Colombia's Travel Trade Is on the Brink of Change
Colombia's Travel Trade Is on the Brink of Change

Colombia's Travel Trade Is on the Brink of Change

Latin America, including Colombia, is a key battleground for global travel companies vying for a foothold in emerging markets.

“Global and regional companies looking for the next wave of travel growth – both online and offline – need to look no further than Latin America,” PhoCusWright wrote in its 2011 report, Latin America: Navigating the Emerging Online Travel Marketplace.

While online travel agencies are growing fast, according to PhoCusWright, traditional travel agencies still dominate the retail travel marketplace, including in Colombia, Latin America’s fourth-largest travel market.

Travel Market Report spoke with Colombian travel agency veteran María Claudia Isaza to learn how global and online competition and other factors are shaping the retail travel landscape in her country.

Maria Claudia Isaza

Isaza is the newly appointed general manager of the latest OTA entrant in Colombia – Muchoviaje Colombia, an offshoot of Spain-based Muchoviaje.

Before joining Muchoviaje, Isaza was on staff at Grupo Aviatur for 22 years, most recently as vice president of electronic negotiations. (Grupo Aviatur is one of three partners in Muchoviaje Colombia.) Earlier in her career, she worked for a Carlson Wagonlit agency.

How do most Colombians buy travel today?
Isaza: They take different steps. First, they use a website to shop around.
When they are looking for air tickets, they go first to airline websites. When they need other kinds of services, they go to a travel agency website. Then they’re looking for the price.

Then, most go to a traditional travel agency, or call a call center. Colombians need visas for 170 countries. This is the reason that Colombians need travel help – to get visas, buy tickets and do the land portion.

If you are buying a ticket point to point, you don’t need help; you can buy the ticket on an airline site. But if they need more than one [leg] on the ticket, they need help.

How much travel is purchased online in Colombia today?
Isaza: Not too much. For example, Aviatur has 28% of the market and 350 traditional travel agency offices in Colombia. Of Aviatur’s total sales, only 1% to 1.5% is online.

What are the challenges of growing online travel business in Colombia?
Isaza:  The electronic payments are different here than in the U.S. We had big problems 10 years ago, so now we have different electronic payment rules than in the U.S. and Europe.

Also, we have to work with different currencies. In the U.S., prices are in U.S. dollars. In Colombia, we have to give prices in Colombian pesos, dollars and euros. It is very difficult to put all these in the same site.

Another is that Colombians don’t feel secure about putting their credit card [information] online.

What impact has the entrance of Expedia and other international OTAs into Colombia had?
Isaza: There is a market for everybody – in this moment. But in the future, one big competitor is going to be most important [dominate the market], because of negotiating power and [advantages in] technology.

Expedia has been in Colombia for two years, but it is not important here. If Colombians want to buy a ticket to Europe, they don’t go to Expedia. Despegar is an important competitor.

How is the traditional travel agency business changing in Colombia?
Isaza: Many people in the past had a travel agency but now they are freelance. They go to, for example, Octopus Travel [host agency owned by Grupo Aviatur] in order to keep their clients and not have to pay for an office. In Colombia, there are three [major] host agencies.

When did that change and why?
Isaza: Five years ago. I think there are two important reasons – one  is the economy, the economic situation in the world.

The other one is that the market has changed a lot. In Colombia, 90% are small travel agencies, with a maximum of 10 employees. They need to have capital to invest in technology, in websites. So they prefer to be independent, to be freelance.

How should Colombia’s travel agencies adapt to succeed?
Isaza: I think it’s how you communicate with the user. This is the big difference now. The users are through the computer, through the tablet. We have to change how to communicate, how to talk to that user. That is a big challenge.

Do you see agencies making this change?
Isaza: I’m going to give my opinion. The old generation of owners doesn’t want to change. Travel agents have to change how they think; if they don’t, they will disappear. A new generation of owners is going to change all the perceptions about the business.

There are things that can’t change, because the passenger needs help in order to imagine the trip. Travel agencies will exist for many years. 

What’s the future of the agency business in Colombia?
Isaza: I think with OTAs, the services, everything, will be the same. The only change will be how you communicate with the clients and how you pay.

[Editor’s note: Consumers in Colombia often use nontraditional methods to purchase travel, including paying in installments and making payments at supermarkets, kiosks and through local online payment processors, and access to a range of payment methods is important to travel clients, according to PhoCusWright.]

The people who put together different packages, the people who do negotiations, for example with airlines and hotels, they have to exist. Because if you don’t have these kind of products on the website, you can’t buy or sell anything.

Do Colombian travel agencies put together their own packages now?
Isaza: No; but in the future they will have to.

When did airlines stop paying commissions in Colombia?
Isaza: Two years ago, more or less, after deregulation. Before that we had 10%. But commissions went down, down, down. Now, the law is airlines have to pay 1%.

With air commissions only 1%, are some agencies starting to charge fees?
Isaza: Yes.

See related story: “Agents in Emerging Markets Hold Their Ground Against OTAs”  (May 26,2011)

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The old generation of owners doesn’t want to change. Travel agents have to change how they think; if they don’t, they will disappear. A new generation of owners is going to change all the perceptions about the business.

Maria Claudia Isaza, Muchoviaje Colombia

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