After years of tough competition with Online Travel Agents (OTAs), traditional agencies are re-gaining popularity as travelers seek out bespoke service and specialist advice over discounted deals.
Traditional travel agencies have an opportunity to re-capture the market share previously lost to OTAs by converging operations to digital and social media platforms, delegates at the Arabian Travel Market 2017 Digital Transformation Summit have learned.
Addressing the summit on 25 April, 2017, Benjo Van Laar Hoven, Chief Executive Officer, Prizm, advised traditional agents to meet their clients online and on social media in order to safeguard business, as regional Internet connectivity and social media use continues to soar.
Addressing delegates, Hoven said: “This part of the world has the highest number of travel agencies per capital but 50% of them are at risk of losing their business within five years if they do not innovate their business model. To truly achieve this, they’ll need to address the challenges in digital transformation and meet their target audience on their preferred platform. Online is no longer a different sector of the industry, but can become a platform for both traditional advisory and self-booking models to co-exist on.”
Travel agencies across the world have lost significant revenue streams over the last decade due to the emergence and dominance of OTAs. However, according to data published in January 2017 Middle East Internet penetration is up 15% year-on-year, with the regional total rapidly approaching 150 million connections; the highest growth rate in the world currently.
Coupled with world-leading social media use, this presents multiple opportunities for traditional travel agents to move into the digital space, a move which will regain their market share and also bring new business opportunities from the region’s 12.8 million Millennials.
Before the emergence of OTAs and self-service airline tickets, travel agencies earned an average of 9 per cent commission on each ticket sold, with a target of six ticket sales a day in order to generate sufficient profit margins. Today, each agent has to sell dozens of tickets a day to generate the same returns.
Acknowledging the game changing potential of both Millennials and expatriates on travel in the region, Hoven added: “The GCC and Middle East is a fast-paced region and is making heavy investments in travel and tourism across the board, which means the travel agents and airlines must follow suit.
“The high proportion of expatriate and Millennial residents in the region, coupled with generous holiday allowances in the public and private sector and increased connectivity with major and emerging global destinations, drives unprecedented demand for travel.”
As agencies compete with a wider spectrum of businesses, Hoven advises a focus on value-based packages, increased transparency in pricing structures and a greater understanding of target markets and the platforms and travel brands they use.
Hoven concluded: “The digital journey will only work if you know who your customer is. For example, if your customer target base is Gen Y you need a digital booking and payment system and you need to connect with them through stories and compelling content, predominantly on social media.
“Many hotels and airlines have created a customer experience online that fails to meet the same levels of client care as the offline experience. This offers huge potential for travel agencies to offer a better online experience, or add value to the offline experience for those who prefer to book that way.”