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SimSolTravel - The Future of Travel

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How has the travel industry changed?

First came the Internet that enabled direct communication with anyone on the planet. Then came the World Wide Web, and the web browsers that made that communication so easy everyone can do it. Before the Internet, when you wanted to book an airline flight you either called the airline directly or talked to your travel agent who had access to a Global Distribution System (GDS) like Sabre, Apollo or Worldspan. Using a GDS was complex with many cryptic commands that took years to learn. Once mastered, a good travel agent could find the lowest fare, book the best connections and build complex itineraries. All of the training and effort by the travel agent was rewarded by a commission paid to the agency by the airline. However, the airlines discovered that they could commuicate directly with customers by embracing the Internet and Web browsers.

 

The Big Change

That discovery led to the creation of travel portals, like Travelocity and Orbitz, in the 1990s by airline organizations. The ensuing explosive growth of travel portals put tremendous pressure on travel agents because it was so easy for customers to just book their own flights. The airlines began "adjusting" the commission rate and soon quit paying travel agent commissions altogether. In fact, it is not uncommon for a non-airline booking site to charge a small fee for booking a flight. In addition, by creating their own web booking sites, the airlines could also avoid paying GDS fees and increase their control over the relationship with customers. Many airlines now offer "web specials" only on the airline's web booking site as extra incentive. Direct booking through airline specific web sites has proven to be extremely good business for the airlines because it limits customer exposure to the competition, avoids commissions and booking fees, and allows the direct targeting of extra services and products, such as upgrades or extra frequent flyer miles.

 

Lots of Little Changes

It should not come as any surprise that other travel suppliers, such as cruise lines, hotel chains, and car rentals, have noticed the airlines' success. We now see an almost constant stream of "adjustments" to commission rates and rules that is slowly reducing travel agent revenue. These adjustments take many forms and vary from one supplier to the next. Some all-inclusive resorts will market "return" packages to guests that are not commissionable to the agent who booking the initial trip. Some suppliers have increased the total annual bookings by an agency required to get to the higher commission levels. One airline started offering incentives only through their web site, such as advance seat assignment, earning 100% of miles flown instead of 50% for other bookings, lower fees for itinerary change, fares which include free checked bags and free access to premium seating options. Some cruise lines have increased what is in the "Non-Commissioned Fare" category (the part of the cost of the cruise for which the travel agent does not get a commission). At least one major hotel chain only gives reward points when the stay is booked on their web site directly or by an agent directly and they do not give award points when the stay is "booked through a third party website (Expedia.com, Booking.com, etc)."

 

The Future of Travel

What does the future hold for the travel industry? As a old saying goes: "It is very hard to make predictions, especially about the future!" Even so, we think we can see a pattern from our experiences in other industries. As an industry matures, the large established companies become committed to a given style of business. They are extremely reluctant to do anything that puts their current product offerings, and associated revenue, at risk. Along come the start-ups that don't have an established revenue stream to lose, so they will try anything that looks promising. The measure of this is seeing how the established companies react to the disruptive ones. Unfortunately for the old guard, by the time the disruption is recognized, the new guard has already captured a significant part of the market. Our prediction is that this trend will continue and that it will escalate as suppliers are more successful managing the direct-to-customer relationships. We are not predicting the demise of the travel industry or of travel agents, just that the industry is going to keep evolving in a way that challenges the current ways of doing business. This is the natural result of good companies making good business decisions for their employees and shareholders. Twenty years ago no one in the telephone industry would have even thought, let alone said, that the long-distance goldmine would ever disappear. Travel agents will always have value because they have knowledge, experience and understanding that the traveling public needs. They can contract with suppliers for special rates and amenities. They cultivate special relationships with preferred suppliers for special treatment, both for the agency and the traveler. The challenge is how to make a living by sharing that knowledge, experience and understanding as suppliers become less willing to pay commissions. Some agencies have invented new services and new products that leverage their relationships with a small number of preferred suppliers. Creative agencies will adapt and create even more unique solutions. What is unclear is how long the suppliers will be willing to work with a middleman. At some time in the future they will reach the tipping-point and only support direct-to-customer relationships. While there will always be travelers who want the absolute lowest price for everything, and are willing to put forth their own effort to look for it, most travelers understand the difference between value and price and are willing to pay a little extra when they see the value. We believe that relying only on commissionable products is not the best path to the future, for us or for our clients.

 

Travel Agent vs. Travel Consultant

What is the difference between a travel agent and travel consultant? Our view is that, in general, the travel agent is paid by the supplier and the travel consultant is paid by the client. This doesn't mean that a travel agent never does anything for an extra fee (called an "upcharge" in the trade) or that a travel consultant never gets a commission. It's really more a matter of philosophy than of practice. For example, most travel agents won't help you leverage the most value out of your timeshare or book an apartment using one of the many new "by owner" services. A travel consultant will do that and more, but with the understanding that those services have value worth paying for. How much that "value add" is worth to the traveler is still to be determined in the marketplace. At SimSolTravel we specialize in travel we know and understand. We have self-service portals available for our clients who want to do their own planning, but we would rather give you the benefit of our personal experience. And when we do talk about travel, we won't recommend something we haven't done or experienced ourselves. There are many places that we know very well and we would be happy to give you trip planning advice based on our personal "been there, done that" perspective. However, there are also many places where we have not yet been, and we'll tell you that.

 

Our Promise

We love to travel and to talk about where we've been and how we got there. We'll always answer a question or two just for the fun of talking about travel or over a pint at a local brewery. If you want a more in-depth discussion, we'll give you our best estimate of the time it will require, make adjustments as needed and return any consulting fee if you don't feel the value was worth the price. So, whatever you travel idea is, give us a call or send us an email and we'll help make it a plan.

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