Traditional Travel Agents vs Online Travel Agents Essay

The conditions of the global travel agency industry have significantly changed over recent years, mainly because of the development of the new technologies, electronic commerce and the major changes in tourism consumer behaviour. Increasingly, people are booking their travel over the Internet, directly from the suppliers or on electronic retailer’s websites affecting traditional travel agencies on the high street. Further, the market starts to show signs of overload because of the high competition.

Due to all of these factors, the industry is in an uncertain situation and high street travel agencies are worrying not only about how to secure their profits, but in many cases of how to survive. How can they gain competitive advantage over the travel suppliers who once used to be their partners, and who are now trying to cut them out of the distribution chain? Some sources predict that the end is in sight for the traditional travel agencies because of the competition with their online rivals. However, other sources report that consumers are slowly turning back to high street travel agents seeking a human touch.

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ABTA (2012) reveal that “consumers value the help of a human being and the reassurance of dealing with someone face-to-face”. In order to deal effectively with this problem of disintermediation, the topic has been researched with the purpose of investigating the future situation concerning high street travel agents. Main body/ discussion According to the latest figures from ABTA (2012) consumers are turning back to the high street travel agents. Its latest Consumer Travel Trends Survey has found a significant jump in bookings through agents over the last three years.

It has also recorded a drop in consumers booking holidays direct with airlines and hotels. This shift has been explained by confusion about the overload of choice on the internet and increasing concerns among consumers about being properly protected when travelling. According to Travelmole (2012) report the percentage of people booking a foreign holiday through a high street travel agent has grown from 17% in 2010, to 25% in 2011 and 27% in 2012. While, the number of consumers booking independently organised holidays has fallen from 43% in 2011 to 27% in 2012.

Surprisingly, the younger generation of consumers seem to be the biggest fans, with 45% of 15-24 year olds value the services of a travel agent, up from 30% in 2011. Mintel’s (2012) research shows that the older people get, the more enjoyable they find the whole planning/booking process and the more content they become with their holiday. Younger travellers, though, are more accepting to advice and guidance. For travel agents who can engage with under-35s, there may be not only short-term opportunities but long-term gains as they age and their travel needs change.

According to Page (2003) “Travel agencies are service companies which consists of meeting traveller ?s needs and expectations related to travels within the tourism market. Travel agents act as intermediaries between travel consumers and tourism suppliers and destinations. ” The 3 main functions of retail travel agents can be described as: Carrying out a mediating function between tourism suppliers and customers acting as a middlemen on behalf of the consumers and making arrangements with tourism suppliers, such as hotels, airlines, tour operators, car rentals, etc. and been paid a commission from these suppliers. The travel agents carries no stocks and the financial risk is low because they do not purchase products themselves, they receive a commission for each sale. ” (Page S. and Connell J. ) Retail travel agencies mainly sell prepared package tours from tour operators. However they can also carry out a producing function – designing and organising tourism products generated by the combination of different services and prepare individual itineraries driven by the demand, so called tailor-made products, where they can arrange accommodation, meals, sightseeing, transfers etc.

Nowadays the most important function of travel agencies is considered to be the advisory function. Which is “informing and advising consumers about the specifics of destinations, the available services, the suppliers and the available travel alternatives in order to help them to choose the most suitable option considering their needs and expectations” Buhalis (2003) Although the holidays arranged in travel agency branches accounted for an impressive 17 million bookings last year, the number has dropped by 16% from 2007 to 2011 according to Mintel (2011).

It’s harder for many people to find a local travel branch nowadays as companies continue to merge, the number of branches run by the big name companies are rising (e. g. TUI, Thomas Cook). And many branches have relocated to out-of-town retail parks – First Choice have done this a lot. Page (2003) points out a transition within tourism retailing from “old” to “new” forms of tourism. According to him, the “old” tourism, as well described as mass tourism, was driven by inexperienced and predictable travellers, who demanded homogenous tourism products.

Due to this, the star product was mass-produced packages. This “old” tourism was very much supply driven. However, within the “new” tourism, which concerns the current situation, the travellers are more experienced and sophisticated, they seek memorable experiences instead of a repetition. This “new” tourism is driven by the demand, because the tourists define what they want. Due to this fact, importance of package tours will decline in favour of independently organised travels.

