CHICAGO -- Agencies can accrue certain profitable efficiencies
through electronic commerce, but they first will have to alter the
way they do business, according to a panel discussing on-line
booking systems at Travel Weekly's Technology 2000 conference here.
The audience heard from three agencies of various sizes that
have successfully used on-line booking.
Two made significant investments in technology; one relatively
small. But all said their agencies and clients were better off.
"There has to be a commitment from the [agency] that it sees
[on-line commerce] as a tool that is important to the future of the
organization," said panel member Todd Tarber, president of Navigant
Vacations in Englewood, Colo.
Tarber said many agencies, including Navigant, are "challenged"
by the surging growth in the travel industry coupled with the
inability to find and retain qualified travel agency employees.
But Navigant sees "the Internet and e-commerce tools as a way to
enhance our [client] relationships, increase productivity and
further evolve with the industry."
Tarber said most agencies today are "paid on a linear income
model. You book a transaction, and you get paid. Unfortunately, we
are in a declining linear income model, where many are receiving
less and less money from those transactions."
However, he said, proper use of e-commerce could enable an
agency to shift from linear income to "a residual income mode."
"So instead of booking $1 million a year, agents will need the
tools and the environment where they are booking $3 million, $4
million or $5 million."
Tarber conceded that within that model agents possibly will
"earn less on each transaction. But by introducing a 'residual
model' to [the agency], they will have an incentive to grow the
customer base."
Tarber said insurance companies typically use the residual
model.
"The [insurance] agent gets a high commission in year one, but
they keep getting an annuity for each year their customer continues
to renew the insurance contract," he said.
Similarly, at Navigant, "agents are encouraging customers to go
to our Web site and do the booking if they want," said Tarber. "I
want the customer to do on-line bookings as a productivity
enhancement. Even though the agent has not taken a call or
processed the transaction, we will share in the revenue stream that
we generate from that booking. So it is a different type of
business model."
Marka Jenkins, chief executive officer for Seattle-based
Metropolitan Travel, a $150 million corporate agency, and its
offshoot Highwire, said plugging into on-line bookings required a
significant investment in technology.
"I don't recommend it for everybody," said Jenkins, who didn't
reveal the amount of the investment.
But Metropolitan felt compelled to dive into the deep end of the
on-line pool to remain competitive with well-known mega-agencies,
Jenkins said.
Furthermore, at the time Metropolitan was investigating on-line
solutions, it found no technology companies that could provide the
"control pricing of transaction" capabilities it was seeking.
The end result was "we've developed our own booking engine
tool," Jenkins said.
The program is given free of charge to Metropolitan's clients.
It has been so successful, Jenkins said, that Metropolitan created
another company, Highwire, to market the booking tool to other
businesses.
The intention, Jenkins said, was to "bring on-line booking into
[her clients'] world but not as a be-all and end-all booking
solution. We really feel that the opportunity for us is to
supplement on-line bookings with service."
Bill Nichols, senior vice president at Pegasus Travel, a $20
million, mostly corporate agency based in Fort Worth, Texas, said
he also is encouraging his clients to book on line, but that
decision was born largely out of necessity.
"Many of the booking tools we bought were mainly for marketing
purposes," Nichols said. "We never intended to actually have a
customer use them. And most of our customers didn't want to use
them. They wanted to call our agents, and that was fine."
But the airline commission cuts induced Pegasus to institute,
then later raise, booking fees. Concerned that fee increases would
eventually cause clients to balk, Pegasus decided to allow them to
book on line.
"We decided we'd offer them the free way or the fee way,"
Nichols said.
Nichols said he literally went to a software store and bought a
program to help design Pegasus' Web page. After surveying various
sites, he "stole their ideas and built my own Web site."
He then went to Sabre, which allowed him to accept Web
reservations.
"It is probably the worst booking engine I have ever seen, but
it is free," Nichols said.
That was three months ago at a total investment cost of about
$5,000.
"Last month, we ended up with 7% of our volume and 9% of our
transactions booked on line," Nichols said. "So I have to say it
has been somewhat successful."
Panel moderator Mat Orrego, president of Cornerstone Information
Systems in Bloomington, Ind., said all three companies illustrate
that virtually any agency is capable of reaping practical benefits
of going on line.
"There is a lot of hype about the Internet right now, driven by
initial public offerings and [firms such as] Expedia and
Travelocity, which are investing huge amounts of money into this
market," Orrego said, suggesting going on line enables agencies to
compete with bigger players.
"What drove us on line was the fact that we had people calling
us," said Nichols. "They would call with questions like 'I went on
line the other day and I bought my ticket on Priceline.com and now
I want to change it. Can you help me?' We would say, 'Of course we
can't help you. You're toast.' "
But, Nichols said many of his clients wanted to use the emerging
technology epitomized by the Internet.
"They are going to use it when it is convenient for them,"
Nichols said. Customers that book on line but later call with
questions have to pay a fee, he said.
His agents also review on-line bookings to make sure clients
have booked the lowest fare.
"[Clients] are going to call us if there is a question. And we
want them to call us. We want to maintain that relationship,"
Nichols said.
And, echoing other panel members, going on line is one way to do
that, he said.