The distraction of direct bookings

By Charlie Funk

Charlie FunkTwo articles in Travel Weekly's Consumer Trends issue (July 30) contained a wealth of information on consumer travel buying trends. One described the value a traditional retailer adds and how the quality of agent bookings differentiates them from other distribution channels. The other study looked at channels through which travel reservations are made. 

The booking channel survey revealed not-so-surprising data regarding hotels: Barely 5% of resort hotels and 3% of nonresort hotels were booked through a traditional agent. The lion's share of bookings for these properties were made direct with the supplier -- about 60% -- with online travel agencies (OTAs) taking second place as most often used.

In fact, only two types of travel -- cruises and package tours -- were booked more than 20% of the time through traditional retailers.

The study found that 34% of cruises were booked through a traditional agent and 16% through an OTA. But the statistic that jumped off the page for some was the whopping 39% of consumers who indicated they booked their cruise direct with the supplier. That number was greeted with skepticism by some on the supplier side, primarily because it contradicts direct-booking levels reported by cruise line executives, most recently by Micky Arison, Carnival Corp. chairman and CEO, when he told analysts during the company's second-quarter earnings call that about 19% of bookings across all brands were direct.

Soon after the study was published, I began receiving phone calls and email expressing concern, even anger, about the high direct-booking level and the disparity in the two percentages, asking how they might be reconciled. One went so far as to suggest some sinister plot was afoot.

I am certain that by some measure, direct bookings across the Carnival Corp. fleet really do constitute 19% of its business. Other statements on the topic suggest that the metric used is a percentage of some revenue number: sales, operating profits or the like. Financial analysts are interested in information as a percentage of revenue or cost of sales or profits. The Travel Weekly study, on the other hand, was based on percentage of passengers who booked direct rather than some percentage of revenue. The two measures are not at variance. Rather, the data clearly support the value of the traditional travel agent.

Over the last two or three years, I have written a couple of times -- and my wife, Sherrie, and I have noted numerous times at seminars we conducted -- that a resort or cruise ship is a beast that must be fed.

The retail channel has been warned since 1999 that these properties had to be filled and that if the retail channel couldn't/wouldn't fill them, the suppliers would have no choice but to do it themselves. Perhaps the admonitions were too subtle or low-key to have the needed impact, because clearly OTAs and traditional agents have failed to do the job.

But let's set aside for the moment what is, for some, one of the most contentious topics of discussion today.

Let's look at data from the other article mentioned, which clearly shows the value of traditional travel agents and affirms our continuing value to suppliers.

  • Clients of traditional agents took 23% more trips over the previous 12 months than did those who did not use an agent.
  • Clients of traditional agents booked trips that on average were 50% longer.
  • Clients of traditional agents spent 50% more than when no agent was involved.
  • Not all agents' clients used an agent every time they traveled.
  • Consumers using OTAs overwhelmingly sought the cheapest price.
  • Consumers using traditional agents sought expertise about the travel they were planning.
  • The majority of those using travel agents were satisfied with the services provided.

The traveling public abounds with those who know the price of everything and the value of nothing. We can't really blame the consumer for not understanding the value of a good travel planner (or how to find one) because as a group, we have done a terrible job of communicating what we do and why the consumer should use our services. For the most part, travel agent advertising has focused exclusively on selling a destination or product.

Robert Joselyn, president and CEO of Joselyn Tepper & Associates and Travel Agency Management Solutions, said it best: "The idea of simply retailing other people's products vs. being a knowledgeable consultant is not a viable business model for agents."

Indeed, the direct-booking data mentioned above further support the notion that traditional agents do a better job of selling high-value travel. For illustrative purposes, let's say all the major cruise lines, on average, book 19% of revenue direct. If it takes 39% of cruise passengers to generate 19% of revenue, the value of those direct bookings is substantially less than sales through traditional agents. It also means those direct bookings would not be profitable for agents. Why would we want to pursue business that isn't profitable?

Rather than bemoaning the number of bookings a supplier makes direct, concentrate on touching your clients. Focus on the ones who value your knowledge and expertise. This is still a business of relationships. That's why those who travel more frequently and use travel agents use the same agent 70% of the time when they book again.

All major travel suppliers, certainly all major cruise lines, have trumpeted the importance they place on a healthy retail channel. Some have very active, well-publicized programs supporting those statements. Properties and ships have to be filled. Data show traditional agents do a better job of selling longer, higher-value vacations.

The bottom line here is that traditional travel agents can focus on their skills and strong points, support suppliers that support them best and fill the tours and ships. Or they can allow themselves to be distracted by the size of a supplier's direct bookings and do things that push the supplier to increase that level because the retail channel is underperforming.

It's time for traditional agents to get busy selling their skills, expertise and knowledge. Your success won't be determined by direct-booking levels.

Charlie and Sherrie Funk own Just Cruisin' Plus in Brentwood, Tenn., and have provided agent and agency-owner training throughout North America on every facet of travel agency operations. They are the authors of several books, including "A Recipe for Travel Agency Success," "Creating a Blueprint for Growing Your Agency" and "You're Invited," a complete guide to hosting consumer travel events. 

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