Monday, February 10, 2020

Where is the future of travel agents?

A dead-end or a detour?
There is a great debate about the future of travel agents as it has become easier, faster and cheaper for consumers to buy their travel online. While the debate focuses on what can traditional travel agents can do to compete with OTA (Online Travel Agents) and survive in the industry, both are facing the same problem in the long-term: the declining perceived value of their services, the specialized information from which they derive their revenue, as that information becomes increasingly more localized, relevant and current on the Internet. Viewed from that angle, OTA are actually worse off than traditional travel agents as they compete within the same realm than the free specialized information lives in, while the traditional agents retain the advantage of the personal contact dimension with customers. But traditional travel agents face another problem: as there is nothing to physically deliver to the customer any more as tickets, hotel bookings and travel insurance contracts are all delivered electronically, there is no compelling reason for the customer to visit their store or office.

Redefining travel agents

The debate should be about redefining the purpose and function of travel agents for them to remain relevant in the marketplace. Instead of focusing on a rapidly shrinking scope of services still competitive to a diminishing customer pool, exploring new ways to deliver value and how to translate that into revenue would open a path away from the dead-end road ahead. The traditional model of sales commissions has become a mismatch as the sales process is increasingly detached from the transaction.

This is especially apparent with OTA who depend on review sites to generate sales while they themselves are mostly transactional, worth only a nominal portion of the sales commission they collect. Hotel bookings decisions are increasingly being made on the review sites, like TripAdvisor, which have become the substitute “travel agent” providing much of the information the consumer relies on to make purchase decisions before going to a booking site, like, for the transaction. Yet hotels are paying the commission to the booking sites rather than the review sites that actually generated the sale. While the booking sites do spend some of that commission money to advertise on review sites, it is an intermediary function the hotels could easily bypass and go direct at a lower cost while ensuring that their money is spent to promote their own properties, not that of the competition as is often the case (the infamous “visitors have also looked at these other properties…” driving them away from their own review page).

That leaves the OTA with only the transactional process as the service value, a fractional value of the commission rates typically paid to OTA. It may not turn out to be a great future for OTA as transaction service providers begin to compete in earnest against them. They are more convenient and their fees are comparable to that of bank card processing, a fraction of that of the travel trade commission rates.

Exploring other avenues

AirAsia, the airline that has figured out many clever ways to make sure that “Now everyone can fly”, has a new option to pay for bookings made online without a bank card: the bookings made online, most often on a smartphone, can be paid for in cash at any 7-11 convenience store in Thailand, already the most popular place to pay utility and phone bills. With over 10,000 stores nationwide, it is indeed an easy convenience. While that option is probably not suited for hotel bookings, it shows how innovation and fresh thinking can open new roads to success for travel agents, even if they have to drastically change their business model and become known as travel “something else” instead of travel “agents”.

One avenue for traditional travel agencies could be to convert to travel stores, located in major shopping malls, selling related travel and leisure products while promoting resorts and travel destinations within the environment. Far from being limited to luggage and power converters, travel stores can offer a very wide range of products: clothing, books, cosmetics, etc. while featuring wall video and marketing material of resorts and travel destinations who pay for the prime value of exposure and promotion in major shopping malls.

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