The changing face of the travel agency business

This is a viewpoint from Brendan Iglehart, founder of altSTATES.

Online travel agents (OTAs) have nearly obliterated the travel agency industry that was once responsible for booking tickets and hotels.

Or so you may have thought.

According to Statista, the travel agency business is booming with the industry expected to rake in nearly $17.3 billion dollars in revenue by 2020; up from 12.2 billion in 2010.

A major chunk of revenue continues to come from commissions and service fees. But the source of these commissions has been changing over the years. When airlines stopped paying high commissions back in the 1990s, travel agents started to lean heavily on add-on services such as hotel and transport for commissions.

With services such as Airbnb and Uber now available in almost every major city, commissions from these services too are likely to dwindle in future.

At present, travel agents depend on two categories of travelers for their revenue. A good number of corporate business travelers still rely on partner agencies for their tickets. In the consumer segment, holiday packages and custom itinerary planning services have been taking off with an increase in international holidaying. The drop in commissions is mostly made up for by the corresponding rise in the scale and value of such bookings.

This is however not a long-term fix. A number of startup online itinerary planning services are already making a mark and a number of OTAs today offer holiday packages on their websites.

The travel agency industry is already in consolidation mode with larger players constantly acquiring smaller and niche TAs to increase market share. The future of the travel agent depends on innovation.

Adding value

Over the past three decades, the business model of the travel agent has merely been to identify and focus on channels that have not been disrupted by new tech. When airline commissions disappeared, agents moved to taxi and hotel booking, and when they got disrupted, they set their eyes on package tours. But this is not likely to last long.

One of the best ways to survive disruption is by reinventing your model and adding value. The average traveler is beset with a number of problems – finding the right hotel, getting plugged in with internet in a new country, currency exchange, landing at a tourist spot in the wrong/crowded season, and so on.

While there are online startups that address each of these many issues, the average traveler doesn’t recognize the need for these services until they are too late.

A travel agent may however bring together all these different services under one roof. A tour package that includes all these value-added services to clients is likely to retain and grow their business.

TAs may also look at expanding their offering to include exotic and unexplored holiday destinations that are not part of the average holiday experience today. The idea is to create value that a traveler does not get with traditional OTAs and market that offering.

The challenge here, however, is that if there is business potential to something, competition swoops in. Adding new value to your offering thus needs to be a continuous process.

Consulting

Travel agents get access to thousands of data points that a regular traveler is not exposed to. This provides them with a unique perspective on traveling. Add to this, the ability to mine thousands or even millions of flight and travel related data, the agent can provide unique insights to travelers.

One app based startup, for instance, advises its users on the average wait time at each of the many attractions at destinations like Walt Disney World. The startup then uses this information to optimize the schedule for its users. As a travel agent, you may offer paid consultations on similar insights to your clients. Such data driven insights could help travelers know the optimal travel plan for their vacation, places to avoid, and also the best hotel to stay while on a holiday.

There are two challenges here for a travel consultant. Firstly, most agents cater to passengers outbound from their city to other parts of the country or the world. It may not be realistic for an agent to keep tab of insights from across the world. Secondly, travel agents house thousands of local data points that do not come in handy with a bulk of their clients who are outbound.

A lot of modern travel agents are being equipped with tech systems that can consolidate insights from around the world. This makes it easy for the agent to consult their clients on questions specific to particular destinations or travel routes.

More importantly, TA partnerships are emerging as one of the most effective ways to keep the industry alive. A growing number of travel agents today partner with fellow agents from other parts of the world to share and service each other. For instance, an agent from Chicago may tie up with agents located in cities like Mexico City, Tokyo or Beijing. Often times, cheap domestic flights and trains in these places may not be accessible or known to agents from other parts of the world. Having a local partner book for you can thus be more value-adding.

Another aspect of this partnership is data sharing. Consolidated data points from hundreds of travel agents could help each of these businesses derive meaningful insights that could help agents with their consulting.

The future is tech

In all likelihood, the travel agent business is not going away anytime soon. But agents who fail to update themselves with modern tech may see their business fade away. The future of the travel agency business lies with providing value that technology cannot offer by itself. Consulting and value addition are areas that are likely to grow over the next decade.

Related reading:

Travel agents take note – some things haven’t changed…

Photo by John Matychuk on Unsplash

Opinions and views expressed by all guest contributors do not necessarily reflect those of tnooz, its writers, or its partners.

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Viewpoints

About the Writer :: Viewpoints

A founding principle of tnooz was a diversity of viewpoints from across the spectrum. Viewpoints are articles by guest contributors from around the travel and hospitality industries. The views expressed are those of the author. and do not necessarily reflect those of the author's employer, or tnooz and its partners.

 

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