I remain stunned how often I still read announcements from large off-line travel agents (in Australia, Asia and elsewhere) saying that they don’t need to worry about competition from online players.
Just recently in separate reports leaders of two of the largest in the Pacific region reaffirmed their online travel disinterest.
Peter Lacaze is the CEO of Stella Travel. One of the Pacific’s largest network of offline franchise travel agents, corporate travel and wholesale/consolidators. Lacaze is confronted with a lot of challenges. Today he announced plans to cut franchise fees and other measures to retain stores/members. Despite the challenges to his business, he does not believe online is the answer. In fact he has gone beyond just ignoring online to being positively negative on it. In a recent TravelTrendspost he said “not in my lifetime” in response to a question about the internet taking over half the market in Australia. I am not sure what market or stats he is looking at. The online domestic air business is already above 50% and online hotels are in the 30% range. PhoCusWright (in their recent APAC report) say that 26% of leisure and unmanaged business travel spend is online in Australia (2008) set to rise to 41% in 2011. At this sort of pacing more than half of the spend will be online before the end of the next decade (as it already is in the US)
Graham Turner (Lacaze’s rival over at Flight Centre) continued the “denier” talk during the presentation of his FY09 annual results (see TravelToday pdf here). Telling the audience and media how little he was worried about online travel companies and that they were not a threat to his business.
How to get serious about online
I regularly write stories on this continued denial by the off-line players. In response I am often asked by email and at conference either “how would you know if the online companies ‘got it’ and started a real push into online?” or “what would you tell an off-line CEO that he/she needs to do to be serious about online?” The answer to both questions is the same. There are three things that players like Stella and Flight Centre need to do right now to take online seriously:
1. Hire a new person and restructure: Appoint a senior exec to be the boss of online. Critically they need to report direct to the CEO and be free of any “cannulisation hand-cuffs”. That can buy, invest and drive online without fear of the sales taken away from the store-front;
2. Set a specific Target: Make a company aim and shareholder commitment of a number of transactions (or dollars) that will come in from online bookings by a certain date; and
3. Embrace Technology: Accept the fact that technology is critical to selling travel well. Hire a team of developers (or do a deal with a technology company) devoted to online only activities, reporting to the new online boss.
How to revitalise off-line
To be fair, I do not expect a 100% off-line company to become a 100% online company. Therefore I am going to add three more recommendations on how off-line players should use technology to protect their existing business and stay relevant to consumers looking to fulfil their more complicated itineraries off-line and therefore protect their revenues from complex itineraries. They are:
1. Destination Experts/Complex Product Methodology: Brochures and Famil trips are not enough to provide off-line agents with the level of information they need to sell complex itineraries to consumers better than the web. To effectively compete with the scale of information online, off-line agents need to be able to add their skills to a deep content library of destination information and a discovery and recommendation system to help sort through all that is available;
2. Massive CRM investment: Off-line agents get to see their customers, online don’t. This means that off-line agents can make decisions about purchase intention and consumer activity that online can’t. Also means they can ask more detailed and targeted questions about consumers than off-line. This improved access to information on consumers is currently wasted by the major off-line agents because they either don’t collect it, or if they do, they don’t know what to do with it. I recommend a massive investment in a CRM systems tied to the desktop sales tools and to the incentive plans for staff; and
3. Rewrite store experience (copy the supermarkets): The travel agency store layout has not changed in my lifetime. The rows of brochures in no particular order with deal led window displays look the same today as they did in the 70s, 80s and 90s. Meanwhile other retail organisations (especially supermarkets) have invested heavily in consumer retail pattern research and store layout. The location of items, stores and promotional spaces has become a science. All designed towards bringing the customer to the store, keeping them inside the store and directing their purchasing behaviour. Travel companies have to do the same. They need to rewrite the consumer experience to make more of the merchandising opportunities offered by access to customers walking around with their wallets in the pockets.
The other view is that it is too late to save the offline players. What do you think? Too late? Answers in comments
From the industry blog “The Business of Online Travel” by Tim Hughes.