What are the risks and opportunities of tourism business in the coming years?
The answer to this question was the subject of a presentation by Angel Garcia Butragueno, vice president of American Express Business Travel, spoke during the “Second Meeting with Industry Leaders” organized by Antonio Lopez de Avila, Director of Executive Master in Business Tourist Enterprise Institute, whom I thank for your invitation to participate in it.
Some of the ideas that Angel Garcia and the number of participants presented during this meeting proved to be particularly interesting.
The business travel market: current situation
The Spanish Corporate Travel market (which includes groups and incentive) reached a transaction volume exceeding 3,200 million dollars and is the 5th in size in Europe after Germany, Britain, France and Russia. It is expected that this market will continue to grow thanks to good economic conditions that are experiencing this country.
The tourism business has become a technology business in which we must be able to handle information quickly increasingly abundant and complex.
In general travel expenditures of enterprises engaged in 75% to the purchase of air tickets, 10% hotels, 10% for groups and incentives and 5% for cars.
The corporate tourists stays generally range between 1 and 2 days, which is a hotel for overnight stays between zero and half a night.
In the last 5 years for the sale of airline tickets commission received by travel agents has dropped 6.95 points. It is expected that soon the commission will zero for this type of sale.
Spending on business travel are rising primarily due to rising fuel prices and high hotel occupancy rates being experienced. For this reason, companies tend to focus their recruitment to increase their bargaining power and lower their costs.
For many travel companies represent the largest cost item after salaries and technologies.
The crisis of the traditional business model of travel agents
Contrary to expectations, the Internet has not yet produced the expected disintermediation in tourism. In Spain the number of travel agencies continues to grow.
According to Ángel García Butragueño this phenomenon can persist only temporarily, as the crisis for independent travel agents is inevitable. So what is the force that will cause this crisis? The answer: technology.
Clearly, online booking service available to Internet users are becoming more comprehensive, varied and easy to use. This makes the traditional services of travel agent bookings lose value.
Trying to compete on price has no future. The travel agent has to stop acting like a “teleoperator” and fully transformed into a travel consultant. The role has to shift from commission agent commission agent supplier’s customer is a sales agent of the supplier to customer purchasing agent.
In this sense, information technologies play a fundamental role: to produce a consultancy service with high added value the agent will need increasingly sophisticated technologies, whose costs will be unsustainable for many.
The agencies also have to specialize because companies prefer those agencies that can provide sufficient strength and reliability. No longer goes “do everything”.
American Express’s strategy here is to help businesses maximize the return on investment in the trip. Do not want to be the cheapest, but those that provide the best value for money in terms of services.
This approach is consistent with the change of mentality of the companies now consider travel as a profitable investment rather than a mere game to manage and minimize costs (as happened in the past).
The new business model
According to Garcia, soon we will see the implementation of zero commission for selling airline tickets. The agents have to go to charge a transaction fee directly to customers.
In the future we will commission / transaction fee to the commission / fee for consulting. But will customers be willing to pay?
If businesses are willing to pay, the agents must be able to:
* To help enterprises optimize management and travel costs.
* Provide an adequate level of supply of service providers.
* Provide an efficient service through the appropriate use of technology.
* Provide quality service at the right price.
Change adaptation and innovation, together with the training of human resources in this context will be critical to success.
Since its launch in April 2007 Expedia.es is offering its customers the service to purchase airline tickets free of charge. Travelprice.com, the white mark of Lastminute.com, in some periods also apply this policy of no fees and always try to charge less transaction fees than other online travel agencies. Priceline.com and AvionExpress.com (belonging to Viajar.com) are other examples of companies that use this type of timely promotion.
It seems clear that the charges for transactions with low value added, as is the case of airline tickets between major cities in the world, is something that tends to disappear in the future. The income of travel agents in the future will depend mainly on the services “as”.
Travel agents need to realize the low value they bring to their customers for certain transactions.
According to Angel, another possible scenario is the variable commission payments by airlines to the agencies. A few days ago I read that Aireuropa, in order to encourage ticket sales of higher value, is considering paying a commission to agencies dynamics, instead of 1% fixed for 2008.
The hotel industry, tourists and business travel agents.
The hotel industry, unlike the airline industry is very fragmented. It is likely therefore that the current commission levels experienced by hotels continue unchanged for the coming years.
For the agents maintain the information and services necessary to provide a valuable service to businesses, hotels information (availability, price, service, etc..) Must be integrated into the systems of the same agents.
In Spain 60% of the corporate market is in the hands of the 4 main groups: Amex, Carlson, and Marsans English Court. It is likely that in coming years to grow its market share further.
This implies that those individual hotels can not afford to be part of computer systems and commercial of these groups are very likely to fall outside of this market.
While the goal of agent-consultant will be to offer your client the best solution in terms of money, the running time of this operation must be minimized so that this service can be profitable.
To be effective agents will then see the options of their own system. The hotels that appear on the screen, depending on your criteria, are those which propose to their customers. The agent will then offer the best under a bond of time / productivity, always more important to the profitability of your business.
The hotels belonging to major chains in this context will be advantaged. By contrast, independent hotels have to develop other marketing strategies to attract those tourists who are organizing business trips independently.
The search service hotels that provide travel agents will also depend on the agreements that companies have with the hotel chains.
In the case of contracted rates between companies and hotels, travel agents from American Express process the transaction as quickly as possible because, in this case, everything will be fixed and linked. This operation will then be a transaction with little added value.
Sevices low-cost business and tourism
The entry of low-cost airlines in the business market has covered a market gap that traditional companies were not attending.
According to Garcia ’s low-cost airlines are serving well to companies who want to travel to destinations that their side but market penetration is likely to grow slightly in coming years due mainly to limited and sometimes nonexistent, differences in prices with the companies traditional, such as Iberia, if purchase in advance.
Significantly, according to a study by Accenture, the tourist business in the U.S. after having set a trend towards services for hotels and low-cost in recent years, are now returning to traditional companies in search of better services and guarantees ( such as punctuality in the case of flights). It is possible that this phenomenon is present also in Europe.
Travel agents must take into account the 2 types of carriers when advising their clients, still the best solution for companies to find the optimal combination of use of the 2 services.
Similarly, the new travel agents also have to offer its customers an optimal combination of using low-cost hotels and traditional hotels.
Future scenarios and service autoreserva
Travel agents will stop using their traditional inplants, which will replace the outsourcing of their service to call centers and online services on their websites.
The strategy for success begins with customer knowledge and technologies today allow us to know all data, customer preferences and needs without requiring a dedicated Implants to a number of accounts.
In addition, the website of the agencies that will enable business customers to directly manage those services with low added value “transactions commodity.
Then be developed autoreserva services for travel agents can devote their time to value transactions, and limit your involvement in the most basic and common transactions.
Customers will then be able to develop standard transactions for its own account in the Web environment from the agency or through automated telephone services.
Therefore, although the technologies play a fundamental role for travel agents tourism oriented business, savings and management control are the other pillars are essential for success.