Within a recent five-day period, I addressed two industry groups. The first was a sales meeting for a well-known supplier. The second was the steering committee for a major travel agency group. Each seemed very interested in -- and unsure about -- the future of the supplier-agency relationship.
At the agency meeting, an attendee noted in a conversation that the same cruise line that bends over backward to help him as he puts groups together is also the first to try to establish direct relationships with his clients as soon as the cruise is over. He characterized the supplier as both "very helpful" and "the slimiest." But he has no plans to discontinue working with the supplier, because his clients are happy and still come back to him; he has built a good business selling that particular supplier's products.
At the supplier sales meeting, I was given some examples of how various incentives were given to agents in an attempt to gain market share, but none moved the needle appreciably. The supplier continues to try to woo agents, however, because of research that shows that travel agencies deliver more loyal and higher-yield travelers who also take longer trips.
Perhaps the discomfort both sides are feeling is a consequence of doing business in an era of such extreme fragmentation and pragmatism. The landscape of travel distribution has become so complicated that it sometimes feels like the industry itself has fallen from innocence and grace.
The multiplicity of options for selling travel has its pros and cons. It was not that long ago that the agency and supplier communities practiced a relatively uniform business model, underpinned by the sale of airline tickets out of brick-and-mortar locations.
Suppliers had a relatively homogenous approach to agents, and part of that approach was to swear an oath of fidelity. No suppliers that wanted to remain in business would promote a toll-free number in an advertisement without appending "or call your travel agent." To do otherwise was to risk being called out as engaging in "agent bypass" in the Letters page of Travel Weekly.
But at the agent meeting I attended last week, some attendees expressed deep concerns about whether various supplier segments were planning to follow the airlines' lead in cutting out travel agents altogether from their marketing and distribution plans.
I don't think that's likely to be a widespread practice anytime soon. What I think has already occurred, however, is that pragmatic concerns have driven most suppliers to become channel-neutral. They continue to be very interested in travel agents because agents deliver the most profitable type of business, but they will leave no channel in our fragmented industry untested. They will experiment with different marketing initiatives in measure with possible rewards, without much worry about whether they will be singled out as engaging in agent bypass. They want the higher-quality clients that travel agents deliver, but they also will take the lesser-quality clients they get from the Internet and call centers.
I don't imagine many suppliers are, like the airlines in the 1990s, single-mindedly working to eliminate the "expense" of agents. Perhaps the most representative sign of these pragmatic, channel-neutral times is JetBlue's recent decision to enter the world of GDSs and, by extension, travel agents.
Agents are pragmatists, too. They have abundant product options and methods of communicating with their clients, but their behavior at times seems mysterious to suppliers, because agents have an outlook that favors long-term client retention over short-term profit.
My advice to the supplier sales team was to do all they could to show appreciation for agents and to continue to research what's most important to agents, particularly with regard to the agent-client relationship. Agents have demonstrated time and again that it's not just about money; they have stubbornly refused to move clients around simply because they could pick up a point or two in commission. Their first commitment is to their clients, and their second is to suppliers that help them look good to their clients.
In this age of fragmentation and pragmatism, agents must both continue to bring quality clients to the table and make themselves difficult to replace through even more granular specialization and differentiation. No other channel has the ability to organize an affinity group or consistently deliver the type of high-yielding customers who demand expertise and personal service.
And what came through loud and clear at both meetings is that although there is a lot of anxiety among both agents and suppliers, there is also an awful lot of goodwill. The same supplier that's forging closer, direct ties with travelers and dumping distressed product on the Internet might also sincerely want to work more closely with agents.
I believe it was the clearheaded concerns of pragmatists that I heard in the meetings I attended. Pragmatists chart a course that will work best, given the circumstances. Circumstances, however, are not static. The agent-supplier relationships will, for the foreseeable future, be both characterized by unease and driven by enlightened self-interest.
Email Arnie Weissmann at [email protected], and follow him on Twitter.