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Printed in, Mon 22-Nov-2004

COLUMN: Are Travel Agencies Becoming Extinct?

According to a recent study conducted by Deloitte in The Netherlands and published in a report entitled "Consumer's Choice of Channels" the use of the internet for booking vacations has increased enormously. Half of all travel is now booked via the internet in Holland. Last year this percentage was 35%. With the increase of the internet as the most important channel for travel related bookings, Dutch travel agencies are losing significant market share.

Are travel agencies losing money to online travel shops, booking sites and direct sellers?

In 2003 41% of travel tickets were booked via a travel agency, nowadays only 29 percent of Dutch travelers use a travel agent. This Deloitte report shows that, of the 3.300 persons surveyed who booked a trip in the last 12 months, 80% got their information online whereas only 11% via an offline travel agency.

The candlestick maker is already extinct. The butcher and the baker are heading that way. The travel agent may be next for the chop. Booking travel online is becoming easier daily as airlines, hotel chains and tour operators gradually adapt to the new selling medium.

Why haven't many more travel agencies adopted the internet as an extra channel for their travel products and services? Many travel agency owned web sites offer online brochures, but still require a phone call or visit to the travel agent when it comes to booking.

Internet has change the face of the travel industry and will continue to do so. On the one hand consumers can now access the internet for all kinds of travel related information including ticket prices and on the other hand online travel shops, booking sites and direct sellers have direct access to these consumers. The transparency this has created in the travel market and the redundancy of the travel agents in the travel supply chain have far-reaching consequences for offline travel agencies.

In terms of consumer preferences and efficiency the travel agency is losing grounds against the internet. This is posing a dire threat to travel organizations in regards to the future of their storefronts. The Deloitte study shows that travel agencies cannot compete against the internet when it comes to speed and ease. The travel agency is also losing the battle in terms of pricing and cost-efficiency as it is much cheaper to book online than via a travel agent.

Airline companies such as KLM are also lowering commissions and openly targeting costumers directly through their online websites and bypassing tour operators and travel agencies in the process. When these airlines lower their commissions to zero percent from 2005 how will travel agencies survive when their business costs are forever on the rise?

Already many travel agencies are closing down their businesses or are going bankrupt. This month (November 2004) alone has seen at least 25 travel stores file for bankruptcy protection (Chapter 11) and many more are expected to follow by the end of this fiscal year.

But lowering costs and offering better service at lower service fees is not enough to turn the tide, the important question is how should travel agencies position themselves in the new marketplace dominated by the internet? That is the question that now remains to be answered.

A mixture of offline and online is needed. In this light, it is interesting and hopeful for travel agencies to know that the Deloitte study also shows that the respondents exhibited a high loyalty to the channel they chose to make their travel plans. Of those who chose the internet as their prime information source, 64 percent did book via the internet. For travel agencies this percentage was 91%.

In other words, the conversion and loyalty retention rate was much higher for travel agents. Obviously, a live person had more to offer consumers in terms of advice and personal assistance. This is especially true in the business and corporate travel market.

People still want the personal touch in order to be certain that their travel plans are well taken care of. For many travel is a very stressful experience and many would feel lost without a human being there to guide them through the process. Business travelers, for instance, like to be able to confirm their flights while en route to the airport or find at which gate they have to check in at. Internet can not do that for them. A travel agent can.

The American Society of Travel Agents (ASTA) slogan 'Without a travel agent you are on your own' hits the nail on the head. The ASTA has started a huge campaign in the US to promote awareness for the use of travel agents. The Dutch ANVR would do wisely to follow ASTA's lead. It might just help save a lot of Dutch travel agencies from bankruptcy.

An Management publication - Copyright 2004

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