Why Online Travel Services Have Replaced Traditional Travel Agents

When was the last time you heard someone say "Let me call my travel agent" or "My travel agent got me a great deal to Aruba"? Chances are it's been quite a while.

Travel Darwinism and Travel Agent Extinction

The traditional "brick and mortar" travel agency is on the verge of extinction ... despite the fact that travel is a $14 trillion plus industry that continues to grow at astounding double-digit rates. This growth is largely as result of its ability to capitalize on new technology as it evolves and adapt to ever changing socio-economic and political conditions.

The travel industry has always been "dog eat dog" where in Darwin's terms, it's purely natural selection and the survival of the fittest.
This combined with the impact of 9/11, an unstable economy, accompanied by high unemployment, steadily increasing fuel prices and soaring air transportation costs has forced all segments of the travel agency to re-evaluate and re-invent themselves.

Embrace Change To Survive

Airlines, cruise lines, hotels, and tourism boards have changed their marketing and sales strategies dramatically. They've embraced change by incorporating new technologies, more targeted marketing and becoming more self-sufficient.

Traditional travel agencies, on the other hand, have failed to evolve and adapt making them virtually become obsolete and put them on the verge of extinction.

Travel agents and industry observers blame the downfall of the travel agency on the growth of online discount travel services, hotel cruise and airline web sites offering direct booking and big discounts. However, the online booking is only the tip of the iceberg but it's the final nail in the travel agent's coffin.

Airline Deregulation Changes The Game

Prior to deregulation, the federal government controlled almost every aspect of the airlines operations, including ticket prices and who could distribute and sell airline tickets.

Under the regulated environment, airline tickets could only be purchased directly from the airline, or through industry sanctioned and trained retail travel agents. Travelers paid the same price whether they purchased the ticket through the airline directly or from a travel agent. Each ticket had a built-in travel agency commission that couldn't be rebated to the traveler. If the airline sold the customer a ticket directly, the airline kept the commission they would have paid the travel agent for themselves.

Airline Ticket Commission Revenue Drops Sharply

Airline ticket commissions generated the majority of the revenue for most travel agencies. The commissions airlines paid travel agents was also government-regulated and averaged 10%-12% of the ticket price. So for just issuing a ticket for a $2000 ticket from New York to Tokyo, the travel agent made about $200. Not bad.

As one of only two ticketing options available, travel agencies profited from a government-supported monopoly creating a steady and easy source of virtually passive income. Deregulation of the airlines produced a number of changes that benefited both the airlines and travelers. These changes, however, would drive travel agencies to the brink of extinction.

Airlines By Pass The Travel Agent

With the end of government control over ticket pricing and marketing, airlines made extensive changes to help solve the financial difficulties created by the often unreasonable demands of union labor, as well as rising fuel and other operating costs.

Initially,to help cut costs and increase their market share and profitability, airlines reduced travel agency commission rates and put "caps" on commissions they paid. This created much lower revenues for the average travel agency.

At the same time, they drastically cut the marketing dollars spent on travel agent advertising and promotions. This saved the airline industry billions of dollars and cut even more deeply into travel agencies' biggest source of revenue. It also greatly reduced many of the free perks travel agents traditionally enjoyed such as "fam trips" and free airline travel.

Full Service Airline Web Sites Lure Flyers

As part of an effort to be more profitable and keep revenues within the company, airlines began selling tickets directly to passengers through toll-free telephone numbers and later on the Internet. Airlines had the technology and trained reservations staffs, so it made no economic or marketing sense to continue to rely on travel agents to do the same job.

Airlines now went a step further. Since most already had strategic marketing partnerships with hotels, car rental companies and other travel suppliers, they started selling the traveler complete travel packages including airfare, hotel, car rental and even attraction and theme park admissions. Previously this had been bread and butter for the travel agent.

Along with the internet came the consumer demand for the convenience of " 24 hour shop from anywhere service" a benefit that was especially attractive to business travelers. The airlines already had 24/7/365 operations, so they were able to quickly respond and offer the traveler this benefit.

