TravelNewsAsia.com

   

 

New Cendant TDS Research reveals impact of Rising Costs and new Technology on Travel Agents in Asia

Travel News Asia 15 December 2005

Cendant Travel Distribution Services (TDS) today announced the results of research undertaken in Asia, to discover how Asian travel agents are reacting to a market being shaped by changing technology, rising costs and an increasingly demanding traveling public.

The research reveals that there is widespread uncertainty about whether travel agents can provide the best price for travel. In Hong Kong 54% of travelers and 40% of Malaysian travelers were unsure about the price competitiveness between traditional travel agents and fares made available online. Possibly reflecting the existence of low cost carrier AirAsia in the Malaysian market, the research found only 37% of Malaysian respondents believed that making online bookings is inconvenient and takes too much time. This is in marked contrast to 48% of respondents in Hong Kong who need assistance from agents when making travel arrangements.

Research was undertaken between December 2004 to May 2005 for Cendant TDS by independent research firm MarketShare who interviewed travelers in Hong Kong and Malaysia, as well as talking to 55 leading travel agencies in China, Taiwan, Philippines, Malaysia, Hong Kong and Singapore.

The research found that most Hong Kong and Malaysian travelers believe that travel agents are extremely efficient (57% and 56% respectively) although many are unable to commit to using travel agents in the future (37% in Hong Kong and 50% in Malaysia).

Our research shows that the role of travel agents is changing from one of pure distribution to advice and consultancy, said Mr Anthony Venus, Executive Director, Marketshare.

The experience in the US and EU should serve as an early warning signal for the industry in Asia. Players in the market need to continue to be responsive and evolve with the changing market environment, Mr Venus added.

While the presence of online bookings is a threat to the traditional travel agent model, Cendant TDSs research found that there is widespread uncertainty about the security and transactional capabilities of internet booking sites. The survey found that:

- 46% of respondents are uncomfortable leaving their credit card details online; 
- 59% are unsure whether they can book travel packages online;
- 65% of respondents are uncertain as to whether they can get instant confirmation on their travel bookings;
- 62% are unsure whether they can make waitlist bookings online; and 
- 59% are unsure of the online capabilities of making multiple bookings.

These findings tend to indicate that travel agent market share remains secure for the moment, however any marketing efforts by online companies to educate customers could tip travelers toward using the internet, particularly if reduced costs offset the diminished service level.

With a large pool of information available to travelers over the internet, customers now have the ability to actively compare prices and product offerings across travel agents. As a result, the reliance on the travel agent as a channel for distribution is reduced unless they are able to provide similar levels of information and advice. The research also concluded that as more consumers move online, it is vital that travel agents can offer an online proposition. Without an online strategy, smaller travel agents will find it even more difficult to compete. Moreover, as low cost carriers make air travel more affordable, consumers have grown increasingly demanding and highly price sensitive, with low fares often negating any sense of loyalty, unless that loyalty is based upon personalized or niche customer service. 

The research examined the major threats currently impacting the travel agent distribution model. One of the major issues is the reduction or removal of commission from airlines to travel agents - travel agents in Asia can look to Singapore, where commissions have been cut to 0%. This is forcing the travel industry to review revenue structures and consider what other revenue opportunities are available to them, for example, service fees or selling content where commissions are still available, such as hotels and destination services. 

Travel agents need to choose the right partner if they are to have access to such content, and this choice of partner could be the difference between being competitive or not. This partner must also be able to provide agents with the technology to improve efficiencies and deliver the content to their customers in the way they want. It is this fusion of content and technology which will define the future success of travel agencies.

These findings imply that the days of travel agents solely selling air tickets as a means of survival are numbered, said Mr. Mark Rizzuto, managing director-Asia, Cendant Travel Distribution Services. Differentiation and product diversification will play a big role in the future of the travel distribution industry. Personalized customer service, specialist travel packages as well as exclusive packages with partners will be advantageous in helping travel agent differentiate their product offerings in the future.

This survey is the second of a series commissioned by Cendant TDS to examine trends in Asias travel industry and the implications for how these trends impact business. The first survey, released in July 2005, detailed the impact of low cost airlines.

Overview of Research Findings

Recent trends in the Asian travel market are directly affecting the key sources of revenue for Global Distribution Systems (GDSs) and travel agents. The major issues for travel agents in Asia are commissions from airlines, sales volume, competition and product diversification. 

The advent of low cost carriers (LCCs) has caused major changes across the entire travel industry. Full service carriers have been forced to reduce costs due to cut-throat competition from LCCs, leading to price and promotion wars, which have come at a time of rising fuel prices and decreasing margins. As a result, full service carriers have slashed their distribution cost by reducing or removing commissions to travel agents and Global Distribution Systems (GDSs) in an effort to cut their bottom-line costs. Airlines across the Asian region are moving at different paces in cutting commissions but are moving towards a zero commission model. Airlines in Singapore have cut commission to 0%. In Hong Kong and Malaysia, airlines are staggering this cut from 7% to 5% and a fall to 0% commission is anticipated.

The cut in commissions to 0% in Singapore raised numerous questions about the relationship between airlines and agents as well as the fate of the agent community at large. Despite the initial controversy, the travel industry eventually worked out an amiable solution with travel agents agreeing to change their fee structure and charge a handling fee to customers. An important part of this step was to make customers understand the need to incorporate a service fee when they use the services of a travel agent. 

Sales volume is another key area of change for travel agents. With commissions falling, travel agents can compensate through receiving incentives provided by consolidators and GDSs. With sufficient volume the payout and leverage places the travel agent at an advantage. Small agents however, without the volume leverage might find it difficult to survive in the long run.

New technology and the introduction of online bookings is a major competitive threat to the traditional travel agent model. Both full service airlines and LCCs are building relationships with their customers directly via online or call center channels, while the capabilities of technology facilitating online search and bookings have also influenced the needs of travelers. Internet-enabled travelers are now able to compare prices and product offerings across travel agents. Travel agents are also no longer simply competing directly with other travel agents. They are competing indirectly with other travel distributors such as online travel agents ZUJI, Travelocity, Expedia, etc.

In this environment, differentiation and product diversification play an even greater role. Customer service is a key differentiator as well as the offer of specialist travel packages, such as spa holidays and religious events. The coming age of zero commissions has forced travel agents to readjust their business strategies to remain competitive. As such there is a need to review the direction of their revenue structure to either niche or volume, diversify products to include car hire and accommodation, adopt technology and redefine their customer service strategy to offer more of a consulting or advisory approach.

Industry players are yet to determine the optimum business model and continue to seek out the best ways to respond to the emerging challenges. The key message from the Cendant Future Distribution Model of Asian Travel Agents research is that every player in the industry airlines, GDSs and travel agents need to embrace change and re-strategize in order to survive and thrive.

See other recent news regarding: Cendant, Research

Subscribe to our Travel Industry News RSS Feed Travel Industry News RSS Feed from TravelNewsAsia.com. To do that in Outlook, right-click the RSS Feeds folder, select Add a New RSS Feed, enter the URL of our RSS Feed which is: https://www.travelnewsasia.com/travelnews.xml and click Add. The feed can also be used to add the headlines to your website or channel via a customisable applet. Have questions? Please read our Travel News FAQ. Thank you.

     

Advertising
Advertising

 
 
Copyright © 1997-2023 TravelNewsAsia.com