Caught In Interesting Times

Hotels tell Bhisham Mansukhani that travel agents are relevant but they need to evolve to stay in the game.

Travel agents have been a harried lot in recent times. Airlines have trimmed commissions in a staggered and irreversible trend since 2001 contracting it to five per cent and openly warning them of taking it to zilch, while the Internet has begun to win away a lot of their clientele.

The overt reality that the travel agent, in essence, owns nothing but service has come home to roost rather rudely as their more reliable principals - the hotels - have been running in with them on contracted rates in times of overwhelming demand and dealing directly with opulent corporate cliques. Suddenly, the travel agent appears to have his back to the wall with all his once-reliable streams of income becoming uncertain. Or perhaps its merely a dose of Armageddon-like exaggeration.

The answer could be found in what hotels actually expect from their travel agents in so much as the working relationship and the opportunities and challenges that they face as 'partners in trade'.

With, Not Without

CeeBros CEO Geoff Magee, who is busy expanding his Chennai-based hotel company with homegrown brand Raintree, says the travel agent is extremely relevant to hotels in present times. "Travel agents are akin to the extension of the sales and marketing effort of the hotels. We see them as individuals who penetrate a market that most conventional sales and marketing staff cannot. They are also more personalised and have built relationships with clients that a formal organisation like a hotel may find tedious. Even though occupancies are high at this point, hotels need to continue recognising the travel agent as, in the long term, he continues to play a vital role in selling the hotel's inventory."

Airlines' Loss, Hotels' Gain?

Travel agencies were in crisis because they had not developed an alternative stream of income to replace the fast drying airline commission, indeed, since Singapore Airlines introduced zero commission in 1999. Then they started to look at other streams of revenue, when they found an able ally, the hotels.

But with time, the hotels have been decidedly circumspect about their views on the necessity for further evolution of the travel agent's business model and how that will impact them in turn. They are on the same page on two interesting and correlating realities however - that the hotels do consider the travel agent to be integral to their business in the long term but also that this fact cannot be taken for granted.

Travel agents are an extension of the hotels selling arm. With their reach and clientele, they can manage to access markets that may or may not be accessible by the hotel sales force.

According to a highly placed official from ITC, "Over a period of time, vanilla travel agents found themselves diminishing. Hotels would not want to generally cut the agent out of the equation because they represent them in the field. But some companies cite stronger leverage with direct interaction. Agents represent clients that do not have large volumes and a group of such clients gives these agents the necessary leverage. But single clients are increasingly attracted to the online reservation portals due to Net-based information. This again endangers the agent."

Rattan Keswani, senior vice president of Oberoi Hotels & Resorts, does not find any change in the hotel's relationship with the travel agents. "However, a lot has changed in the past and it completely depends on the travel agent as to what kind of service they are providing. The inbound traveller needs the comfort zone of a larger corporation and once things gets prepackaged on the Net, things might change. The travel agent needs to bring that value together. It is not just about selling a room anymore but about service. For the moment, not too many hotels deal with the wholesaler. The concept of Destination Management Companies (DMC) is in," he said.

The Need Of The Hour - Re-Invent

While DMCs are making inroads, travel agents of a different breed who at some stage were involved with outbound tours, are now becoming PCOs (Professional Conference Organisers). This means that conferences double up as incentives. This is big business and organising the entire specialised package with diverse services is a growing business.

The aforementioned ITC official was of the opinion that travel agents who have reinvented themselves beyond merely booking rooms can survive in the long term. "Companies now realise that they do not need basic requirements but want more done with sophistication and the service charge system is being adopted for the same rather than commissions from principle. But not all of them can negotiate a service fee, only the large international level tour operator and hotels deal accordingly," he said.

Causes of worry loom large in front of the travel agent. And if one has to take lessons from the Internet bubble in which all got caught up with, then travel agents must realise that the airline commission cuts and the low cost carrier boom are among the many issues that will engulf the entire travel industry. Vishnuvardhan Bhatt, a hospitality consultant, said, "Airlines and hotels are going direct and new Internet players are coming into the market. The other day I heard of AOL planning a revolution unseen and unheard of, which will change the way the world books and travels. By the look of it, I was sure that the signs for the travel agents are not good. While hotels and airlines have nothing to worry about as they are currently not relying much on the travel agent considering the high occupancy boom and similar travel graph, the agents are in for big trouble and only big names can survive."

The market is dynamic and unless travel agents as well as the hoteliers are going to be able to reinvent themselves, there will be unprecedented changes. "Between two business providers there will always be a controversy, there will always be a situation when one is over the other. It will then come down to service and deliverables rather than package and price because the customer is paying a price and is looking for value. The agent has to justify his premium with a service. And if in one market there are two players where one is weak as against the other, working together is the sensible solution and create a win-win situation. In any business, some of the targeted revenues will be higher or lower and you have to calculate where the revenue lies, find a market and service the destination better," said Keswani.

Hotels currently do not rely much on their online booking in India. The concept is yet to grow, but a time will definitely come when the Net will take away the option of hotel bookings from the travel agent. "Online booking is not easy but you are in control. With the travel agent, you hand over the control to him and I do not think anyone would want to do that unless there is a fruitful, time-tested relationship," Bhatt said.

Evolve And Invent

Change is unstoppable. Everybody else in the value chain has changed and agencies are not appreciating the new landscape.

To survive, agencies too have to become low cost and look at ways to cut as much costs as possible from their business model. Travel agents can make the difference to their customers if they save their client's time which, in the end, translates to money. And if they can work on their service and knowledge levels to earn their trust and confidence, then the battle is won.

Personal touch is something people are still prepared to pay for; hotels know that, airlines know that. It is time that travel agents know it too and do something about it.