Traditional travel agencies generally worked usual daytime working hours and didn't change to meet this new customer need. Now, it became both cheaper and easier to buy directly from the airline.

Frequent Flyer Programs Grow

Frequent Flyer Programs then entered the picture. Airlines could now offer passengers free travel, first-class upgrades and other perks that only travel agents previously enjoyed.

Free airline tickets and first-class upgrades became powerful incentives. Travelers joined frequent flyer programs and dealt directly with the airlines to get bigger and faster rewards. Another to by pass the travel agent completely.

Hotels Get Into The Act Too

The hotel industry saw the success airlines were having, so they quickly followed suit and began marketing direct to the consumer and eliminating the travel agent and their commissions.

Large hotel chains with existing reservations technology and staff quickly promoted special rate packages sold directly to travelers on the phone or over the internet. Like the airlines, hotels started loyalty programs with free upgrades, free nights and even free vacations at their resort properties.

Commissions paid by airlines and hotels accounted for over 95% of all travel agency revenue. Without these, no travel agency could survive. The big online booking sites were merely the nails that sealed the coffin.

The New Breed Of Better Informed Travelers

For some time, the traveling public had been becoming more informed and sophisticated and no longer relied on travel agents to be a source of expert advice.

Even before the Internet became so popular and accessible, cable TV was producing a whole new breed of more sophisticated and well-educated travelers. Armchair travelers were now becoming empowered to get off the couch and see the world.

Programs on the Travel Channel and other cable networks were stimulating people's interest in travel and getting them totally involved in making their own travel plans as well.

Planning and researching the trip now became part of overall experience, especially among honeymooners, travelers interested in eco-tourism, extreme sports vacations or other emerging niche travel markets.

A Combination of Catalysts Accelerated The Change

More aggressive marketing by airlines and hotels combined with the information-access capabilities of the Internet became catalysts that were further hastening the demise of the traditional travel agent.

Travel sites grew like wild fire and became some of the most popular on the internet. Never before was so much travel information available so readily.

It was now easy for anyone to research a destination, its hotels, attractions, restaurants and shops ... and book it ... all in a matter of minutes.

Before making any decisions, travelers could read actual customer ratings and posts on bulletin boards concerning destinations and hotels. Travelers now had a voice, a choice and the power to shop and book at their convenience.

The Time Was Right for Online Travel Services

A new breed of travelers had evolved that preferred to plan and book their own travel on line had developed. Internet access had become universal and the convenience of online price comparison and booking caught on. This opened the doors for the ticket consolidators and online travel services like Cheap Tickets, Expedia, Orbitz, Travelocity and Priceline.

Now with the click of a mouse, travelers could compare itineraries and ticket prices between different airlines and make their own travel plans from the home, office or anywhere 24 hours a day. One more click and discounted hotel options appeared, along with car rental choices as well. These conveniences were especially attractive to business travelers and last minute vacation bookers.

Nobody Does It Better

Internet travel services do it all quicker, easier and cheaper than any traditional agency ever could.

Travelers can now go to Priceline and have William Shatner fight to get them the best price ... or even a price they are willing to pay. Who could ask for anything more?

Travel Agencies Can Blame Themselves

The travel agency industry itself was responsible to a large extent for its own demise. Travel agencies claimed to be experts with extensive first hand knowledge that could help travelers plan an exciting trip and save money. However, very few were.

Protected by archaic government and industry regulations, most travel agents were just order takers and ticket processors. Very few travel agents offered any real value to the traveler.

If travel agencies had been more professional and provided a service of proven and genuine value to travelers, they might have been able to survive by charging flat fees for their services and developing other streams of income. Some agencies tried this route and failed, largely because nobody thought their services were worth paying for.

Traditional travel agencies, as we've known them are almost extinct because of their inability to adapt and evolve. Expedia, Orbitz, Priceline, Travelocity and Cheap Tickets have taken their place.

The travel industry is one of the world's oldest professions. It's survived and grown to over $14 Trillion because of its ability to adapt and evolve.

Only one thing's certain. The travel industry will continue and only those businesses who can adapt and evolve will survive. Today's online travel services will also have to embrace and evolve ... into who knows what ... and who knows when.