficiency of an organization can increase the competitive strength of businesses, even if their rivals have a larger market share (Kumar 2006, p. 106). Moreover, this strategic choice has enabled many businesses to erode the market share of their competitors which had previously seemed almost invincible (Prahalad & Hamel 1990, p. 81; Kumar 2006).
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It should be noted that WRI was able to reduce the cost of its operations because this company did not need to hire a great number of employees or run many offices. As a result, they could win the loyalty of clients and hospitality organizations located in different countries. For example, they make only a ten-percent charge of the price that clients pay (Johnson, Whittington, & Scholes 2011). In turn, the services of other websites are usually more expensive. Therefore, they could meet the needs of price-sensitive travelers who were willing to find a hostel in a specific city or a region. In many cases, these people search for new experiences, and they do not want to underline their social status or purchasing power (Hecht & Martin 2006). In turn, this cost-effectiveness helped this business expand the scope of its operations.
For instance, this organization acquired several websites that were also oriented towards the needs of young travelers (Johnson, Whittington, & Scholes 2011).
Currently, there are many websites, which are closely affiliated with WRI. Moreover, the effective use of search engine optimization helps this business attract new clients (Johnson, Whittington, & Scholes 2011). On the whole, these set of strategies enables WRI to reduce the threats which can be posed by new entrants or full-scale competitors. These are the main strategic capabilities that one can identify.
Furthermore, this case demonstrates that WRI has been able to use information management and knowledge creation as a source of their competitiveness. One should keep in mind that this company assists client in learning more about potential destinations. For instance, this organization posts podcasts and videos which can give customers a better idea about cities, restaurants, natural sites, and so forth (Johnson, Whittington, & Scholes 2011). Additionally, their website contains photographs of hostels. So, travelers can evaluate their interior and exterior design. They can also learn more about their amenities which a hotel can offer to them.
Apart from that, they can learn more about available rooms and prices. So, they can take informed decisions when they need to choose among various hostels. Certainly, such a strategy has been adopted by many travel agencies that provide information about hotels or resorts. Nevertheless, WRI was one of the first companies that began to offer this information about hostels and budget hotels. This is one of the main distinctions that should not be overlooked since it is vital for the competitiveness of WRI. More importantly, several decades ago, customers could be very suspicious of such organizations, because they could not find any data about them. Therefore, while travelling, they could rely on the recommendations offered by their friends or relatives. In many cases, they did not want to go some tourist destinations.
In turn, WRI established its reputation in the market by becoming a trusted source of information. To a great extent, this organization has acquired the so-called first-mover advantage. In turn, this completive strength enabled them increase their revenues and attract a greater number of clients. Certainly, there are competitors that can create challenges for WRI; among them, one can single out Travelocity and Expedia since these companies have larger market share and customer base (Johnson, Whittington, & Scholes 2011). Nevertheless, these organizations do not fully correspond to the demands of tourists seeking hostels and budget hotels. This is one of the main aspects that can be distinguished.
When discussing the competitive position of WRI, one should focus on the major trends that affect this market. First, the bed supply in the major tourist destinations such as Barcelona, Paris, London, or Berlin increases (Savills World Research 2013). This increase can be attributed to hostels, rather than hotels. So, this sector of economy becomes more significant. More importantly, many people aged between 16 and 34 prefer view hostels as an alternative to hotels (Savills World Research 2013, p. 2).
This trend is not likely to disappear in the future because the effects of the global economic crisis are still palpable. As result, a great number of people will may switch from hotels to hostels. Therefore, one can say that there are many companies that may want to provide informational services to such travelers because this segment of the market will become more important. Entrepreneurs will be able to accumulate initial capital to create similar websites. Therefore, the threat of new entrants and substitute products is very high. Additionally, these organizations can eventually imitate the strategic capabilities of WRI. For example, they can improve the design of their information resources and WRI may not be able to distinguish itself among similar businesses. This is one of the risks that should be taken into account by the management of this company.
Apart from that, companies like Travelocity can provide more opportunities for hostels and travelers who cannot afford the services of conventional hotels. Currently, their websites are of little help to these stakeholders. This is another threat that should not be disregarded. Admittedly, there are several specific advantages that WRI has. In particular, this organization is one of the first companies that entered this market. To a great extent, WRI created this market. Therefore, its reputation is one of the factors that help this company to retain its market share. Nevertheless, it is important to remember that this advantage is not permanent. According to the findings of researchers, the travelling behavior of people change as they become older (Hecht 2008). In particular, people, aged above 30 tends to attach more importance to privacy and in many cases, they prefer to use the services of a hotel (Hecht 2008, p. 69).
So, their attitudes change profoundly. Furthermore, at this age, their purchasing power usually increases; so a hostel is not the only option available to them. Therefore, the management of WRI should remember that they will not be able to retain their clients for more than 15 years. Their reputation is not the asset that they can hold permanently. Furthermore, they should continuously study the lifestyles and needs of their target audience; otherwise other businesses will be able to erode their market share. Additionally, they should understand generational differences.
Secondly, this company has been able to design its operations in such a way that they can reduce the cost of their services. Therefore, they contributed to the development of this market, in general. Moreover, the financial performance of this business strongly relies on this strategic capability. Nevertheless, other businesses can adopt a similar approach to the design of their services in the future. Therefore, cost-differentiation strategy cannot ensure their permanent security and sustainability of this company. So, these examples suggest WRI should be ready for possible challenges; otherwise, this business will not be able to retain the positions in this industry.
On the whole, it is possible to argue that that the intensity of competition in this industry can significantly increase in the near future. Moreover, one can say that the competitive position of companies like WRI will depend on their ability to respond to technological advancements and social trends. In particular, they need to learn more about the products that customers purchase and how they use them. For example, the management of WRI wants to design a specific application that will be suitable for the needs of iPhone users (Johnson, Whittington, & Scholes 2011). Therefore, this organization should adapt to the changes in technologies. Such businesses need to consider the way in which potential clients use Internet and various mobile applications. This knowledge will be critical for the development of effective marketing strategies.
As a rule, these people are keenly aware of new trends in information technologies, mass media, entertainment, and so forth. Such people can eventually find new reservations website if WRI fails to serve them effectively. So, much attention should be paid to the demographic and social peculiarities of buyers. Moreover, businesses working in the online environment should be ready for disruptive innovation or a breakthrough product or a service that can render many products virtually obsolete. These are the main issues that should not be disregarded by business administrators.
Therefore, this case demonstrates that information technologies can provide a powerful stimulus to the development of an industry. In particular, this organization has been able to create the connection between travelers and service organizations. This company serves the needs of price-sensitive clients who can often be described as backpackers. This is the core element of their strategy. This organization has achieved competitiveness with the help of effective information management and content creation.
Furthermore, the strength of this organization is largely based on its ability to minimize its operational expenses. Currently, this organization is able to retain leading positions in the sector of the tourist industry; yet, the situation can change dramatically, if this business overlooks the changes in the lifestyles of their major clients. Finally, the management should adapt to potential changes in technologies. These are main points that can be made.
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