Now everyone really has lost the plot. Credit card companies have decided that the best way to get their money back, after a tour company collapses, is by simply re-charging whoever sold the holiday in the first place. In other words, you buy a holiday from Expedia or even Joe Blogs Travel and the tour company goes up the Swanny, the punter gets his money back from the card company who in turn recharges the travel agent. As that Meerkat would say, “Simple, Huh?”
Not quite. Agents are not mega-rich people who have fistfulls of cash floating about the place. Secondly, in case anyone hadn’t noticed, they are agents. That is, they flog the holiday and pick up (hopefully) a (small) commission as a result. Recharge any agent for a couple of £5,000 holidays and you will simply bankrupt every agent in existence. Overnight.
Coupled with this assault on an already fragile sector of the industry, IATA is thinking about taking money every two weeks rather then monthly. The agent will barely get enough time to get the money off the client before airlines, operators, Uncle Tom Cobbly and all are jumping up and down like startled rabbits demanding the agent pays over everything they have including two pints of blood and a small mortgage “just in case”.
Trust has gone with the agency system (I hate the term “model”, let’s deal with the real thing). In any shape or form, online or offline.
Decisions need to be made and the most fundamental one is if airlines and operators wish to distribute through any – and I mean any – kind of agency type arrangement. It matters not if they are on or offline.
What benefits do travel agents, of any ilk offer? Without them, you have to do it yourself. Large operators have the ability to do this and so too would major airlines – at least those airlines that see the UK as a main market. Airlines do have an issue. They do not want to pay for distribution, but at the same time do not want to have to incur the cost of doing it themselves. Legacy airlines view the Easyjets of this world with envy. Easyjet manages to sell their product almost exclusively online; but then again you can do that with a simple and restricted product range that does not need to interact with anything or anyone else. This is not the case with legacy airlines – or indeed, any airline which has a global network – or anything resembling a network, for that matter. As soon as you need to interact, there must be a mechanism to do this and the GDS booking method does this very well. Over time, airlines have, however, lost the ability to network well. They have drawn in their horns and really only want to sell their own product; or at best, their alliances’ product. Fine, perhaps, if you are in the Star Alliance or Skyteam – but Oneworld? BA has no-one left to interact with on anything remotely resembling a “world class” alliance.
The trouble is, when airlines are required to interact, unless an agent can accomplish some tidy footwork, these are invariably for big ticket journeys – valuable top level income which airlines really do need at this time. So, legacy airlines do not want to do the fiddly stuff, they do not want to pay agents to do it and they want the money for it yesterday – but they desperately need this top level income. They want their cake and they want to eat it.
Large tour operators have a love/ hate relationship with agents. Some, such as Thomson, have their own de facto chain of shops and have the resources to “train” staff (ie teach them how to flog their product over anyone else’s). But even Thomson are not TESCO – they do not have a shop every so many miles, so they need to cover the gaps – and the agent does this job for them. Like airlines, however, they do not want to pay for this distribution. Smaller operators are the one group who do use agents and do pay them for referring business; the trouble is, all the small operators together, do not provide a wide enough offering to pay for and maintain a high street presence. The small operator can go online, yet here he faces the issue of reach and exposure; if one is a small operator offering mainstream resorts, then the cost of getting noticed on the internet can run into many, many thousands of pounds.
Now, let’s layer onto the above, the issues of bonding, regulation and now, the cost of even being able to take money off a client. The point is, no-one is going to sell something if they cannot make a reasonable return. Brewers tried this long ago – instead of saying “you pay a low rent and we make money by selling you beer” they said “That property is worth £5mill and we want 10% return from you – You can do what you like” Result: No pubs. Reason: Because there is only so much available in any one transaction. Each person can have a portion of that pie, but as soon as the dominant party wants someone else’s share, the system collapses.
The other reason agents are useful, is because they are retailers. They sell stuff and they sell in volume. The likes of Expedia and Travelocity sell travel and travel products. They are good at it, it is their speciality. AMEX sell business travel (so do I – Plug, plug – and my fees or low ‘cos I have a low cost base!!) they are good at it, they know what the customer likes and understands the customers needs. British Midland, say, run airline services – that is what they are good at. But wholesalers and especially “manufacturers” do not make good retailers – you do not see any DIAGEO shops about, do you? Many airlines have appalling customer service systems, often based in parts foreign, staffed by parrotts or the cheapest humans they can find, with little, if any holistic training. There are airlines, such as BA who have customer service facilities which are excellent, but this is the exception rather than the norm. Most low cost airlines even go as far as to discourage customer contact. The question remains as to how long this style of operation can last.
Agents are a useful intermediary, a foil, twixt client and travel provider. Not all travel, by a long chalk, is simple. Some of it is very complex – not difficult, just complex – so there is a place for “technicians” who have an understanding of how travel works. People who know how part A bolts onto part B. Yes, tour companies and airlines could do this themselves but we come back to the training thing – or rather the total lack of any form of holistic travel training and that no-one with any nounce is going to train themselves for a business that pays rubbish money and shows little if any prospect of real wealth. Ultimately, this leads to “Bankers Syndrome” – as with RBS, one finds that no-one at the top knows anything about Banking. And we all know what happened next, there.
This all leads down a path that leads to a lose-lose situation. As the returns get less, there are increased attempts by various bodies to regulate. More regulation leads to greater cost on the on hand and so even less return on the other, a deep spiral that so encourages the darker side – and with the presence of the internet meaning that one can distribute on a global scale with virtual anonimity – it is easy for this dark unregulated side to take over. Large operators lose their incremental sales and airlines lose their ability to market their high end products – unless they wish to do everything, and I mean everything, themselves.
So the big question remains and before anyone in the travel industry goes any further, it must be answered: Do travel providers wish to do everything for themselves – or do we retain the off and online agency style distribution system? If the answer is no, then fine – get on with it. If the answer is Yes, then the agency system must be allowed to be profitable – and must have a voice that is respected and acted upon by the suppliers. If things just continue along the same road as now, we will see just a few online retailers and a few high street retailers (probably a combination of both – eg Expedia shops) and these retailers will simply dictate who can sell what, for how much and on what terms. Can’t happen? Well, it has in many other fields – Grocery, for example, or computers or DIY….
