When people analyze why a significant number of traditional travel agents have remained buoyant despite airline commission cuts, 9/11, the emergence of the online channel and suppliers' ever-intensifying consumer-direct efforts, a crucial aspect is often overlooked.
Yes, agents have focused more on profitable products, charged fees and found specialty niches. They became Web savvy, reduced their overhead and sharpened their counseling skills. They moved their offices into their homes, or perhaps hosted home agents, or grew their businesses by merging with other agencies.
But if people examine only the activity that has been going on at the agency level, they will miss a key change -- in fact, a sea change -- a bit higher up the distribution chain that began pumping oxygen to agencies at a crucial time.
The explanation can be found in a very dull form of alphabet soup, one that contains only Bs and Cs.
On one front, technology was enabling supplier-direct efforts, a business-to-consumer (or "B-to-C") activity, to become much more efficient and cost-effective. Database marketing, powered in large measure by loyalty programs, enabled suppliers to ramp up these efforts in ways only dreamed about a decade earlier.
Meanwhile, large online travel agencies used technology to muscle their way into the B-to-B-to-C (business-to-business-to-consumer) space that was once the exclusive domain of traditional travel agents. Analysis of Internet consumer behavior provided Web agencies with an edge for commoditized products.
Very few traditional agencies had a client database whose scale was grand enough for the type of demographic segmentation that's useful to marketers. There was, however, a player already in the distribution chain that could help level the playing field again for agents. It was, in effect, a B-to-B-to-B-to-C model. Travel agents might be thought of as middlemen, but there's no one more solidly in the middle than agency consortia.
Just as travel agents reimagined their businesses, so did consortia. In addition to feeling the pressure caused by disruptions in the agency marketplace, consortia found themselves under new pressure from suppliers that were no longer willing simply to hand over a percentage of member-agency sales. Suppliers were demanding that ambitious growth goals be met or there would be very little payday for the organization.
The changes that occurred at consortia were as dramatic as what happened in agencies. Consider: Stephen McGillivray, vice president of marketing at Vacation.com, the largest consortium, told me that up to 90% of the marketing funds provided by suppliers to V-com agency members are specifically earmarked for mailings that go directly to his agencies' collective client database.
At the millennium, that number was 0%.
In effect, suppliers no longer look at consortia as a collection of agencies but perhaps firstly as a consumer database business. The power of the consortia databases, which contain consumer travel patterns available nowhere else, is amplified when merged with the "Big Brother" databases that can be rented from third parties and that contain consumers' age, race, religion, level of education, income, buying history, preferences, habits, hobbies and, no doubt, favorite color and the name of their first pet.
The concept of allowing suppliers to exploit aggregated agency client databases is not new. It was pioneered in the early 1990s by Matthew Upchurch and his small collection of "carriage trade" agencies (now Virtuoso). But what is new is the willingness of the average travel agency to build up and hand over client lists.
I mentioned that the suppliers look at consortia "firstly" as a consumer database business. But there's a very important "secondly" that augments the value of these databases considerably: conversation.
It may seem ironic, but "conversation" is a new marketing buzzword, first brought to my attention by LuxuryTravel360.com publisher Hershel Sarbin. The meaning of conversation as a buzzword is not so different from the conventional sense of the word. What marketers of big-ticket items, including travel, have discovered is that all the database manipulation in the world cannot sell certain products. At the end of the day, someone needs to actually talk to a customer -- to have a conversation. And in travel distribution, only travel agents do that.
Consortia and travel agents remade themselves in the only way that middlemen in the midst of market pressure can. They figured out how to increase value for producers and consumers, the Bs and Cs to their left and right. And of all the ways that traditional agents have retooled their thinking over the past 10 years, their decision to become list-sellers as well as conversationalists might ultimately prove to be the most important factor in their continuing success.
Email Arnie Weissmann at [email protected].