Travel
Agents Haven't Proven They Can Beat The Internet
Threat
By Candee Wilde and Cheryl
Rosen
11-14-00
InformationWeek.com
As the nation's sixth-largest business
travel agency, Maritz Travel knows better than to
argue with the customer. So when corporate clients
started showing an interest in booking travel online,
Maritz sought a way to turn this potential threat to
its advantage.
The company is now building a new
business model--as a technology and E-commerce
consulting firm--in addition to its traditional
travel-booking, meeting-planning, and corporate
incentive-travel businesses.
Maritz Travel has helped over 200
customers develop corporate meeting Web sites on which
attendees can register, pick sessions, and book their
travel. It has also guided 25 corporate customers
through the process of choosing and installing
corporate travel-booking systems.
While the agency is giving up some
revenue on customers' self-booked trips, Richard
Spradling, Maritz VP of IT, says the competition from
E-commerce sites is forcing the company to focus on
areas where a travel agent's skill is needed.
"It's an alternate distribution channel that
relieves us from the simple trips to which we don't
add much value," Spradling says. "In a tough
job market, where finding trained agents is difficult,
it's an opportunity for us to focus our resources on
transactions that add value and provide real
revenue."
But Maritz's warm embrace of the Web
is far from a rule among travel agents of any size.
The travel industry was marked early on as a prime
target for Web revolution, but has so far seen mixed
results. While startups flood in, some large travel
agents have only cautiously dabbled in online sales.
More people are buying airline
tickets online, but travel agents, the traditional
middlemen who sold 85% of all airline tickets, have
been latecomers online--and have seen their market
share erode. Independent sites such as Sabre's
Travelocity, Microsoft's Expedia, and Priceline.com
have taken the top spots, followed by airline sites
such as United.com and Southwest.com. Sites from
airline consortia loom as a potential threat, though
they have yet to get going. The launch of Orbitz.com,
founded by five top airlines, has been delayed until
next June, while another, Hotwire.com, just opened in
October in Priceline.com's market of taking bids to
sell surplus tickets.
Meanwhile, conventional travel agents have seen the
commissions they receive from airlines fall from 10%
to about half that, and many remain cautious about
embracing a Web model that could minimize their role.
Also, whether online or offline, travelers have become
increasingly demanding and are equipped with more
Internet information and more ways to buy.
"The big challenge for travel
agencies in the Internet era is to prove to customers
how much they add value," says Forrester Research
analyst Henry Harteveldt. "The challenge for
Internet travel businesses is to prove to customers
how they make things easier and save them money."
Business customers also are getting
more choices for bringing travel bookings in-house. In
late October, the auditing and consulting firm
PricewaterhouseCoopers became the largest travel buyer
to take advantage of a program run by the Airlines
Reporting Corp., the airline group that certifies
travel agents that lets companies book travel direct
with airlines. PricewaterhouseCoopers' annual travel
budget of $580 million makes it the country's No. 2
travel buyer, behind IBM. The idea of an in-house
travel agent runs counter to the companies movement
toward outsourcing and sticking to core competencies,
but some companies believe keeping road warriors
efficient and happy can be a critical business
advantage. Fifty-seven companies had signed up for the
corporate travel agent status by the end of October,
and another 60 companies are expected to be certified
by year's end.
"The jury is still out on
whether it will be cheaper in the long run than just
using a travel agency, unless you also move your
purchasing online and cut the number of calls to human
agents," says Carol Salcito, president of travel
consulting firm Management Alternatives.
Maritz felt it had no time to lose
finding a niche that depended much less on airline
commissions. It decided that the agency needed to
become less an order-taker and more of a consultant
and to change its revenue model to put less emphasis
on airline commissions.
The company now charges fees to
business customers for automated assessment tools that
help them calculate their likelihood of success with
online booking. Its consulting business helps
companies develop, issue, and evaluate requests for
proposals to link to business-to-business travel
exchanges, such as Sabre BTS and Oracle E-Travel, to
implement systems and train employees to use them.
Maritz also offers full-time help-desk support and
assistance in putting together incentive programs to
reward travelers for booking online.
Spradling says the Internet has
created a power shift in the travel industry: away
from suppliers of travel and toward the travelers
themselves. This forces travel agencies to ditch the
existing culture and think of themselves as
professional service firms with the goal of helping
travelers harness the power flowing from greater
information.
"Travel agencies are uniquely
positioned because of their large number of clients.
We have to help them capitalize on their leverage
through self-booking tools and the data
consolidation," Spradling says. "That's the
big opportunity."
Forrester's Harteveldt says the
stakes are high, even though online sales of trips and
airline tickets account for only a sliver of the U.S.
travel industry. He says it's a conservative
prediction that about 6% of the $203.3 billion spent
in the United States for leisure travel this year,
including airline tickets, cruises, vacation packages,
lodging, and rental cars, will be bought online,
totaling about $12.3 billion. Next year, says
Harteveldt, leisure travelers will spend about $17
billion online, or roughly 8.1% of an anticipated
$209.4 billion total market.