Customers look at travel agents as a source of information and advice, and perceive them as experts on tourism products. However, often the reality is different. Unfortunately due to the low salaries, the young age profile of travel agents, and the wide range of available products, travel agents are far from being experts. The study by Mintel found that “fewer than one in ten customers now believe that travel agents are better informed about holiday destinations than professional bloggers or review websites, such as TripAdvisor. “

Page (2003) suggests that high street travel agents should compete against the disintermediation ( cutting out the middleman) threat by increasing specialist knowledge and provide relative advice. Therefore he proposes the specialisation as the best strategy in order safeguard their position in the future. Author argues that when travel agencies try to offer a broad range of products, their profitability tends to decline, whereas the specialisation allows travel agents to focus on a limited range of wholesalers, develop product knowledge, tailor the products to the markets that they serve, and recognise their own limitations.

According to the ABTA travel report (2012) many travel companies have increased their offerings in specialist holidays, recognising the value they can bring by using their knowledge and experience to create highly tailored and personalised experiences. The main fields on which travel agencies specialise according to ABTA report (2011)are: beach holidays, cruises, mini-gaps, spa breaks, learning/adventure trips, honeymoons, luxury travels, family travel packages. Internet and economic commerce

Buhalis (2003)stresses that “electronic commerce has been an indication of the beginning of a new global economy in which everybody is interconnected and competing on a worldwide scale. This global competition is given because of the transparency in offers and prices. ” Online travel agencies have appeared in form of Internet intermediaries. They have taken advantage from the fact that a travel is an information-based and intangible product and have developed electronic platforms, which allow direct information exchange and transactions between suppliers and customers. (e. g.

Expedia, Travelocy, Lastminute, etc. ) Moreover, the internet allows access to up-to-the-minute information, independent of place and time, it has provided access to all information required for purchasing tourism products and has changed the role of tourism intermediaries. Mintel (2012) research shows that 66 per cent of Britons choose to book through an online travel agent, online tour operator or an online price comparison website. Buhalis (2003) admits “If agents are to survive, technology will have to become an essential tool in the future business strategy determining their competitiveness.

In this sense, technology is both a threat and an opportunity, as travel agencies need to readjust to the new realities. ” Furthermore, technology continues to integrate itself into consumers daily lives, with new developments such as smartphones and Internet-enabled tablets people are constantly connected. Although mobile travel is still considered to be in early stage of development, Mintel’s (2012) consumer research continues to show this as a marginal channel for holiday planning and booking, compared to desktop/laptop internet use. However, this is a rapidly changing.

Between April 2011 and January 2012, the proportion of UK web users aged 16-64 with smartphones rose from 36% to 56% and those with tablet computers almost quadrupled from 5% to 19%. Rising tablet usage, on the other hand, may offer greater possibilities, with the possibility of new applications combining rich, personalised multimedia travel content with booking tools. Holidaymakers will also increasingly take their tablets away with them, offering opportunities for tour operators to offer ‘virtual rep’ services at the destination, or creating new opportunities for local information tools for independent travellers.

This way both tourism suppliers and destinations have massive potential to track, interact and better inform travellers, providing them with more focused information and more precisely targeted offers. Businesses that recognise this trend, and can figure out how to exploit it successfully, will gain significant advantage over their competitors. Conclusion However, both Buhalis and Page think that the core of the problem is not the disintermediation threat because the Internet not only has brought opportunities for tour operators and other suppliers, as well for travel agencies.

They think that the core of the problem of traditional travel agencies is that most of them endanger their competitiveness by ignoring the technological developments and the new industry challenges and are hesitant to take advantages of the emerging technological advances. At present, travel agencies are in a transitional stage. They are facing the new challenges which have forced travel agencies to redesign their business model, develop new value propositions and change their role in order to protect their position.

High street agents should adapt to the new trends, offer high standards of customer service, become knowledgeable advisers and boost the distribution through the different channel that are emerging in order to add value to the tourism products and fulfil the customers expectations. The challenge for high street agents is therefore to offer value added to the process and meet the expectations of a more knowledgeable traveller, which has become more demanding.

In order to achieve this the recruitment of skilled personnel and the training of travel agents are crucial. Furthermore, travel agencies should show a high power of reconversion and redesign their functions with the tools that the Information and Communication Technologies development has provided them with, and still maintain their traditional off-line presence as well, the different market segments will use different distribution channels for selecting and purchasing their tourism products according to their specific needs.

Only travel agents who develop new value propositions and provide value added to the tourism products will survive, otherwise customers will continue booking through the Internet and travel agencies will gradually lose market share.