As breakups go, it was
all very civil. A year ago, the two parties in question issued a
joint statement. It began with a declaration that they had enjoyed
an enduring and mutually successful relationship. But right on its
heels came an ominous, However ...
the outline of dissolution was painted with the careful, clinical
language of divorce court, beginning with a Therefore and moving
towards placed in abeyance.
The possibility of
reconciliation was mentioned -- everything would be reviewed in
half a year, and there was even the suggestion that the parties
long-term relationship would benefit from a six-month trial
But there was no
further communication, no happy announcement of love rekindled. The
travel agent group Virtuoso and the tour operator Abercrombie &
Kent had what appeared to be irreconcilable differences, and
A&K officially became an ex-preferred supplier. It had been, it
agents typically find themselves on the other side of the
disintermediation equation. Theyve lost clients who prefer to use
online agencies as intermediaries, or to the supplier-direct
channel, which has the wishful goal of eliminating all
between Virtuoso and A&K was, at the time, a unique situation:
A&K was its preferred supplier, but Virtuoso had also acquired,
as preferred suppliers, so many of the hotels and other on sites
used by A&K that Virtuoso agents could get net rates on their
own, mark up package components on their own, and present
near-mirror images of A&Ks offerings as their own (more
Virtuoso has made
no secret about its ambitions to become a wholetailer that creates
and sells its own packages. Ron Letterman, chairman of Classic
Custom Vacations, has charged that thats the real reason his
company was cut from the groups preferred supplier list.
George Morgan-Grenville is more sanguine in his analysis, noting
that the disintermediation was a result of ever-changing market
dynamics that are broader then Virtuosos ambitions, and that
A&K is adapting happily to the new environment. Whoever is
right (and they may both be), Letterman and Morgan-Grenville find
themselves part of a phenomenon that has significant implications
for traditional tour operators and wholesalers. And its not just
occurring with the high-end products they represent.
Earlier this month
at the Travel Weekly Las Vegas Leadership Forum held at the MGM
Grand in Las Vegas, representatives from Certified Vacations and
Travel Impressions noted that in Las Vegas they found it difficult
to get net rates on air and hotel rooms (in some categories),
squeezing margins and making it difficult to put together packages
that were profitable, given their relatively high costs associated
with customer service.
However, no such
complaints came from the representatives of Travelocity, Orbitz and
Expedia. These travel agencies have the distribution power and
technology to get inventory and assemble packages in a way that
disintermediates traditional wholesalers. (An exception may be Mark
Travels Southwest Airlines Vacations brand. Marks own technology,
coupled with exclusive access to Southwests bulk and published
inventory, keeps it a strong player in the market.)
Ironies abound --
travel agents who supported suppliers are disintermediated by them.
Tour operators that supported travel agencies are disintermediated
by them. And the GDSs that conveniently linked suppliers to travel
agencies for years, are being disintermediated by both.
This brings us, in
conclusion, to the curious case of Travelocity, a travel agency and
wholesaler that is owned by a GDS. One has to wonder: If it were to
attempt disintermediation at every level possible, would it
dominate travel distribution ... or cease to exist?