Entrepreneur Gregg Bleakney
represents both the promise and the problems facing
online travel agents trying to grab a piece of this
spending. The president and CEO of the startup
WhereNext.com in Portland, Ore., a travel-research
site aimed at the under-34-year-old leisure traveler,
says his offline travel rivals usually have some sort
of Web presence, but few are pouring much energy into
it. WhereNext's own experience may be part of the
reason: The company has yet to turn a profit.
"Most offline travel agents
have a sustainable business, and they aren't worried
about their cash reserves like a new Internet
company," Bleakney says. "They can afford to
wait and see what happens."
Or maybe they can't. Forrester
predicts online bookings placed directly on the major
airlines' Web sites, bypassing travel agents, will
contribute up to 10% of each carrier's revenue by the
end of the year. The stakes will get higher as buying
travel products on the Internet spreads into areas
beyond airline tickets to hotels, tours, and other
travel services.
Business travelers, meanwhile, are
moving online in larger numbers as well--44% of them
will book some travel on the Web this year, Forrester
forecasts. Third-party competitors are again taking
the lead here. Sabre is the market leader with its
Business Travel Solutions system, a position
solidified this month with its purchase of No. 2
player GetThere.com.
But the biggest agencies are
starting to fight back. They are offering tiered
pricing, where companies pay one price for tickets
that involve human intervention and another, often as
much as 30% cheaper, for electronic tickets booked
online. World Travel Partners of Atlanta and Sato
Travel of Washington, D.C., last year began a new
business that offers companies low-priced fulfillment
services, including a 24-hour customer service center,
for tickets bought online. This month, American
Express Co., the nation's largest corporate travel
agency, followed suit.
Many corporate travel agents say the
technology of online newcomers hasn't caught up enough
to provide the service companies need. Bob Chaiken,
chief operating officer of Adelman Travel Group, a
corporate travel agency in Milwaukee, says business
travelers still generally expect personal service from
professionals, while their employers need a managed
travel program that can access corporate negotiated
rates and provide the kind of customer service to take
full advantage of their buying power. "Using
unmanaged public Web sites such as Expedia .com,
Travelocity.com, and Priceline.com doesn't afford
businesses and associations the opportunity to get
consolidated reporting of their purchasing data.
That's essential to negotiating discount arrangements
with suppliers and for monitoring travel to ensure
it's within that company's travel policies," says
Adelman's Chaiken.
In the past few months, Adelman has
rolled out its own online effort, including online
reporting and travel management tools and online
vacation-booking, and it's developing online meeting
and event planning.
Leisure travel agents also are
beginning to respond to the Internet threat and move
online, says Bernard Frelat, chairman and CEO of the
online travel business EuroVacations.com, in White
Plains, N.Y., which markets the Eurail passes that
thousands of college students use each summer to
backpack their way around the continent.
Like the Net itself,
EuroVacations.com is both a threat and opportunity to
travel agents. Agents can use EuroVacations.com to
book vacations on behalf of clients at a special price
and receive commissions. Yet, the site can also fill
the role of a human travel agent by letting travelers
describe their perfect holiday and then sending them
suggestions for places to visit, sleep, and eat.
As the Internet gives people access to resources
previously limited to travel professionals, including
some computer-reservation systems for airlines,
hotels, and car-rental companies, travel agents must
concentrate on services that require special
expertise, says Joseph Buhler, executive VP of
EuroVacations.com. An agent who specializes in cruises
or adventure travel can help would-be travelers weed
out information from a Web search that might be
redundant, erroneous, or outdated. "People expect
travel agents to have skills that they don't have
themselves, like superior destination knowledge and
insider information," Buhler says. "Agents
can play a role as the arbiter of what's valuable
information and what's just lots of information."
Frelat emphasizes the potential to
communicate differently using E-mail, as well as
extending service beyond the normal 9-to-5 workday.
Agents can use EuroVacations.com to put together a
package and E-mail it to customers much quicker than
the old way of mailing a collection of brochures.
"It brings together the benefits of the two
worlds--the ease of communication of the Web and the
power of a travel agent making recommendations,"
he says.
Travel agents continue to own the
market for foreign travel, cruises, and vacation
packages, Forrester's Harteveldt says, and many agents
should meet the threat of online competition by
providing the best possible service in these
categories. "The Internet is not the end for
travel agent but a challenge for them,"
Harteveldt says.
Some companies see that opportunity
as bigger than the travel industry itself: Maritz, for
example, envisions marketing its E-business experience
to an audience beyond travel companies through a new
Haybridge Technologies division that will create and
sell E-commerce and supply-chain management services.
Says Spradling, "Travel has been one of a few
industries at the leading edge of E-technology, and we
have a lot of experience, technology, and logistical
expertise." Maritz now just needs to prove that
it--and the entire industry--can stay ahead of the
crowd.
Related Links:
Travel's
Long Journey To The Web (10/30/00)
VAR Business: Putting
the Pinch on Priceline.com(9/4/00)
Sabre
Thinks Big For Booking And Reporting System
(10/16/00)
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