With the emergence of e-commerce and e-business, the role of the travel agent has changed.  It used to be one of gatekeeping, where agents were responsible for most travel sales in the whole industry.  However, now more than ever, the travel agent job is becoming centreed on “shopping”, as agents specialize and are constantly looking out for the consumer’s best interest by helping them find the lowest possible fare.  In fact, the travel agent business is slowly (but surely) becoming one of “brokering” and “consulting”, instead of merely “ticketing”.

These trends come at a time where the tourism value chain (or the interlocking relationships linking travel consumers to service suppliers) is under dramatic shifts, which had been presaged for some years.  For example, several airlines believe they no longer need an intermediary to sell their product.  Their sales on the Internet are cutting into travel agents’ business.  Airlines and other travel suppliers are squeezing the travel agent as they cut commissions and sell directly to customers.

Despite these trends, airline ticketing remains one of the leading e-commerce segment due to several converging factors.  The ease of substituting one remote channel for another and the lack of physical fulfillment have made the traditional visit to a travel agency or to an airline ticket office obsolete for the purchase of airline tickets.

Today, the phone call has given way to the Internet as the next step in this evolution.  Many airlines are battling non-airline-affiliated travel agencies for total domination of online distribution such as Travelocity and Expedia, the two larger online travel agencies.l

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Therefore, it is clear that the adoption of the Internet for booking airline tickets wil  continue regardless of how this channel war plays out, but the possible lack of competition will not be positive for customers.  In order for your travel agency to position itself amidst such market turbulence, you should carefully prepare your ebusiness strategy, make sure to:

  • Look at ticketing as merely an attraction factor, an opportunity to get price-loyal clients,
  • Develop new services that will distinguish you and position you as the hassle-free agency,
  • Build a Web presence that consistently reflect these characteristics and leverage them,
  • Create a virtual network of specialised tourism consultants operating on your Web,
  • Exploit location-specific opportunities, such as getting personal advice on demand, etc.,
  • Advertise aggressively on price and sell packages to get complementary margins, and
  • Teach customers to move upscale away from basic and towards higher value packages.

Adopting an alternative revenue base structure

In the same time as they commit to e-business, both online and offline travel agencies should prepare for a future without commissions, if they have not yet done so.  They must also continue to increase airline ticket sales or they will risk losing complementary sales of hotel rooms, car rentals, and more profitable travel packages and cruises.

Six years after the airlines first introduced a series of commission cuts that would forever change the shape of the travel agency industry, the American Society of Travel Agents (ASTA) has found that today the clear majority of travel agencies are charging services fees with no adverse effects.  The results of this survey send a message loud and clear, that travellers value the services of their travel agent and are willing to pay a fee for the expertise and experience they bring to the table.

Results of the 2001 Service Fees study show that 88 percent of all ASTA member agencies charge service fees for all or some of their services, and in spite of initial scepticism, agencies have encountered little to no resistance from clients.  Some travel agency staff found it very hard to ask for a service fee, especially with friends and longstanding clients.  But when they are explained the logic that they are professionals and deserve to be treated like professionals, hesitation fades away.  Rather than losing clients, agents have found that the implementation of service fees has made very little difference in the size of their client base.

On average, the survey found, ASTA agencies have retained 91 percent of their customers.  Prior to 1995, on average, only 20 percent of ASTA agencies were charging service fees.

Today, of those agencies that have gone to a service fee schedule, 84 percent of them have been instituted since the commission cuts in 1997.  Of those agencies that are charging fees, agents have found that clients are more willing to pay for some services over others.  Among the services clients are least willing to pay a fee for are hotel-only reservations (18%) and car-only reservations (15%).

Although a clear majority of travel agencies are now charging fees, the services agencies charge fees for and the amounts they charge vary.  The price for issuing airline tickets — the most common service for which fees are assessed — ranges from $5 to $25 per ticket, with a $13.21 average.  The vast majority of agencies that charge fees have a standard fee for all airline tickets issued.  Compared to 1998, the average service fee for issuing airline tickets has gone up about $3.

Travel agents, faced with dwindling commission rates on ticket sales and declining use of their services, have turned to selling tours, cruises, and travel insurance to make a profit.  One other potentially lucrative niche is meetings.  The companies that will survive the coming shakeout will offer high touch, not just high tech.  Meeting planners need service – just automating the booking process is not the answer.

Overall, this trend should lead you as a travel agent to draw some defensive strategies, in order not to get caught off-guard as you will want to focus on implementing your e-business strategy.  Indeed, the choice of travel niche must be made in accordance to the kind of tourism e-business your agency may want to enter, and especially whether it will be sufficiently lucrative to help sustain e-business investments.

Therefore, your analysis should take in consideration the following steps:

  • Analyse what, when, how much your clients are ready to pay, whether offline or online
  • Target for fees the products and services where “price elasticity” or sensitivity is lowest
  • Teach clients the basic rules of value-for-money by making their online shopping easier
  • Build integrated Web-based account statements that transparently display fees or taxes
  • Use internal Activity-Based Costing (ABC) to identify clearly price/cost advantages
  • Change pricing policies and ensure that clients see that you make them benefit
  • Give Internet prices that reflect low operational costs and give service quality measures.

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