Online travel firms 'trashing margins'

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• Do whatever you do best...
  
  

  Online operations are by their nature low cost and can therefore afford to operate at lower margins. If agents can't compete they have to find some other way to differentiate themselves. Product specialisation (I agree, Fleur) with in-depth knowledge and personal service is a real alternative to the often bewildering world of online for the client. And niche products are much less price-sensitive.

  By Gary Grieve, Monday, June 30, 2008
• I agree with Paul Riches
  
  

  Its a fact the only winner is the customer. Travel Republic have drastically cut margins and are attempting to squeeze other agents out! You have to have Exclusivity. However, the bed banks also have to take responsibility because they give agents like Travel Republic bigger commission rates than they give the smaller agents, so how can they compete? This is why, I decided to get my own exclusive product which no other bed bank has got or can have. From my 3 years experience as an agent they do not appreciate your business. My advice is be different and get your own product.

  By Fleur Jardim, Monday, June 30, 2008
• Separate Suppliers from Passengers
  
  

  As most now realise, individuals e-mail addresses and cell / hand phone numbers are gold. Unfortunately many travel product suppliers have few morals and will happily steal passengers from agents. Travel agents should use special e-mail addresses - NOT their own agency address - such as G-mail, which are given to product suppliers such as air and cruise lines. Return communications can then be monitored AND censored by the agent. This way agents can catch any specials that are fed to your clients by suppliers trying to cut you out of the transaction chain. A word of warning. This requires frequent monitoring so that messages are not delayed too much. For high revenue customers this service can help you retain their custom.

  By Jon Hewson, Thursday, June 26, 2008
• ..its not just supply and demand...
  
  

  In my opinion the DP business model has broken down somewhat in some destinations and is therefore is no longer attractive. Supply to many destinations this Summer has actually fallen and Tour Operators (such as mine, Discover Egypt) do not have a need to sell cheap flight only deals. There is still a need for discounting of 'lates' but I am able to sell a package (to Egypt for example) to the customer much cheaper than most on-line companies can offer. The online DP model is now not always attractive against the conventional Tour Operator package, and I can understand that these guys have had to reduce margins in order to try and compete. Even at that, many online companies are cheating (perhaps inadvertently) and offering a less competitive deal in order to maintain margin. The trusting online customer is being taking advantage of in some cases - quote Kane Pirie 'There are online companies who still see the customer as an open wallet.'! He's right. Doug '✠I agree 'technology isn't everything' and you still need to have the right product at the right price for which(David..) 'travel industry expertise' is certainly a valuable asset.

  By Philip Breckner, Thursday, June 26, 2008
• Recession, what recession?
  
  

  The on-line community is not at all responsible for "trashing margins"the whole upsurge of new accommodation suppliers had to be able to compete and naturally, rather than sell on high quality value and service, price becomes the lead factor. The Internet is exactly the same. This is simply evolution within the industry and we last saw that with tour operators beating each other up with low margins and now its the turn of the on-line dynamic packaging agents but never fear as history has shown us, the market will level out and once this happens, margins will recover but not at the same levels as before simply because the Internet era is upon us now and surely with 10 years or more of advance warning, it can be no surprise? Traveltek has seen aggressive but steady increases in online bookings over the last five years and this week saw an even bigger jump as we reach the "lates" season finally! This is travel. Get on-line and I'm afraid, it's not the future any more; it's just the way it is.

  By Kenny Picken, Thursday, June 26, 2008
• Transfer Operators already sell direct
  
  

  If you can't stand the heat - get out of the kitchen. As an independent transfer operator www.chamexpress.com we specialise and are already experienced in driving customers to our site and enjoy year-on-year growth. Middlemen like A2Btransfers.com are simply an un-neccesary agent/middleman.

  By andrew Martin, Thursday, June 26, 2008
• Online travel firms ARE trashing margins but this is not new...
  
  

  Now this is a subject that is very close to my heart! Ben Braude is absolutely spot on the money! Travel Republic are one of several large companies who are using their developed muscle to bring down margins that has a knock on effect that is impacting on all types of agents in the UK. I don't see how anyone can dispute this issue. As for David Burdon's comment: It is inevitable that in a recession margins will fall to a level close to marginal cost. There is overcapacity relative to underlying demand. This may be true in itself but as a statement is wide of the mark in relevancy to the subject matter of the article. Business could be booming and the online travel companies that have this volume sales 'kill the opposition' low margin approach to getting volume bookings would be doing exactly the same. This has been going on for quite a while and because of the increase in ppc costs it is becoming harder for medium and smaller companies to be able to compete with. The real heart of the problem is that regular customers of travel agents are being lost hand over fist to these companies. These clients that find the lower prices then expect their own travel agents to compete on price AND offer the usual advisory service. It is obvious that Travel Republic are using volume discounts from bed bank providers and rather than earning more are passing this discount on to the direct booking public through low prices in a totally calculated way. It's easy to do price checks and comparisons on the properties they feature if you can work out the supplier, which in itself is quite easy. In order to price match with TR and other similar companies we usually have to go as low as 5% commission (or less). Trouble is when all is said and done its a market ploy that is working. It's happened with airline tickets, attraction tickets, car rental, travel insurance and its now the turn of accommodation. Could go on for hours on this subject but its a bit like talking about politics - it gets you nowhere!

  By David McGregor, Thursday, June 26, 2008
• technology isn't eveything
  
  

  'Suppliers will find a way to reach the customer direct so they won't need tour operators, bed banks or even transfer companies like ours '✠they will sell direct to the consumer.' This is nonsense. You can have the best site in the world, but if you don't have visitors then it's worthless. Everybody now knows that if you're not on the first page of the search engines then you might as well not bother. There are simply too many individual suppliers for them all to appear on the front page, so aggregators of some form are here to stay - by bulking up on the supply they can offer they can to muscle out the smaller fry, both in terms of superior SEO and marketing budget and also because search engines like a site with depth. And - while I'm on the subject - customers like the depth as well. Have your tried going through small site after small site after small site looking for what you want but not finding it?

  By andrews doug, Thursday, June 26, 2008
• Margins
  
  

  It is inevitable that in a recession margins will fall to a level close to marginal cost. There is overcapacity relative to underlying demand. Demand is stimulated to meet supply by cutting prices. The weak and inefficient fall by the wayside. I'd agree with the character who said its about knowing how the new - search powered - market operates rather than a reliance on so-called travel industry expertise.

  By David Burdon, Thursday, June 26, 2008