Today, in venture capital
companies across the country, entrepreneurs are making pitches to
VCs, and in their PowerPoint presentations there is one slide,
especially, that those seeking capital love to display, and that
those dispensing capital love to see. This PowerPoint slide has
just one word: Disruption!
The reason VCs like
to see that slide is because whenever there is disruption in a
marketplace, opportunity knocks for someone.
For almost 25
years, from about 1970 to 1995, the travel industry grew very
nicely, with suppliers paying commissions to brick-and-mortar
travel agents to distribute their products. No one questioned that
travel agents were an efficient and effective way to sell travel
products to consumers.
But then, in the
The 1995 commission
caps and 1996 launches of Travelocity and Expedia changed
everything overnight. Suppliers, for the most part, understood the
potential significance of these disruptions, and they began to look
at travel agents differently.
It's not that
anyone knew what was going to happen. But when the airlines, with
all their power and resources, decided to reduce travel agent
commissions, it caused nonairline suppliers to wonder if perhaps
the airlines knew something they didn't.
And for the most
part, they recognized the Web for what it is: a tremendous
interactive marketing opportunity.
We all know the
results of this disruption: the closing of many travel agencies
that couldn't adapt to a new model, but also a refinement of
targeted marketing on the part of agencies and suppliers. Many
agents focused on specific niches, and suppliers focused more on
the agents who really delivered for them.
Looking back on
today five years from now, we may see the middle years of this
decade as another period of disruption(!) in distribution models.
The sudden erosion of GDS incentives is certainly going to cause
some agencies to redefine their business models once
But a more subtle
change is occurring that has suppliers reevaluating their long-term
relationships with travel agents. They have noticed that the flow
of fresh blood into the agency community has been disrupted; young
people are not joining the profession.
In the short term,
agents are in a fairly sweet place: They are peers with baby
boomers and seniors, the wealthiest generations. These age groups
grew up with an awareness of travel agencies and are interested in
trips that will benefit from professional counseling.
But the younger the
travelers, the less likely they are to be aware of the value of a
travel agency. While suppliers value the travel agency channel --
because agency clients take more and longer trips and spend more
per day -- suppliers base their plans on the assumption that the
universe of agency users will shrink.
Can this trend
reverse? Perhaps. At this point, it may hinge on whether boomer and
senior agents can understand what younger generations want in
travel products and how to market to them. But equally important is
the question of whether younger people will perceive that older
generations understand their needs.
It seems intuitive
that Gen-X agents would have more success selling to Gen-X
consumers, and echo-boomer agents to echo-boomer
Perhaps the message
to younger people shouldn't be to use a travel agent but to become
If younger people
don't begin using, and becoming, travel agents, suppliers are
likely to rev up alternative methods of distribution before the
last older agent dies or goes out of business.
This is what
suppliers talk about when agents aren't in the room. They talk
about the day when agents may no longer be a factor in the market.
It's a disruption they can plan for.