Up In The Air

Why use a travel agent when you can just go and buy airline tickets and book hotels directly online? As travel agents in the US are discovering, it's all about adding value. Arabian Business.com looks at the growing online travel market.

  • E-Mail
By  David Ingham Published  December 5, 2000

The Threat|~||~||~|As the USA’s sixth-largest business travel agency, Maritz Travel knows better than to argue with the customer. So when corporate clients started showing an interest in booking travel online, Maritz sought a way to turn this potential threat to its advantage.

The company is now building a new business model as a technology and e-commerce consulting firm, in addition to its traditional travel booking, meeting planning, and corporate incentive travel businesses.
Maritz Travel has helped over 200 customers develop corporate meeting Web sites on which attendees can register, pick sessions, and book their travel. It has also guided 25 corporate customers through the process of choosing and installing corporate travel booking systems.

While the agency is giving up some revenue on customers’ self-booked trips, Richard Spradling, Maritz VP of IT, says the competition from e-commerce sites is forcing the company to focus on areas where a travel agent’s skill is needed. “It’s an alternate distribution channel that relieves us from the simple trips to which we don’t add much value,” Spradling says. “In a tough job market, where finding trained agents is difficult, it’s an opportunity for us to focus our resources on transactions that add value and provide real revenue.”

But Maritz’s warm embrace of the Web is far from a rule among travel agents of any size. The travel industry was marked early on as a prime target for Web revolution, but has so far seen mixed results. While startups flood in, some large travel agents have only cautiously dabbled in online sales.

More people are buying airline tickets online, but travel agents, the traditional middlemen who sold 85% of all airline tickets, have been latecomers online, and have seen their market share erode. Independent sites such as Sabre’s Travelocity, Microsoft’s Expedia, and Priceline.com have taken the top spots, followed by airline sites such as United.com and Southwest.com.

Sites from airline consortia loom as a potential threat, though they have yet to get going. The launch of Orbitz.com, founded by five top airlines, has been delayed until next June, while another, Hotwire.com, just opened in October in Priceline.com’s market of taking bids to sell surplus tickets.

Meanwhile, conventional travel agents have seen the commissions they receive from airlines fall from 10% to about half that, and many remain cautious about embracing a Web model that could minimize their role. Also, whether online or offline, travellers have become increasingly demanding and are equipped with more Internet information and more ways to buy.

“The big challenge for travel agencies in the Internet era is to prove to customers how much they add value,” says Forrester Research analyst Henry Harteveldt. “The challenge for Internet travel businesses is to prove to customers how they make things easier and save them money.”

||**||Business travellers|~||~||~|Business customers also are getting more choices for bringing travel bookings in-house. In late October, the auditing and consulting firm PricewaterhouseCoopers became the largest travel buyer to take advantage of a program run by the Airlines Reporting Corp., the airline group that certifies travel agents that lets companies book travel direct with airlines.

PricewaterhouseCoopers’ annual travel budget of $580 million makes it the country’s No. 2 travel buyer, behind IBM. The idea of an in-house travel agent runs counter to the companies movement toward outsourcing and sticking to core competencies, but some companies believe keeping road warriors efficient and happy can be a critical business advantage. Fifty seven companies had signed up for the corporate travel agent status by the end of October, and another 60 companies are expected to be certified by year’s end.

“The jury is still out on whether it will be cheaper in the long run than just using a travel agency, unless you also move your purchasing online and cut the number of calls to human agents,” says Carol Salcito, president of travel consulting firm Management Alternatives.
Maritz felt it had no time to lose finding a niche that depended much less on airline commissions. It decided that the agency needed to become less an order-taker and more of a consultant and to change its revenue model to put less emphasis on airline commissions.

The company now charges fees to business customers for automated assessment tools that help them calculate their likelihood of success with online booking. Its consulting business helps companies develop, issue, and evaluate requests for proposals to link to business-to-business travel exchanges, such as Sabre BTS and Oracle E-Travel, to implement systems and train employees to use them. Maritz also offers full-time help-desk support and assistance in putting together incentive programs to reward travelers for booking online.

Spradling says the Internet has created a power shift in the travel industry: away from suppliers of travel and toward the travellers themselves. This forces travel agencies to ditch the existing culture and think of themselves as professional service firms with the goal of helping travellers harness the power flowing from greater information.

“Travel agencies are uniquely positioned because of their large number of clients. We have to help them capitalize on their leverage through self-booking tools and the data consolidation,” Spradling says. “That’s the big opportunity.”

||**||High stakes|~||~||~|Forrester’s Harteveldt says the stakes are high, even though online sales of trips and airline tickets account for only a sliver of the U.S. travel industry. He says it’s a conservative prediction that about 6% of the $203.3 billion spent in the United States for leisure travel this year, including airline tickets, cruises, vacation packages, lodging, and rental cars, will be bought online, totalling about $12.3 billion. Next year, says Harteveldt, leisure travellers will spend about $17 billion online, or roughly 8.1% of an anticipated $209.4 billion total market.

