Abacus Survey Shows Travel Agents Tackling Change Head On

A large number of travel agencies in the region are considering moving further into corporate travel to reduce the possibility of price wars with other agencies and to increase revenue.

This is one of the findings that emerged from Abacus’ extensive annual survey of travel agents, involving an in-depth telephone survey of 1,533 travel agents in 12 markets between May and September 2006.

Don Birch, President and CEO of Abacus International said the survey provides the Asian travel industry’s best snapshot of the business issues facing travel agents and how they are responding.

“35% of all the travel agents surveyed across all the markets identified the price war among travel agencies as the most critical business issue. This concern was more prevalent among travel agents in the China, Indonesia, Philippines and Taiwan compared to the rest of the markets,” Mr Birch said.

The second most critical business issue, nominated by 26% of the respondents, predominantly those from India, Malaysia, Taiwan and Thailand, was the emergence of Low Cost Carriers and airlines selling tickets directly to the travelling public. Small travel agencies seem to be particularly affected, as this threat was pinpointed more often compared to middle sized and large agents.

The need to increase revenue for the agency was the third most critical issue, nominated by 24% of the respondents especially in Hong Kong, Korea, Philippines, Singapore, Sri Lanka, and Vietnam, while the need to reduce operating costs was rated the most critical issue by just 12% of the respondents.

The survey found that this need to increase revenue varied according to specialisation. Whereas wholesalers were most focused on increasing their revenue, leisure and corporate travel agents are more concerned about price competition.

In response to these issues, the markets seem to differ considerably on their choice of strategy. 

Mr Birch said that many agencies saw a move into corporate travel as a way to avoid the consequences of possible price wars with fellow agents in mainstream markets. 

“About 21% of the 461 travel agencies indicated they would focus on the high margin, low volume customers such as corporate markets and segments at the specialised level, when probed on their plans to manage the competition,” Mr Birch said.

But while agencies in China, Hong Kong, India, Singapore, Sri Lanka and Taiwan are more likely to take this direction, Vietnam did not find this strategy applicable to its market.

“The next most popular strategies were the development of loyalty programs to retain customers (18%) and to explore partnerships with other agencies to expand the product offering (14%),” Mr Birch said.

The loyalty programme approach is more favourably received by China, Hong Kong, Philippines, Singapore, Sri Lanka, Taiwan and Thailand, while the agency partnership approach was more popular with China, Indonesia, Korea, Taiwan, Thailand and Vietnam.

Alternative strategies to manage competition include focussing on low margin, high volume customers such as groups (13%), increasing expenditure on advertising and travel fairs (11%), diversifying into other travel related businesses such as event management (10%), or even opening more branches to increase customer reach (7%).

Interestingly, most small travel agents plan to manage competition by implementing loyalty programmes to retain customers (20%), while medium sized agents focus more on group travel (18%) as well as loyalty programmes (24%). Large agents are mostly planning to concentrate on corporate markets and specialized travel (31%).

Responding to the rise of LCCs and airlines selling direct to the travelling public, agency strategies included bundling non-air packages with LCCs content to create margin (21%), bundling non-air packages with published fares (20%), offering more non-air products like hotels, cars, cruises, rail, travel insurance, etc. (20%), and charging service fees when booking web fares for travelers (19%). Again, preferences across the individual markets differ considerably. For example, 67% of the Vietnamese respondents prefer to bundle non-air packages with LCCs content, while about half the number of Chinese travel agents opt to bundle non-air packages with published fares instead.

When polled on travel agencies’ strategy to reduce operating cost, few agencies find a reduction in staff size appropriate (3%). Instead, about 36% of the respondents plan to increase staff productivity through training, particularly in China, Indonesia, Taiwan, Thailand and Vietnam, while 27% will deploy technology at the back office support functions to reduce operating costs, particularly in Hong Kong, Malaysia, Philippines, Singapore and Sri Lanka. Additionally, 18% of agents want to encourage both business and leisure customers to engage in online transactions. This strategy seems to be particularly popular for large travel agents.

In an attempt to increase revenue, the majority of travel agents (29%), specifically those in Indonesia, China, Singapore, Hong Kong, Philippines and Sri Lanka, aim to move their main focus onto corporate segments. In contrast, Vietnam and Korea aim to concentrate on leisure segments, a strategy preferred by about 18% of a total of 277 travel agents questioned.

Other revenue increasing approaches include maximising supplier override incentives (17%), as well as selling more other non-air content such as cars, cruises, rail and travel insurance (12%).

“The survey shows that the travel industry is continually changing but remains highly complex and localised. While there are global trends, the survey shows us that local conditions vary, requiring different approaches in different markets” Mr Birch said.

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