Successful agent, you have a problem. You may be a very sharp marketer, have loyal clients and get top commissions from suppliers. You may feel reassured because you showed stability or even growth through the recent economic downturn. But you face a subterranean challenge that threatens your future in ways that no single agency, no matter how large or successful, can combat alone.
The question that nags is not whether an individual agency is successful or not, but whether the agency distribution channel as a whole is growing, flat or shrinking. That trend line, over time, is of critical importance even to suppliers that today demonstrate what appears to be unquestioned loyalty and support to agents. Believe me, they keep a close eye on whether overall business from the agency channel is ramping up or declining, and if the trend line heads south noticeably, they put proportionately more money into alternative sales channels.
Interestingly, much of the activity one sees in the agency community that results in stronger agencies doesn't necessarily translate to channel growth. An agency can increase profitability by investing in technology to make individual agents more efficient, but it doesn't necessarily follow that the agency will sell more travel. An agency owner who is a superior marketer may steal market share and obtain higher commissions and greater profitability, but contribute nothing to growing the sales channel. And two agencies can merge and reduce overhead expense, but the level of sales in the postmerger agency may be no higher than when the two agencies operated independently.
What can be done to stimulate overall growth in agency sales? It's easier to describe the goal than how to get there, but it seems obvious that new models must exploit both the Web and high service levels.
Most of the interesting high-tech, high-touch models I'm seeing are showing up in hosting agencies. But there is still a piece missing for channel success, and its absence may have to do with the underlying fundamentals that drive many of the successful hosts.
Hosts first started appearing shortly after airlines eliminated base commissions, providing an alternative for agents who were suddenly overwhelmed by the overhead associated with maintaining a brick-and-mortar agency (and their GDS contract) without airline support.
Initially, hosts helped staunch the flow of agents leaving the business, but they did little to grow the channel. Most hosted agents were experienced and brought a book of business with them, and while a host might provide marketing tools to their agents, most hosted agents were regarded as contractors who would be responsible for growing their businesses if they chose to.
The next generation saw a real step-up in the provision of marketing tools, and even leads, by the host (think America's Vacation Center). While it's unclear how many of these leads represent market share shift vs. new channel business, it's not unreasonable to assume that the host's consumer marketing -- particularly Web marketing -- brings some online shoppers back to travel agents.
There are lots of reasons for hosts to want to work with established agents. They bring sales volume from day one. They don't need to be trained. The more selective a host is in recruiting experienced agents, the less time will need to be spent on customer service issues or worrying about the hosts' reputation.
Ironically, the host is discouraged from engaging in a practice that is absolutely critical for channel health: recruiting and training new agents. The best-known hosts that focus on newbies also offer a multi-level marketing approach, and have been roundly criticized for being more interested in selling memberships than travel.
A new host model, however, is emerging that seems to be addressing this issue, intentionally or not.
Its founder, like the founders of AVC, comes from a traditional agency background. Mike Putman founded Putman Travel in 1984; it was once one of the largest privately held agencies in the Southeast. Like many agencies, Putman began consolidating in 2000, and today maintains only three walk-in agencies, down from 12. He became interested in online sales and started 11thhourvacations.com, which he subsequently sold to OneTravel, an online agency controlled by the GDS Amadeus. He joined the Amadeus team that produced Agenta, a host connected to Amadeus-owned agency consortium Vacation.com.
Putman's new host agency, Rovia, has a three-tier membership model, structured to accommodate everyone from a GDS-trained agent to a complete novice. Its construction reflects the experience of someone who knows the industry well -- no one at the lowest level, for instance, can contact a supplier directly, to avoid annoying suppliers with basic questions. There is a multilevel component to the structure -- experienced agents can share commissions with less experienced agents whom they assist -- but it is not a membership organization. Recruitment of inexperienced agents, and online training, is key to the program. Rovia does not provide leads but offers a loyalty program to help its agents retain customers.
It's unlikely that any one company can or will be responsible for a spike up in travel agency sales, but a combination of innovations in new models can. It's often said that competition is good, and even if we know that to be true intellectually, it often doesn't feel that way. However, when it comes to new agency models, we should all cheer new entrants and wish them every success, especially if there's a good chance they're going to grow the channel.
Email Arnie Weissmann at [email protected] and follow him on Twitter.
This column appeared in the July 26 issue of Travel Weekly.