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New Cendatn TDS research reveals impact of rising costs and new technology on travel agencies in Asia

Dec 19, 05 | 8:54 am

Travel Agents need to adapt and re-focus to survive in new travel climate

Cendant Travel Distribution Services (TDS), a division of Cendant Corporation (NYSE: CD), today announced the results of research undertaken in Asia, to discover how Asian travel agents are reacting to a market being shaped by changing technology, rising costs and an increasingly demanding traveling public.

The research reveals that there is widespread uncertainty about whether travel agents can provide the best price for travel.  In Hong Kong 54% of travelers and 40% of Malaysian travelers were unsure about the price competitiveness between traditional travel agents and fares made available online. Possibly reflecting the existence of low cost carrier AirAsia in the Malaysian market, the research found only 37% of Malaysian respondents believed that making online bookings is inconvenient and takes too much time.  This is in marked contrast to 48% of respondents in Hong Kong who need assistance from agents when making travel arrangements.

Research was undertaken between December 2004 to May 2005 for Cendant TDS by leading independent research firm MarketShare who interviewed travelers in Hong Kong and Malaysia, as well as talking to 55 leading travel agencies in China, Taiwan, Philippines, Malaysia, Hong Kong and Singapore.

The research found that most Hong Kong and Malaysian travelers believe that travel agents are extremely efficient (57% and 56% respectively) although many are unable to commit to using travel agents in the future (37% in Hong Kong and 50% in Malaysia).

 “Our research shows that the role of travel agents is changing from one of pure distribution to advice and consultancy,” said Mr Anthony Venus, Executive Director, Marketshare. “The experience in the US and EU should serve as an early warning signal for the industry in Asia.  Players in the market need to continue to be responsive and evolve with the changing market environment,” Mr Venus added.

While the presence of online bookings is a threat to the traditional travel agent model, Cendant TDSs research found that there is widespread uncertainty about the security and transactional capabilities of internet booking sites.  The survey found that:

-          46% of respondents are uncomfortable leaving their credit card details online;

-          59% are unsure whether they can book travel packages online;

-          65% of respondents are uncertain as to whether they can get instant confirmation on their travel bookings;

-          62% are unsure whether they can make waitlist bookings online; and

-          59% are unsure of the online capabilities of making multiple bookings.

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These findings tend to indicate that travel agent market share remains secure for the moment, however any marketing efforts by online companies to educate customers could tip travelers toward using the internet, particularly if reduced costs offset the diminished service level. 

With a large pool of information available to travelers over the internet, customers now have the ability to actively compare prices and product offerings across travel agents. As a result, the reliance on the travel agent  as a channel for distribution is reduced unless they are able to provide similar levels of information and advice.  The research also concluded that as more consumers move online, it is vital that travel agents can offer an online proposition. Without an online strategy, smaller travel agents will find it even more difficult to compete. Moreover, as low cost carriers make air travel more affordable, consumers have grown increasingly demanding and highly price sensitive, with low fares often negating any sense of loyalty, unless that loyalty is based upon personalized or niche customer service.

The research examined the major threats currently impacting the travel agent distribution model.  One of the major issues is the reduction or removal of commission from airlines to travel agents - travel agents in Asia can look to Singapore, where commissions have been cut to 0%.  This is forcing the travel industry to review revenue structures and consider what other revenue opportunities are available to them, for example, service fees or selling content where commissions are still available, such as hotels and destination services. 

Travel agents need to choose the right partner if they are to have access to such content, and this choice of partner could be the difference between being competitive or not. This partner must also be able to provide agents with the technology to improve efficiencies and deliver the content to their customers in the way they want. It is this fusion of content and technology which will define the future success of travel agencies.

“These findings imply that the days of travel agents solely selling air tickets as a means of survival are numbered,” said Mr. Mark Rizzuto, managing director-Asia, Cendant Travel Distribution Services. “Differentiation and product diversification will play a big role in the future of the travel distribution industry.  Personalized customer service, specialist travel packages as well as exclusive packages with partners will be advantageous in helping travel agent differentiate their product offerings in the future.”

“With so many factors influencing the industry, travel agents must consider the GDS partner that can deliver the technology solutions and content to ensure their future survival.  At Cendant TDS, we are much more than just a technology supplier.  Through our varied subsidiaries across the world, we can provide innovative new channels and content for our travel partners to access package components that help them adapt their business model in the face of these rapid industry changes,” Mr. Rizzuto said.

This survey is the second of a series commissioned by Cendant TDS to examine trends in Asia’s travel industry and the implications for how these trends impact business. The first survey, released in July 2005, detailed the impact of low cost airlines.

About Cendant Travel Distribution Services

Cendant Corporation’s (NYSE: CD) Travel Distribution Services Division, is one of the world’s largest and most geographically diverse collections of travel brands and distribution businesses. The division, employing nearly 9,000 people in approximately 120 countries, includes: a leading global distribution services (GDS) company (Galileo), serving more than 44,000 travel agencies and over 60,000 hotels; hotel distribution and services businesses (Neat Group®, THOR®, TRUST and WizCom®); leading online travel agencies (CheapTickets®, ebookers.com®, HotelClub.com, Lodging.com, Orbitz®, and RatesToGo.com); an airline market intelligence company (Shepherd Systems); an international travel technology and software company (Travelwire); a leading international provider of long-haul air travel and travel product consolidator (Travel 2®/Travel 4®); online global corporate travel management solutions (Orbitz for Business® and Travelport®); and a leading wholesaler and global online provider of hotels, destination services, travel packages and group tours (Gullivers Travel Associates, OctopusTravel.com® and Travel Bound, Inc.). 

About MarketShare

MarketShare is an independent market research firm with offices and affiliates across the world. Our mission is to help clients gain profitable market share through understanding consumer behavior, competition, local regulations and changing market dynamics. We assist our clients in making decisions that profit. We work with the senior management teams of Fortune 500 companies and high-growth companies to help achieve superior returns on investment. In 2003 our research supported over US$1 Billion in investments and marketing decisions in Asia Pacific.