Entrepreneur Gregg Bleakney represents both the promise and the problems facing online travel agents trying to grab a piece of this spending. The president and CEO of the startup WhereNext.com in Portland, Ore., a travel research site aimed at the under 34 year old leisure traveller, says his offline travel rivals usually have some sort of Web presence, but few are pouring much energy into it. WhereNext’s own experience may be part of the reason: The company has yet to turn a profit.

“Most offline travel agents have a sustainable business, and they aren’t worried about their cash reserves like a new Internet company,” Bleakney says. “They can afford to wait and see what happens.”

Or maybe they can’t. Forrester predicts online bookings placed directly on the major airlines’ Web sites, bypassing travel agents, will contribute up to 10% of each carrier’s revenue by the end of the year. The stakes will get higher as buying travel products on the Internet spreads into areas beyond airline tickets to hotels, tours, and other travel services.

Business travellers, meanwhile, are moving online in larger numbers as well: 44% of them will book some travel on the Web this year, Forrester forecasts. Third party competitors are again taking the lead here. Sabre is the market leader with its Business Travel Solutions system, a position solidified this month with its purchase of No. 2 player GetThere.com.

But the biggest agencies are starting to fight back. They are offering tiered pricing, where companies pay one price for tickets that involve human intervention and another, often as much as 30% cheaper, for electronic tickets booked online. World Travel Partners of Atlanta and Sato Travel of Washington, D.C., last year began a new business that offers companies low-priced fulfilment services, including a 24-hour customer service centre, for tickets bought online. This month, American Express Co., the nation’s largest corporate travel agency, followed suit.

||**||E-travel agents' shortcomings|~||~||~|Many corporate travel agents say the technology of online newcomers hasn’t caught up enough to provide the service companies need. Bob Chaiken, chief operating officer of Adelman Travel Group, a corporate travel agency in Milwaukee, says business travelers still generally expect personal service from professionals, while their employers need a managed travel program that can access corporate negotiated rates and provide the kind of customer service to take full advantage of their buying power.

“Using unmanaged public Web sites such as Expedia.com, Travelocity.com, and Priceline.com doesn’t afford businesses and associations the opportunity to get consolidated reporting of their purchasing data. That’s essential to negotiating discount arrangements with suppliers and for monitoring travel to ensure it’s within that company’s travel policies,” says Adelman’s Chaiken. In the past few months, Adelman has rolled out its own online effort, including online reporting and travel management tools and online vacation booking, and it’s developing online meeting and event planning.

Leisure travel agents also are beginning to respond to the Internet threat and move online, says Bernard Frelat, chairman and CEO of the online travel business EuroVacations.com, in White Plains, N.Y., which markets the Eurail passes that thousands of college students use each summer to backpack their way around the continent.
Like the Net itself, EuroVacations.com is both a threat and opportunity to travel agents.

Agents can use EuroVacations.com to book vacations on behalf of clients at a special price and receive commissions. Yet, the site can also fill the role of a human travel agent by letting travellers describe their perfect holiday and then sending them suggestions for places to visit, sleep, and eat.

As the Internet gives people access to resources previously limited to travel professionals, including some computer-reservation systems for airlines, hotels, and car-rental companies, travel agents must concentrate on services that require special expertise, says Joseph Buhler, executive vice president of EuroVacations.com. An agent who specialises in cruises or adventure travel can help would-be travellers weed out information from a Web search that might be redundant, erroneous, or outdated.

“People expect travel agents to have skills that they don’t have themselves, like superior destination knowledge and insider information,” Buhler says. “Agents can play a role as the arbiter of what’s valuable information and what’s just lots of information.”

Frelat emphasizes the potential to communicate differently using e-mail, as well as extending service beyond the normal 9-to-5 workday. Agents can use EuroVacations.com to put together a package and e-mail it to customers much quicker than the old way of mailing a collection of brochures. “It brings together the benefits of the two worlds: the ease of communication of the Web and the power of a travel agent making recommendations,” he says.

||**||Conclusion|~||~||~|Travel agents continue to own the market for foreign travel, cruises, and vacation packages, Forrester’s Harteveldt says, and many agents should meet the threat of online competition by providing the best possible service in these categories. “The Internet is not the end for travel agents but a challenge for them,” Harteveldt says.

Some companies see that opportunity as bigger than the travel industry itself: Maritz, for example, envisions marketing its e-business experience to an audience beyond travel companies through a new Haybridge Technologies division that will create and sell e-commerce and supply-chain management services. Says Spradling, “Travel has been one of a few industries at the leading edge of e-technology, and we have a lot of experience, technology, and logistical expertise.” Maritz now just needs to prove that it, and the entire industry, can stay ahead of the crowd.||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code