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Analysis: Can Travel Agents Compete Against Online Tour Sellers?June 11, 2009 By: George Dooley
A new study is putting pressure on travel agents to step up their offerings and adapt in order to compete with online venders.
The American Society of Travel Agents, along with the United States Tour Operators Association and the National Tour Association are justifiably earning praise for their work and sponsorship on the newly released landmark study, the U.S. Packaged Travel Landscape 2006-2010. The study offers real insights into a market critical to travel agents and tour operators.
This should be a wakeup call for travel agents and tour operators. Online travel agents, or OTAs, such as Expedia, Travelocity and Orbitz, have gained ground in tour sales, and traditional travel agents and tour operators are going to need to improve their ability to compete. PhoCusWright, the prestigious research firm which surveyed 176 tour operators for this ASTA study, estimates that 69 percent of tour operator sales, or about $8.4 billion, are by agents, while $3.8 billion are consumer direct. The total market is estimated at $18.2 billion.
Justly billed as a landmark survey, the study notes that travel agents are still delivering sales. But PhoCusWright reports strong gains from the OTAs and asks a tough question of both agents and tour operators urging engagement in a new system, not just competition: “Consumers will book online and direct, so will you compete, or will you participate, empower and profit?” The question gains added urgency with PhoCusWright’s estimated steep contraction of 17 percent in 2009 sales – only slightly offset by a forecasted 2 percent gain in 2010.
"Travel agents and tour operators face similar challenges," the study's authors say. "Both are intermediaries and both are getting squeezed by online/direct sales." PhoCusWright notes the competition for tier one sales to destinations such as Las Vegas, Mexico and Florida, suggesting that both agents and tour operators must add real value to the distribution chain to stay relevant. There is a need for differentiation, specialization and agent expertise, the study authors conclude.
The study also found that travel agent-centric packaged tour operators (which produce more than $10 million in sales annually) are relatively unreliant on repeat business. These operators are also far less reliant on seniors than other age groups, with sales distributed more evenly across Baby Boomers, Generation X and Generation Y.
Agent-centric operators are predicting more family, romance and honeymoon travel in the future. The survey notes that 51 percent of sales are by 3 percent of tour operators and 9 percent of sales by 74 percent of tour operators. PhoCusWright tracked groups, escorted and packaged vacations.
The total packaged market of $18.2 billion sees consumers buying 33 percent from online packagers and 67 percent from tour operators with travel agents accounting for 68 percent of the tour operator total, with consumer phone and consumer web sites sales substantially less. OTA packagers have surged – now about 37 percent of the market.
PhoCusWright says tour operators are also eying the direct online sales channel for growth but continue to score agents highly with as many as 34 percent seeing growth in agency sales. Larger package tour operators tend to rely on travel agents while smaller operators tend to sell direct and via tour group leaders, PhoCusWright says.
Packaged travel accounts for 36 percent of the business for the average leisure agent (compared to 28 percent cruises and 29 percent air/car and hotel). For home-based, the breakout is 30 percent of their business in packaged tour/FIT’s compared to 43 percent cruises and 19 percent air/car and hotel. Most tour operators offer multiple package/tour types, PhoCusWright reports: 91 percent offer group travel, the largest category; escorted tours total 79 percent; packages 75 percent; custom itineraries 65 percent and individual component sales 38 percent.
The survey is sure to spark controversy and hopefully offer new recognition of the importance of tour sales and tour operators among travel agents –including home based agents. It may also accelerate investment and implementation in new booking technologies such as Vacation.com’s EZguider and TRAMS Customer Relations Management systems that will help agents expand sales.
Improved direct and emarketing systems will also help – even in a down turn. As well, the ASTA survey will help tour operators grasp the importance of travel agents to them – including the critical role agency marketing groups and host agencies can play in the tour sales equation. A strong productive partnership between agents, tour operators, agency consortia and hosts will include new technologies and approaches to marketing.