Online evolution
How real a threat to travel agents is the advent of internet-based bookings and online distribution? Arabian Travel News staged a roundtable for industry heavyweights in a bid to get some answers.
The furore over online distribution and its potential to marginalise the more traditional booking routes offered by most travel agencies in this region is gaining pace.
ATN took the opportunity to gather high-ranking industry experts and decision makers at a roundtable hosted by Jumeirah Emirates Towers to get to the bottom of this thorny issue. The first point agreed by all attendees was that internet usage was on the rise.
"It might have been slower to develop in this region, but it's certainly a reality," said Hilton Hotels regional director of sales and marketing Guy Epsom. "For example I think at the moment in the US, 73.6% of the nation uses the internet compared to the Middle East's 23.3%, but it's growing all the time and we need to be aware of that growth and its implications."
Nazar Musa, managing director of Holiday Autos was even more emphatic, claiming there was a "definite trend" towards online booking, but added: "There will always be an offline demographic too."
Alarmingly for travel agencies, Carla Sfeir, director of revenue at Raffles Dubai revealed that 10% of the hotel's bookings were generated online and that the relatively new property already allocated 25% of its marketing budget to online promotions.
Oliver Fasching, the distribution development manager for Jumeirah Group, reminded panel members that while online distribution was a "present reality", it had by no means reached its potential.
"Online distribution is having an effect right now," he said. "The Middle East and Asia Pacific regions are still growing in this sense of course, but it is impossible to ignore the impact on booking trends the internet has.
"Currently eighty-five percent of travellers worldwide make reservations online and when this region catches up, it is going to be huge."
Fasching also commented that advertising online was more measurable than the traditional methods.
"If you have the correct tools you can track the specifics of an online campaign," he said.
"Moving online to advertise and promote you can measure exactly how much the campaign costs and how many bookings you received directly as a result. It can give you a much clearer picture of what you receive for your investment than if you tried it with other methods."
Kirsten Spence, web operations manager for Jumeirah Group, took a more measured approach.
"Online and offline distribution must be looked at group level," she said. "You can't ignore either, but what is massively important is if companies are going to have these different distribution channels throughout the trade then the information that the client receives must be consistent.
If a travel agency has different information about a company to what the company is representing online, specifically in terms of price, then that is not good.
Raffles Dubai's Sfeir raised an issue about agencies that had the facilities to allow clients to book online.
"I would like to see the figures for what percentage they manage to book online," she said.
"I would be fascinated to see how much they mark up the price because in that instance you may have an agreement with them, but as a hotel with its own website and booking portal you actually have the instance of the trade driving the customer away from you to book with them, which
is ridiculous."
Hilton's Epsom noted this issue.
"It's all about the contract," he said. "I think the contracts and agreements we may have signed with travel agencies years ago regarding online sales were not strict enough because it didn't represent anything like the volume of business it does now. Those sorts of contracts must now be tighter and more restrictive."
Accepting evolution
So if the consensus is that online distribution will have a continuing and growing impact on booking cultures and trends in the travel industry, the next question is what are the travel agents supposed to do about it?
"Travel agents in this part of the world are just going to have to accept that online distribution is going to take part of their business," said Holiday Autos' Musa.
"Of course, their business still has a part to play, but I think there is some level of denial with some of the travel agents. I don't think they have accepted the degree that these online channels change things."
Jumeirah Group's Fasching agreed that agents would "remain important" but insisted that they would have to work harder in light of the new challenges they faced by competing with online options from an increasingly web savvy market.
"Travel agents need to identify niches," he said.
The key is that travel agencies have to be able to sell things to the clients that online options can't cater to.
"GCC clients still want to be able to talk to someone prior to booking, so there will always be a role for travel agencies; it's just about them making sure they can maximise that role and give the clients what they want rather than just being booking agents."
Key points made
Online distribution will never fully replace travel agencies but it will take an increasing percentage of the market share.
Companies within the travel industry acknowledge the importance of maintaining strong relationships with travel agencies but accept that the internet and online distribution is a channel that must be exploited.
Some travel agencies have not accepted the reality of online distribution and the impact that it will have.
Travel agencies that cannot offer additional services or who lack industry knowledge will eventually expire.
Online distribution will never fully replace travel agencies but it will take an increasing percentage of the market share.
Companies within the travel industry acknowledge the importance of maintaining strong relationships with travel agencies but accept that the internet and online distribution is a channel that must be exploited.
Some travel agencies have not accepted the reality of online distribution and the impact that it will have.
