"Change in Form" for the Travel Industry

Article Published in Travel Weekly November 16, 1995

The growth of point-to-point domestic air carriers that offer fares effectively competitive with automobile travel over the same distances has created a new airline product. The concept of the point-to-point service has recently broadened into long haul "shuttle" services by major airlines. The overall effect is lower commission revenue to agents.


The commission cap programs instigated by most U.S. hub-centric carriers has precluded agencies from earning revenue to off-set the losses incurred in booking the "shuttle" type carriers. "Rumor" suggests that commission caps will be implemented for selected international routes in 1996.


The high cost of GDS/CRS distribution is impacting airlines and other travel vendors ... to the point that they seek alternative distribution channels for their products.


These (and other) issues point to a "change in form" of the existing distribution process -- a "change in form" that does not mandate a restructuring of the industry.


Conceptually, the "change in form" I see, will be five-part.


1. Total automation of the booking process for point-to-point (low commission) and other high volume selected "product offerings".


2. "Pro-active" product marketing of specific product by travel agencies or other retail outlets in lieu of the traditional passive "wait for the phone call" marketing role of most agencies.


3. Localized market product development, and offerings, that demand action -- quite different from the generalized, broad-based marketing efforts of national vendors today.


4. Direct access to key vendor-inventory systems for selected offerings by specific retail and corporations willing to assume "risk" for inventory or make guaranteed financial commitments.


5. Cooperative product creation and joint marketing between vendors, agencies, and other retail outlets as the marketing emphasis shifts from "manufactured" vendor based product to "consumer-demand" local retail offerings.


The key "change in form" will be the way travel product becomes marketed.


Today, few travel agencies or airlines market pro-actively. Rather, they passively offer their products. A typical travel (or airline) agent call, after the appropriate greeting, goes something along the lines of...


...where do you want to go?


...where are you going from?


...when do you want to go?


...etc.


The "query line" of such a conversation does need a human travel agent. Further, the "query line" is far too complex to "automate" in a timely way. The effort to follow this "query line" is one of the reasons for the rather dismal acceptance, to date, of software tools designed to automate and provide self-booking. The "query line" takes too much time to process automatically without a human to "break the time line" with conversation.


Of course, the "it takes too long issue" is one of the reasons that point-to-point bookings are not economically viable for most travel agencies -- the revenue earned does not off-set the human labor cost involved to consummate the booking.


Accordingly, this type of booking must be automated. For customer satisfaction, it becomes important to minimize the "interactive discussion" in any automated booking. Toward this end, initial automated booking products are likely to offer "pro-active" marketing solutions ... focused on a few very specific product offerings. For example, a "package" round-trip Los Angeles to Denver with a hotel at the airport and rental car might be offered -- traveler picks the date and times only! One travel agency developing a "pro-active" selling program will offer only five point-to-point destination packages, one cruise, and one tour offering through a single dial-up touch-tone response phone number. Depending on the market, any group of packages would be possible.


Given the ability to identify and offer a specific "product", automated bookings will begin to assume greater importance in the marketing effort. The high labor costs of human interactive booking will revert to the "value added" services of complex itineraries and up-scale tour and cruise offerings.


Pro-active marketing will requires higher advertising and sales costs then most travel agencies typically spend. These higher marketing costs will necessarily be offset by lower labor and operations costs that come with automated processing ... and through joint-funding with key vendor suppliers.


This "change in form" is already being implemented by progressive travel marketing firms, particularly in some of the "new media" communications forms. The rapid assimilation of "ticketless" travel and related electronic commerce is likely to speed its acceptances.