Disintermediation and Reintermediation in Travel Industry

Question: Critically discuss how disintermediation and Re-intermediation have affected one of the markets below. Use current examples to enhance your arguments.

• Travel Industry

• Insurance Companies

• Music Retailers

Introduction:

Disintermediation and re-intermediation has affected a lot of companies in recent years and even have provided them the path to do their businesses in a different way. In the following essay, travel agents have been chosen as a topic of main interest; disintermediation, partial-disintermediation and re-intermediation have been discussed in their chosen context. The aim of this essay is to find out the reasons, which influence each of the above in travel industry (with suitable examples). Finally, in the end conclusion and some recommendations are suggested. For the purpose of this study, secondary data has been collected from research journals.

Disintermediation:

Disintermediation has been described by many researchers as "the exclusion of the middleman in the industry's network". Some industries have felt this "exclusion of middleman" more than others; one industry suffering most from this dramatic change is that of travel agents.

Harris and Duckworth (2005) mention in his research about the history of disintermediation and talk how it occurred in the travel agencies, they say that over 20 years ago, independent travel agencies made up almost 90% of their sales, until their leading operators decided to bypass traditional agents by owning and controlling all of the components of the distribution channel such as hotels and airlines etc. The outcome was that most of the independent travel sales were redistributed to these vertically integrated companies, and they increasingly took control over supply and distribution (Harris and Duckworth, 2005). According to Harris and Duckworth (2005), it was the start of the disintermediation process in travel services, which accelerated with the emergence of the electronic commerce as a cost-effective distribution channel (a rough figure shows that in UK, 37 agents have went out of their businesses in 2002 and 31 were in 2003).

E-commerce has highly played a role in disintermediation, it has revolutionized the distribution channels and changed the way travel services did their business. This new technology has brought both travellers and travel operators (airlines) close to each other and has left travel agents aside. With the help of e-commerce, travellers can now have easy access to greater information and to new choices that enable them to bypass those traditional intermediaries that add little value (Dilts, & Prough, 2003). On the other hand, tour operators can now sell their products faster and going direct to the travellers (one-to-one