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| By the book |
May 6, 2002 |
By Peter Wolchak
As many travel web sites enjoy growth and success, traditional travel agents face a big challenge: evolve or die. The next few years will provide a fascinating study on how a bricks-and-mortar industry adapts and prospers because of e-commerce.
For decades travel had consisted of a cozy relationship between distributors (the travel agents) and suppliers (the airlines, cruise companies and hotels). Travellers got free advice and booking services from agents, who in turn collected plump fees from suppliers.
Then e-commerce entered the picture in the form of travel information and booking sites, and in a few short years agents have been transformed from essential players in the industry to an embattled and increasingly marginalized sector.
Although the best estimates indicate 90 per cent of worldwide travel spending is still funnelled through traditional agents, the writing is on the wall for these middlemen. Three factors are combining to put the squeeze on agents: the move by airlines to streamline their distribution channels, the desire by many travellers to take the wheel when it comes to destination decisions and the simple reality that travel is a solid e-commerce fit.
A perfect match
The primary job of a travel agent is to connect travellers with appropriate flights, cruises, accommodations, etc. In essence, the process is an information trade: dates and times on one end, credit card numbers on the other. This also works well in the online world.
“The travel industry absolutely matches what e-commerce does well—bringing people and information together,” said Mark Riseley, a travel analyst with Gartner G2 in Egham, England. “This is an e-commerce natural.”
Online travel planning also avoids the shipping hurdles that often trip up other Web retailers, according to Stuart MacDonald, managing director of the popular travel site Expedia Canada. “Many products sold online are difficult to deliver [to the buyer]. Most of the goods in the travel industry do not involve distribution of any kind.We exist in a world of electronic tickets and reservations and people can print off a copy of their information themselves.
“Where there is distribution to be done, it’s simply [a matter of putting] something into an envelope.”
Travel Web sites also benefit from the fact that distribution and booking systems have been computerized for two decades.
“It’s an easy step to deliver this information directly to travellers, because we don’t have to actually create the whole electronic distribution,” MacDonald said.
Pressure in the air
The bricks-and-mortar travel world has reacted to these changes with changes of its own—visiting a travel agent isn’t what it used to be. In years past, a trained professional would spend 30 minutes working out the details for a family trip to Europe, and that service cost the family nothing. The value proposition was clear: free is good.
But these days, odds are that same family will face a service charge for their bookings. Airlines have for years been reducing the per-ticket commission they paid to travel agents, according to Louise Crandall, director of communications for the Association of Canadian Travel Agencies (ACTA) in Ottawa.
Air Canada announced recently it will pay no commissions at all, but an ACTA study concluded that a Canadian round-trip ticket costs an agency $45.82 in overhead and staffing charges.
Because of that simple mathematical reality, Crandall said 85 per cent of Canadian agents now charge a booking fee.
And this is a global trend, although the specific fee structure varies around the world, according to Riseley. “The suppliers have cut commissions so low that travel agents can’t afford to take a booking without charging customers.”
Fee cuts are a tactic the travel suppliers—and particularly airlines—are employing to squeeze their distribution chain into a more manageable and rational model.
“They want to force failures and consolidations in distribution,” Riseley said. “That’s not their stated strategy, but you can infer it from their actions.
“It would be easier for them if there were fewer distributors to manage, and if these distributors were more efficient.A large chunk of travel distribution is really just about ordertaking, and they don’t want expensive humans doing this.”
By contrast, travel Web sites such as Expedia do not currently charge additional fees.
Self-serve
Travel consumers also want to take control of the process.
After all, travel sites are only successful to the extent that people are willing to invest their own time in research, as opposed to getting a professional to do it.
The move toward self-service is part of a larger ecommerce phenomenon, Riseley said. “There is a group of people who prefer to do it themselves and there is a group of people who prefer to trust experts. As the Internet provides more information, that shift toward people wanting to do it themselves will get more pronounced.”
A recent study from Expedia Canada and Ipsos-Reid highlights this cultural change. In February, 700 Canadians across seven cities were
surveyed, and 80 per cent said they prefer to research their own travel plans, rather than rely solely on an agent.
One such traveler is Aaron Fleming, information technology manager at WebPartz in Mississauga, Ont. He flies two or three times a month, and has only used a travel agent once in the last year.
“The online services are so much faster and easier,” Fleming said. “Arranging a trip takes five minutes online, but if I send an e-mail to my travel agent it takes her a day to get back to me.
And usually all a travel agent does is log onto a computer, book the ticket and mail it to you. I can book a flight and reserve a car and get a hotel room all on one Web page.”
The future of agents
But the news isn’t all gloom for travel agents. If they can step up and provide customers with value-add services—such as help with complex trips or a personal approach that people find comforting—then they too can grab a piece of the travel market.
“Travel agents will increasingly specialize in more complex travel itineraries,” Riseley said. “Buying a ticket from one airport to another doesn’t require a travel agent, but planning a three-week European tour may.”
ACTA’s Crandall predicts that weaker members of her association will simply disappear, leaving behind those more able to move with the times. “The Mom-and-Pop shops might close—I think we’re going to see a reduction in the overall number of travel agents in the next few years. But the ones who survive will be technically savvy.
“Some people will always want to deal with a person.”
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