The travel agent in metamorphosis

Part 1 of 2

By Charlie Funk
Charlie FunkThree years ago, the travel industry was in the throes of a recession that began in early 2007 and eventually surpassed the fallout from the events of 9/11 and the onset of war in 2003.

I was working on a column [It's Like This ...: "A bridge over troubled waters," June 29, 2009] and in conversations with agency owners all over the country, I discovered that many thought the coming years looked grim. In my column, I forecasted that up to half of traditional travel agencies would be closed in two years and exhorted owners to get busy and prove me wrong. 

A recent PhoCusWright report found that 23% of ARC agencies closed between 2007 and 2011, leaving slightly more than 14,000. The drop looks even worse when you consider that there were 33,000 ARC agencies in 2000. I was wrong about the percentage, but 23% is a big hit. Granted, the report could not say how many non-ARC appointed agencies had closed, morphed into home-based agencies or merged with other agencies, but the total didn't approach 50%.

During the same years that saw 4,000 traditional agencies close, the number of home-based agents exploded from slightly more than 30,000 to more than 40,000. While that would seem to suggest a net gain in sales volume, in reality it isn't, because home-based agents embrace a variety of business models. The average home-based independent produces just over $300,000 in sales, and the average hosted home-based agent produces just over $170,000 a year.

As a result, PhoCusWright predicted that traditional brick-and-mortar agencies' share of cruise sales volume would fall from 68% in 2009 to 64% by 2013 as online agencies and cruise lines' direct sales continue to capture a growing share of the rapidly expanding cruise market. Cruise bookings with suppliers and online travel agencies (OTAs) continue to grow but at a slower rate than air, car and hotel travel bookings through those channels.

Online cruise bookings (those that start and finish online, never involving interaction with a human) have stayed at or near 9% for the last several years.

As long ago as 2007, Forrester Research reported that fully 50% of consumers who booked travel online found the activity stressful, and SideStep (now owned by Kayak) found that 70% of buyers younger than 25 felt overwhelmed with the online travel-booking process.

In short, those planning the trip of a lifetime through online research and/or booking suffer from information overload. And yet online travel booking will have grown 44% in the last three years, according to PhoCusWright.

A recent collaborative survey by the IBM Institute for Business Value and Frost & Sullivan suggested that OTAs and suppliers don't understand their buyers. Curiously, the report states that fewer than 50% of consumers booking travel online think they got their money's worth and that online booking technology is as much a deterrent to customer service as it is an aid to the process. The most dissatisfied online bookers were those looking for the cheapest price. How dissatisfied are they going to be when they find out they paid the same price they would have paid a retailer who would have done the work for them?

For me, the most astounding revelation in the IBM report was that about 20% of online travel buyers spend more than five hours researching and making a booking, and about 50% spend more than two hours. Surely those surveyed have to place some value on their time, and we're not even considering the mistakes that can be and are made or the stress that those mistakes create.

One on hand, we read that the travel agent is soon to be (or already is) irrelevant. To the extent that the term "travel agent" fails to adequately describe what retail leaders and innovators in travel do, the assertion is probably correct. The disconnect is in the label, not the value and necessity of what the travel professional does. Perhaps we should stop calling ourselves travel agents.

But on the other hand, reports have been popping up in the media suggesting a resurgence in the use of travel planners for anything more complicated than buying an airline ticket, booking a hotel or renting a car. Recent research by Forrester, for example, revealed a 20% growth in the number of consumers who expressed interest in working with a travel planner.

The assumption is that a large part of this increase consists of consumers who fall within the upper 5% to 10% in income and thus spend more on travel. A growing number of leisure travel buyers understand the wisdom of relying on someone else to put together all the elements of complex vacations that involve air, sea, lodging, cruise and more. They probably also have come to realize that they've been paying for this work anyway when they booked themselves, and they're not happy about it.

So, how should travel professionals accommodate these findings in their business? Here are a few suggestions:

• Let the OTAs have the bargain-hunters and penny-pinchers. OTAs that offer reservation capabilities usually do so through a third-party booking engine, paying a fee for page views whether a booking is made or not. The average travel shopper today views 10 times as many pages as he or she did a decade ago. Nobody was making that much money on entry-level bookings, and now they're making even less.

• Likewise, let the suppliers directly serve those shoppers looking for the cheapest vacation. In the case of cruises, noncommissionable fees are such a huge percentage of the cruise fare on lead-in rates that commissions often are less than 8%. Suppliers can't make money on a price that low, and many only offer such fares expecting additional revenue from ancillary sales prior to or during the vacation. The reality is that buyers of lead-in rates tend to spend substantially less than those who pay for a better accommodation.

Besides, retention rates for bargain-hunters tend to be low because no value-based relationship is established.

• Make sure suppliers know you provide great service to clients and sell them accommodation that produce the best vacation experience. Traditional travel retailers sell packages that average about $200 higher than OTA-booked travel.

• Help your clients understand how you save them time because you deal routinely with complex travel planning and sell them on the convenience that you provide.

• Set aside at least two hours a week to contribute to activities that will keep the retail travel profession sustainable and viable in future years.

Next week: How you can help ensure the future of professional travel sellers.

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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