Role of travel agencies diminishes as online travel matures

Use of online tools likely to increase as Internet penetration and credit card ownership go up.

Online ticketing in the United States, valued at $80 billion during the last year alone, accounts for about 38 per cent of all online sales, making it the largest e-commerce segment. At present, Google is also eyeing the market with its proposed acquisition of ITA Software, which powers 65 per cent of airline carrier search engines.

In the deal valued at $700 million, significant attention has been drawn to the industry as a whole and Pakistan has some catching up to do.

State of online reservations

The role of conventional travel agencies has been to provide scheduling services, manage changes, issue paper tickets and provide ancillary services such as hotel bookings and vacation packages.

Airblue, which was the first airline to offer electronic ticketing ‘effectively’, laid the groundwork for other carriers. The introduction of e-tickets was a critical move as it was no longer necessary to rely on agencies for tickets –  a key step without which a sale cannot not be completed. More importantly, it also paved the way for online reservations.

Agencies could not have been too happy with the changes looming on the horizon and at one point the Travel Agents Association of Pakistan (Taap) boycotted Airblue on the grounds of diminishing agency commissions, typical around 10 per cent.

The current online reservation tools, though fairly effective in their use, appear to be bare with little marketing attention or awareness despite the mutual benefits they offer to both airlines and customers. Online bookings can yield up to seven per cent savings and are alluring to price sensitive customers.

All three major airlines comprising Pakistan International Airlines, Airblue and Shaheen Air International now offer online reservation systems though still relatively new. The systems are  powered by Sabre, the same company that also provides the ticketing system to travel agents, however, the services have yet to mature as they do not allow online changes to reservations, are often non-refundable and lack online check-in and other comprehensive features such as meal and seating preferences.

Mind the gap

Elsewhere across the globe, online reservation tools have not only caught up with agencies but in many cases offer even better planning and pricing options. Web portals such as kayak.com have revolutionised the online booking process, while Google’s foray into online travel search and booking vertical promises to disrupt the industry even further.

Not only do online reservation tools help reduce costs for travellers and airlines alike, they also help dynamic pricing, a practice for which the airline industry is notorious. These include discounts on early bookings or non-changeable itineraries, red-eye flights (departing late at night) and further sub-classing within the business and economy class. Such dynamic pricing allows consumers to balance their own ticket features and pricing.

As Internet penetration and credit card ownership pick up, so will the increasing use of online reservation tools and travel agents may well have to find other innovative ways to be of some value to travellers.  However, in a country where a culture of full service prevails, the role of agencies is not expected to dissipate any time soon.

The writer is heading Online Strategy and Development at Express Media.

Published in The Express Tribune, November 1^st, 2010.