Tourism Industry: Travel Agencies

The Future of Travel Agents

The revolution came briskly and unexpectedly for the German travel industry: in 2004, Lufthansa introduced a new remuneration model of “zero provision”. It replaced the decade-old practice of paying fees as a percentage for every ticket sold. From that time on, ticket prices were given net, forcing the travel agency to impose their own charges onto the customer’s ticket bill in order to create value.

In times of modern technology and direct sales channels such as the internet, provisions from airline tickets constituted a major pillar of a travel agency’s calculation. Lufthansa’s move, which was followed by most other airlines, triggered a profound change process within the industry: travel agencies have to newly position themselves on the market, thereby re-defining their value creation to the customer and generating adequate income for their services.

But this is not the sole challenge that travel agents face. Information is ever more freely available, be it about destinations, hotels, airlines, services and also the associated costs for tourism products. Price comparisons can be easily made by some clicks on the internet, turning travel arrangements into a highly transparent good. Does that mean that the support of an agent to find suitable and well-priced voyages is no longer needed?

While this might hold true for certain straightforward products like low-cost carriers flying from A to B, others are not that easy to compare. As essential components of a holiday or leisure trip, how would one measure the degree of service quality, friendliness, assistance in case of malfunctioning or accommodating behaviour? And in what proportion stands their relative importance compared to the possible additional costs?

Today’s world is characterised by a seemingly overwhelming choice. Deciding on a holiday destination on an ever growing global market turns into a highly complex challenge. This holds especially true for members of the middle and upper social classes. While their available money makes them afford an almost infinite number of destinations, their limited time does not enable them to chose carefully. Those people increasingly want to rely on the services of a professional to filter all available information and to be presented with a limited number of alternatives. And this is where the strength of a travel agency has to come in.

Research of future lifestyle patterns indicate that the working population will have less and less time available for leisure activities. As a consequence, they are hardly inclined to waste it with “unpaid work time” such as the gathering of information, comparing the offers and finding the best solution. Instead, their preference will go into another direction: they want other people to do it for them. And this change in behaviour re-defines the role of the traditional travel agent: he has to become a travel consultant for his customers.

In a first step, a future travel consultant has to strategically assess his/her own positioning with respect to service range, products and target customers:

• Disassociation against no-service products (e.g. cheap flights, low-budget hotels, train services).
• Concentration on consulting-intensive products (e.g. sea cruises, individual travel arrangements, niche products).
• Specialisation on certain product ranges (e.g. countries or regions, health tourism, adventure tours).
• Focus on individual target groups (e.g. young people, families, mid-age, senior citizens, business travel).

As a result, the travel consultant will create an individual business mix that puts him into a unique market position. In order to establish a competitive advantage, he will need to focus strongly on the consulting part of his work and to strengthen his respective competences. Apart from the technical knowledge, this includes social skills, empathy, selling techniques and continuous training. The professional usage of modern technologies as well as of customer relationship management tools needs to be a matter of course. And each customer must be treated individually in order to reach the ultimate objective: gain and retain a satisfied clientele that secures the turnover and the profit.

But even with regard to the active internet users that like to look themselves, not all hope is lost for the travel agencies: the hesitancy to book online is still widely spread. A recent market study by Jupiter Research shows that German online users mainly draw on the internet to compare products and prices, to closely examine the offers and to arrange individual schedules. But before sealing the deal, some 35% still rely on the agency counter in search of the best price, and another 31% seek additional personal advice from a professional. This leaves the travel agent in a new position: he faces a highly informed customer that seeks additional value from him.

A good travel agent is not deterred by this expectancy. In addition to freely available information, he knows how to use the advantage of his personal knowledge. Not only is he highly familiar with the destination and the accommodation options, he has also visited the locations himself and can deliver first-hand experience. And he has had other clients that came back highly satisfied from the same place. By giving tips and referring to local secrets or hidden gems, the agent finally comes around to do what serves best: to convey emotion, enthusiasm, conviction, confidence and excited anticipation with regard to the chosen travel destination.

And this is the essential step to creating satisfied customers that will keep coming back for their upcoming holiday bookings. So maybe, after all, the seemingly destructive change of business conduct by Lufthansa has paved the way towards a promising future for an entire industry.

Andreas Hauser