Leisure travel agents in Latin America and Asia may be better positioned to withstand growing onslaughts from major online travel sellers than their U.S. counterparts were when online channels first became a force here, or even today.
Marketplace dynamics, timing and cultural differences are among factors that favor traditional leisure agencies in emerging international markets, according to PhoCusWright vice president of research Lorraine Sileo.
In Latin America and Asia, 80% to 90% of all travel is still booked through traditional channels, and consumer loyalty to local or regionally-based leisure agents in those regions remains strong, Sileo said, citing PhoCusWright research.
Traditional agents in these overseas markets are often better able to retain customers who shift their travel purchases to online channels. “In other parts of the world, agents are really in a position to leverage that relationship and brand as they move online,” Sileo told Travel Market Report.
Up against Goliath
In the U.S., the sheer force of mega-brands such as Expedia and Orbitz has made it difficult for traditional agencies to wage effective competition online, Sileo commented. “It’s so hard for smaller agencies to compete with the $100 million marketing budget of Expedia.
“Some larger agencies – AAA, American Express – have been successful with online sites,” Sileo commented. But the vast majority of U.S. travelers who use an online travel agency “go to one of the bigger brands – they don’t go to a local brand.”
Roughly 90% of all U.S. online travel agency gross bookings are generated from the major OTA brands, according to PhoCusWright’s U.S. Online Travel Overview, 10th edition. (That report, released in November 2010, was based on PhoCusWright’s analysis of market share, consumer research, discussions with more than 80 travel executives, and data from company reports, Securities and Exchange Commission documents, and other third-party sources.)
By contrast, local and regional agencies in emerging markets have a better shot at facing down big brand OTAs and online supplier channels by cultivating their own online business, while continuing to serve offline customers.
“It’s more common for a local or regional travel agency to have an online presence; they’re taking their travelers online. In emerging markets, traditional agencies, as long as they develop an online presence, will continue to be viable,” Sileo said.
The U.S. difference
That’s different in the U.S., where traditional leisure agents stay relevant and viable not by trying to compete in the online arena with the mega-OTAs and suppliers, but by specializing in complex, experiential and high-end travel and by servicing clients after a booking is made, Sileo said.
“Don’t think you’re going to automate the booking,” she advised U.S. agents. “That’s not what you want to do. You want to have the traveler relationship, and you want to keep that going after the booking, where you’re providing the personal service.
“There’s lots of apps out there, but there’s nothing like somebody caring about the fact that your flight was cancelled, or when the hotel only had a smoking room left. There’s nothing like having an advocate when you’re traveling.”
Online growth, globally
PhoCusWright recently projected that one-third of the world’s travel will be booked online by the end of 2012.
Online leisure and unmanaged business travel bookings are expected to grow twice as fast as the total travel market, surpassing $313 billion in volume by 2012, according to PhoCusWright’s Global Online Travel Overview, 2nd edition. (The overview, released this April, draws on earlier PhoCusWright reports on the U.S. and European online markets as well as two upcoming reports on Asia and Latin America.)
Much of that growth will come in the emerging markets of Asia Pacific and Latin America, where the growth potential for online booking channels is significant, outstripping the potential of U.S. and European markets, which are nearly saturated.
As online channels develop in emerging markets, local and regional agents are often faster responding to the new competition than their U.S. colleagues were when online channels were developing in the U.S., Sileo said.
“I think it’s a timing thing. When Expedia and those brands came out in the U.S., it was the mid- to late-’90s. I would say traditional travel agencies were slow catching up, slow to say, ‘Oh, we need a website.’”
But in emerging markets, by the time online competition such as Netherlands-based Booking.com began making inroads, the world was a different place. Mobile was everywhere and online was well-established generally and widely understood as a force to be reckoned with.
This is a critical difference for agents in places like Brazil. “You’re a lot more savvy” Sileo said of agents in emerging markets. “You have more of that confidence [to say], ‘We definitely need to go online’ – that sense of urgency.
“If you’re a travel agency selling domestic air or hotel, then you see a Booking.com in your backyard doing that same thing, but you have the brand and you’re entrenched, you feel, ‘I have to use this trust I have with my client.’”
Those trust-based customer-agent relationships carry a lot of weight in overseas markets, Sileo said. “In Latin America and Asia, we know that relationship almost means more than in the U.S. In the U.S., we’re more used to having things automated or doing it ourselves. In Asia, Latin America, they still want things done for them.”
As a result, consumers are apt to feel stronger brand loyalty to their agents. Traditional travel agencies are “so much more entrenched” in emerging markets, Sileo said.
Another factor favoring traditional agents in Asia and Latin America is that they have more opportunities to compete on price than U.S. agents. “The travel agent has access to consolidator inventory. There might be prices you can only get through agents,” Sileo explained.
“Here, with price parity, it’s more difficult for agents to compete on price.” The advent in the U.S. of flash sales and deal sites like Groupon has further eroded U.S. agents’ pricing leverage.
For more on trends in online and offline leisure travel sales in the U.S., see related story: In Cruise Sales, Travel Agents Are the Undisputed Champs, May 23, 2011.