Will commission cuts kill the small travel agent ?
When an industry’s’ revenue base vanishes, its time to collapse or transform. The new no- commission world had been on its way since 1995 when airlines first started cutting down on the fee they paid to travel agents to sell their tickets in US. It would be a fallacy to say that the agents didn’t saw it coming. Agents will have to now change from being commission dependent retail clerks into service focused professionals with knowledge that leisure and business travelers are willing to pay for. Without doubt small store front travel agents will be the most affected. Large agencies and consolidators rebate commissions to their corporate customers and have been acting on a fee-for- service basis for years. In an era which used to exist, travel agents were extremely useful because they had information systems, means and expertise which allowed them to easily track all the different airlines. Airlines used travel agents to hold leisure travelers hands as the airlines pushed to expand their customer base. The airlines used the travel agents to widen the customer base for airline products and now when the airline travel market has finally matured and evolved, airline no longer feel the need to pay travel agents to bring in the first time fliers.
But the internet has changed all that, not only has it given the airlines a platform to display and sell their tickets and ancillary services, it has also introduced another segments of travel agents – online portals. The portals are bigger threat than commission cuts and direct selling by airlines. Independent travelers can now compare airline deals on these portals and club with attractive hotels, car rentals, package deals. The deals are getting bigger and better on portals as most of them are backed by venture capitalists and corporate with deep pockets. Using back ward integration the portals using their money power are getting better deals by bulk purchasing on airline seats and hotel rooms. They even offer hefty cash back schemes with credit card companies.
The travel agency business model needs to be redrawn, reshaped and remodeled to fit the new realities. Just as we have seen the demise of general medical practitioners, we have to evolve ourselves to be more specific and specialized travel agents. The survivors of this blood bath would be the ones who have figured out their market and their expertise. Travel agents need to provide inside information that the travelers can’t get off web sites easily. Add an incremental value to the final product/ service which the passenger is willing to pay for.
Final Word – The agents that survive the current shakeout period will be smarter and will probably do more business because they’ll have fewer competitors.
(Watch out for next travel agency blog - “How to survive the shakeout and emerge a smarter travel agent”)
When an industry’s’ revenue base vanishes, its time to collapse or transform. The new no- commission world had been on its way since 1995 when airlines first started cutting down on the fee they paid to travel agents to sell their tickets in US. It would be a fallacy to say that the agents didn’t saw it coming. Agents will have to now change from being commission dependent retail clerks into service focused professionals with knowledge that leisure and business travelers are willing to pay for. Without doubt small store front travel agents will be the most affected. Large agencies and consolidators rebate commissions to their corporate customers and have been acting on a fee-for- service basis for years. In an era which used to exist, travel agents were extremely useful because they had information systems, means and expertise which allowed them to easily track all the different airlines. Airlines used travel agents to hold leisure travelers hands as the airlines pushed to expand their customer base. The airlines used the travel agents to widen the customer base for airline products and now when the airline travel market has finally matured and evolved, airline no longer feel the need to pay travel agents to bring in the first time fliers.
But the internet has changed all that, not only has it given the airlines a platform to display and sell their tickets and ancillary services, it has also introduced another segments of travel agents – online portals. The portals are bigger threat than commission cuts and direct selling by airlines. Independent travelers can now compare airline deals on these portals and club with attractive hotels, car rentals, package deals. The deals are getting bigger and better on portals as most of them are backed by venture capitalists and corporate with deep pockets. Using back ward integration the portals using their money power are getting better deals by bulk purchasing on airline seats and hotel rooms. They even offer hefty cash back schemes with credit card companies.
The travel agency business model needs to be redrawn, reshaped and remodeled to fit the new realities. Just as we have seen the demise of general medical practitioners, we have to evolve ourselves to be more specific and specialized travel agents. The survivors of this blood bath would be the ones who have figured out their market and their expertise. Travel agents need to provide inside information that the travelers can’t get off web sites easily. Add an incremental value to the final product/ service which the passenger is willing to pay for.
Final Word – The agents that survive the current shakeout period will be smarter and will probably do more business because they’ll have fewer competitors.
(Watch out for next travel agency blog - “How to survive the shakeout and emerge a smarter travel agent”)
No comments:
Post a Comment