Much has been written about the changes that have affected the travel distribution network in the past decade or so. These changes are not simply due to the major inroads made by electronic distribution, but rather to the appearance of a new market segment: e-consumers who purchase almost everything online, including travel products.

Travel agents reinvent themselves

In recent years, a trend towards consolidation in the travel distribution network has significantly reduced the number of travel agencies. For example, the number of points of sale registered with the Airlines Reporting Corporation (ARC) in the U.S. fell 13% in 2003, while average weekly revenues per agency grew 12%. This consolidation of the sector should, however, increase the feeling of solidarity among the remaining players.

This period of transition and adaptation, which some are calling a veritable work in progress, is encouraging many travel professionals to experiment with new ways of doing business. This is all the more necessary because airline companies and hotels have turned away from intermediaries in the last few years, preferring instead to invest heavily in their corporate sites and offer best-rate guarantees in an attempt to woo e-tourists.

Meanwhile, with the loss of airline commissions, travel agencies are beginning to adopt the idea of service fees. This practice highlights the advisory role of the profession and means that clients now pay for the agent's expertise instead of suppliers having to pay a commission.

The role of consultant dovetails nicely with the trend towards customized travel. Today's tourists are well travelled and want to enjoy a certain freedom. They want to go beyond the beaten path and avoid crowds, yet still enjoy the benefits and peace of mind they can get from a travel agent. This means that agents must have the flexibility needed to offer customized travel products. Although package tours can be cost-effective, they do not always meet consumer expectations.

Leisure travel or business travel?

In traditional travel agencies serving the leisure market, the expertise of specialists is still appreciated. The added value contributed by such professionals is why consumers agree to service fees. We are also seeing a change in traditional vacation packages, primarily those involving all-inclusive resort destinations, which have long been a cash cow for agencies. Wholesalers are now getting into the act and adapting their business model to sell their products directly to consumers. One such example in Quebec is the business generated by Go Travel Direct, a company that bypasses the network of traditional agencies.

In the case of business travel, online agencies are still outperformed by corporate travel agencies, who continue to play a vital role as a distribution channel. According to some studies, when it comes to booking business travel, 90% of the time traditional travel agencies can find fares equal to or lower than those offered on Internet sites.

Statistics fail to tell the whole story

The big question is how to accurately measure the relative market share of each player in the travel distribution market.  In 2003, in the United States, an estimated 27% of airline sales were made online. Of these online sales, 59% were transacted directly on an airline site and 41% were through online travel agencies. However, this 27% market share does not necessarily exclude the traditional distribution network, because these numbers include tickets reserved by agents directly on airline sites. The same thing holds true for hotel reservations.

The arrival of low-cost airlines significantly changed the landscape of the distribution network. The discount airlines' commitment to reducing costs as much as possible has led them to focus their business model on Internet sales and to bypass the GDS (Global Distribution Systems) used by travel agents. As a result, travel agents are increasingly developing a multi-pronged approach that involves both GDS and the Web, using the same channels as individual consumers. According to a TravelMole survey in the U.S., 93% of travel agents use the Internet to find fares. It is therefore highly probable that travel agencies account for a sizeable percentage of the online sales enjoyed by Canada's low-cost carriers like Westjet and Jetsgo.

Web users shun the traditional network

The traditional distribution network has lost the most ground among Internet enthusiasts. Just over half of Canadians say they would like to continue having a travel agent arrange their summer travel, compared to 64% in 2002. In France, 44% of those polled had used the services of a traditional agency to make travel reservations during the preceding 12-month period.

Among people who are comfortable using online reservation tools, the perception of the usefulness of traditional agencies has changed enormously.

A poll of American e-tourists reveals that over 92% of them usually purchase their travel products over the Internet and that 45% of them do so all the time.

According to these consumers, online agencies charge the lowest prices, are the easiest to use and offer the greatest product variety (Table 1). Although e-tourists do give traditional agencies higher marks for customer service, very few (5%) believe these agencies can offer better prices.

It is therefore not surprising to observe that, among those who regularly purchase travel products online, over 84% say they never consult a travel agent (Table 2).

The dilemma facing Internet users, when it comes to comparing prices, is whether to turn to online agencies like Expedia (88%) or corporate sites like Hilton (73%).

Leverage existing strengths

A recent Conference Board survey shows that most Canadians who consult travel agents do so primarily because of the human contact. For many travellers, this personal connection allays their fears and gives them some recourse if there is a problem, ensures them that the transaction is secure, etc.

Some 29% of respondents will only make a purchase if they can do it in person (Table 3).

Approximately 18% prefer to purchase travel products over the telephone, while 28% opt for a combination of «telephone and in person.»

Human contact remains an important factor for over half of Canadians and travel agents must leverage this fact.

Convincing e-tourists that they will not necessarily find better prices among online travel agencies remains an uphill battle, but technological tools adapted to the Internet give traditional agents access to a wide variety of products (Web rates, discount carrier tickets, GDS, etc.) at competitive prices. And yet, only 5% of e-tourists believe these agencies can find the lowest price.

There is still a need for travel agents. The challenge lies in getting potential travellers to recognize their new role: that of an e-tourism expert who can save the consumer (i.e., budding travel agent!) many hours of research and fruitless surfing.

Sources:

• PhoCusWright (2004), PhoCusWright's Online Travel Overview, Market Size and Forecasts 2004-2006, June.
• TravelMole (2004), TravelMole Reveals Extent of Internet Use by Agents, January 16.
• Conference Board (2004), Outlook for Summer 2004 Outbound Travel.
• Sain, Gary C. (2003), Top 5 Reasons in Choosing a Travel Agent, Yesawich, Pepperdine, Brown & Russell, August 25.
• PhoCusWright (2004), The PhoCusWright Consumer Travel Trends Survey Sixth Edition, Sherman, Connecticut, February.
• Cosmes, Jean-Pierre (2003). «Les agents de voyages doivent revenir aux sources,» Espaces, no 205, June.
• Hagenhoff, Liborius (2003), «The Role of the Travel Agent in the New Travel Marketplace,» Anite Travel Systems, presentation at the International Tourismus Borse - ITB, Berlin, March 11.
• Lastminute.com and Tns-sofres.com (2004), Impact de l'Internet sur la consommation de voyage des Français, March 2.

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