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'Specialise, Build Customer Loyalty and Train to Cut Cost of Error'
This was the key message that emerged from a webinar entitled "Selling Travel In a Weak Economy" organised by the International Air Transport Association (IATA) in conjunction with TravelMole last month.
The webinar was hosted by travel commentator Ms Yeoh Siew Hoon and featured four leading travel and tourism industry experts - Mr John Koldowski (Director of PATA's Strategic Intelligence Centre from Thailand), Mr Gary Grieve (Chairman Chartered Institute of Marketing Travel Industry Group from the UK), Ms Adelia Cardido (product manager at IATA Training and Development Institute in Montreal) and Mr A.K. Bhatia (former Deputy Director General in the Ministry of Tourism Government in India).
Harvest customers in a downturn
Sharing business strategies for an uncertain economy, Mr Koldowski said that while in an upturn, businesses could grow customers, in a downturn, they needed to "harvest".
That means grow existing customers, improve service for current customers, squeeze value out of the distribution channels, optimize current IT, add core capabilities and realize savings from efficiency.
He said that "green shoots" were still facing severe headwinds, business confidence was up and some growth was being seen in inbound arrivals for some countries. For example, Chinese Taipei posted a 48.1% increase in arrivals year-on-year in April 2009, due mainly to the commencement of direct flights to and from China.
India and Malaysia were also on the rise while Singapore was also fighting back, due to its aggressive inbound promotions both as a stopover destination and end point for customers.
Regional travel will be a key driver of demand in the short term due to low cost airlines which were expanding at an accelerated rate.
AirAsia, for instance, is forecast to carry 22 million passengers this year, up from the 18.3 million last year.
He also shared the JWT Anxiety Index Quarterly report for spring 2009, where young adults were asked, "What young adults would give up totally if budgets became tight?"
"The last thing they'd give up was Internet connection and just before that, mobile phone." He said that youths have different priorities these days and the industry needed to be mindful of changing customer needs.
Asked what he thought the last thing baby-boomers like himself would give up if budgets were tight, he said, "Travel."
Retain customers and build loyalty
Mr Grieve meanwhile said agents had to focus on three things - meeting customer needs, keeping customers loyal, embarking on low cost promotions, and using the online channel smartly.
"Does what you deliver (still) match what your customers want? If they have made adjustments, is it time for you to do the same?" he asked.
He said travel agents traditionally had low customer loyalty - with low repeat levels of 15-20% year on year. "Hotels, airines, tour operators are retaining your customers, so start by measuring it, then target ways to improve it."
He suggested some ways to increase customer loyalty:
Eliminate ADMs and improve profits
Ms Candido urged agents to step up their training especially in handling Agency Debit Memos (ADM) which she said was the main cost of error for an agency.
If wrongly handled, ADMs cannibalized profits, were unrecoverable, and tended to recur again and again. (IATA BSP - Bank Settlement Plan - is a central system for accredited agencies to sell, report and remit their airline ticket sales transactions. An ADM is a debit or charge to the agency for a correction on errors such as: air fare under-collection, declared commissions and taxes collected.)
According to IATA statistics, ADMs issued worldwide in 2008 totalled 4,229,736. "At US$10 per ADM, the total cost of error is $42 million. The average number of ADMs per accredited agency is 74. At $10 per ADM, the average annual cost is $750. At $50 per ADM, the average cost is $3,700."
Of 33,971 ADMs issued in the last 12 months to agencies in the large BSP countries, the top four causes of agency error are: 49% for errors related to air fare collection, 10% related to refunds, 10% related to taxes, fees or surcharges, and 9% related to commission claims.
Training, she said, would eliminate these errors and free an agency from ADMs.
Train to increase profits
Mr Bhatia continued the training theme by saying "travel businesses cannot afford not to train their teams".
Training was needed in the areas of arline icketing, computer reservations systems, communicaoon skills and ales techniques.
The most common and costly errors were: improper handling of operations, not charging service fees, ineffective communication, lack of system follow-up and loss of unsatisfied customer.
"The cost of error for travel businesses has a high impact on profitability and can be easily reversed by proper training," he said.
Reprinted with permission, The Transit Cafe (www.thetransitcafe.com)
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