Travel agencies that cannot offer additional services or who lack industry knowledge will eventually expire.
Musa was sceptical as to whether the majority of travel agencies were ready to adapt to a more specialised set of services.
"The question is whether enough investment has been put into the travel agencies for them to upgrade what they can offer," he said.
"The reality that I see in the majority of cases is that the level of industry and destination knowledge that the travel agents have is woeful - they're essentially just booking tools and if they don't have that additional knowledge then they're not going to survive because they're not offering anything that clients can't get online."
Fasching echoed Musa's views by stating that travel agencies without specialist knowledge would "disappear", while all roundtable participants concurred that the key to travel agents' survival was to ensure they invested in staff training.
The core conclusions seemed to be that online distribution had yet to meet its zenith in this region and that it was not expected to replace traditional booking routes entirely.
However, roundtable participants believed that it would definitely represent a significant percentage of business in the future.
"We have to look at all ways of distributing our product," said Jumeirah Group's Spence.
"We want to stay ahead of the game; of course that means the internet, but we haven't forgotten about travel agents or the more traditional routes either and I don't think we ever will - particularly not in this region."
Musa concluded: "Other regions are far more advanced in terms of internet usage and online bookings, we've established that, but if I walk down a High Street in London, I'm still going to see travel agencies - the good ones will survive."
Add value or perish
Where to stay
The ‘Big ATM debate' at this year's Arabian Travel Market painted a stark picture for travel agencies who don't adapt to challenges posed by online distribution.
Debate participant, British Airways commercial director Middle East Paul Starrs told every facet of the distribution chain - supplier, intermediary and travel agent - that they must "add value or perish". He argued: "There is a role for travel agents but there is not a role for all travel agents," explaining how those who did not add value to the basic services provided online would not survive.
Although BA has now scrapped travel agent commission payments in all Middle East markets, Starrs stressed that the airline was keen to work with the following agents: Travel Management Companies (TMCs), a few online agents (Expedia) and those agents catering to niche markets such as premium/top-end travel, students and cruise.
"We are looking for agents that can specialise and seize opportunities to provide value to their customers," he said. "Those who don't add value will perish, but those that do will flourish."
Another debate participant, Expedia's director of market management, Middle East & Indian Ocean, Walter Lo Faro, also reminded agents of the power of the web.
The site, he said, boasted 1.36 billion users worldwide, accounting for 20% of the global population. In Asia alone Expedia has 512 million users.
Lo Faro pointed to Expedia's virtual brochures and sister websites such as Trip Advisor that added value to the online proposition.
"We are going beyond the pure transaction to engage with social media such as facebook as we realise the media potential of our website," he added.
This may serve as a warning to travel agents that travel websites are becoming increasingly interactive and engaging the psyche and every day lives of consumers.
However, Lo Faro did agreed with BA's Starrs that there was only so far online services could go and that in the case of complicated itineraries, agents were essential.
Where to stay
The ‘Big ATM debate' at this year's Arabian Travel Market painted a stark picture for travel agencies who don't adapt to challenges posed by online distribution.
Debate participant, British Airways commercial director Middle East Paul Starrs told every facet of the distribution chain - supplier, intermediary and travel agent - that they must "add value or perish". He argued: "There is a role for travel agents but there is not a role for all travel agents," explaining how those who did not add value to the basic services provided online would not survive.
Although BA has now scrapped travel agent commission payments in all Middle East markets, Starrs stressed that the airline was keen to work with the following agents: Travel Management Companies (TMCs), a few online agents (Expedia) and those agents catering to niche markets such as premium/top-end travel, students and cruise.
"We are looking for agents that can specialise and seize opportunities to provide value to their customers," he said. "Those who don't add value will perish, but those that do will flourish."
Another debate participant, Expedia's director of market management, Middle East & Indian Ocean, Walter Lo Faro, also reminded agents of the power of the web.
The site, he said, boasted 1.36 billion users worldwide, accounting for 20% of the global population. In Asia alone Expedia has 512 million users.
Lo Faro pointed to Expedia's virtual brochures and sister websites such as Trip Advisor that added value to the online proposition.
"We are going beyond the pure transaction to engage with social media such as facebook as we realise the media potential of our website," he added.
This may serve as a warning to travel agents that travel websites are becoming increasingly interactive and engaging the psyche and every day lives of consumers.
However, Lo Faro did agreed with BA's Starrs that there was only so far online services could go and that in the case of complicated itineraries, agents were essential.