When was the last time you went to a travel agent? Chances are, you have not been to one in years.
Where did they all go? I am told, they all became real estate agents!
Kidding aside, the story of the apparent demise of the travel agents has a key lesson for intermediaries in this new world order. Let me explain.
The travel agency network was the distribution channel for the travel industry – airlines, hotels etc. used them to sell their “products” to the end customer. The business model was that of the classic retail intermediary: a fee – built into the price - for each product sold. Customers bought from the travel agents because of convenience, service and choice. Over time, relationships developed that are hard, if not impossible to break. Airlines and hotels – the “product manufacturers” - preferred using travel agents because they did not have the relationship with the customers and to avoid getting into a high transaction business that was outside their core competency.
For decades, this model worked. Along came the internet. It was ubiquitous. It provided the capability for transaction processing, including buying tickets etc. Customers loved it because they had unprecedented choice and convenience.
Product manufacturers loved it because they lowered their cost of doing business…
1) Customers, willingly one might add, did all the “front office” work! They booked their own travel. They checked their own flight information. They provided service to themselves!
2) Out went the fee paid to the travel agent and with it, the travel agent.
3) And with the travel agent also went the expensive operations to maintain the vast network of travel agent relationships!
…at the same time getting what they always wanted – a direct relationship with their customers!
It took some time but the traditional business model of this key industry intermediary – travel agency – was destroyed in favor of business models powered by online transactions:
1) Direct to customer: www.aa.com, www.delta.com etc.
2) Independent online intermediary:
a. Predetermined prices: www.Travelocity.com.
b. Auction model: www.Priceline.com
3) Industry online hub/consortium: www.Orbitz.com
4) Specialty online intermediaries: www.cheaptickets.com, www.travelzoo.com, etc.
It appears that the travel agency disappeared. Did it?
It turns out that the rumors of the demise of the travel agents are vastly exaggerated. The wise ones saw the writing on the wall and did what true innovators do – they adapted. Those who did not only survived but also thrived.
Ironically, with the emergence of the online transaction, there was also the rise of “personalization”. The former brought efficiencies the latter promises to take away.
Simply stated, personalization is, “have it your way” or “build to suit”. Once, the online customer got used to the convenience of online shopping they demanded more. They wanted to be served to their preferences!
For manufacturers, gone are the days of “mass production”. Henry Ford explained this concept very eloquently, “you can have any color you want, as long as it is black”! There are obvious efficiencies in mass production but “off the rack” is as outdated today as the travel agent. Now, customers want the color they want. And they are not willing to wait – everything must happen in internet time.
The new imperative is, “mass customization”. The customer provides their preferences – directly or through customer data analysis – and the product must be built to those and delivered in the same time as a mass produced item. What now?
To address this new imperative, manufacturers could not turn to the internet. Well, not yet. Because, the programs needed to deliver this capability are not devised yet. Also, there is no substitute for human service yet. Also, customers who want them are willing to pay for these services.
So in came the travel agent; this time providing the capability for “custom tailored” travel.
Traditional players such as Philadelphia based Rosenbluth Travel turned to complex corporate travel planning. Did very well and got acquired by American Express.
And a whole new industry segment took shape. “Bespoke” travel here. Exotic vacations in far away lands can now not only be booked but also at the last minute!
Want to go for a luxury trip? Try www.customtravel.com.
Want to go to Rajasthan? Try www.Knocktravel.com.
What a tailor made trip to China? Try www.benmo.com
The list is endless. Try googling on the word. I did. Here are the results: http://www.google.com/search?hl=en&q=bespoke+travel
So is this just a feel good story and a celebration of the life of a travel agent or are there lessons to be learnt? Are these lessons only for the travel industry?
As you may have already figured out, these are rhetorical questions. The lessons are plenty and industry independent. Here are a few:
1) Keep an eye on your environment. What you do not know can and will affect your business
2) Disruptive technologies require fundamental change in your business model. How many travel agents would have survived had they put up their own websites? (Hint: unless they put up Travelocity.com, they would have done little if anything to save themselves)
3) “Mass customization” is an imperative across industry. Learn what it is and how it will affect yours. More importantly, anticipate the changes it will bring to your business model. Then, create a plan to address them.
Sourabh Hajela is a management consultant and trainer with over 20 years of experience creating shareholder value for his Fortune 50 clients. His consulting practice is focused on IT strategy, alignment and ROI. For more information, please visit www.StartSmartS.com. Or feel free to contact Sourabh at Sourabh.Hajela@StartSmartS.com or post your questions at www.CioIndex.com/forums/index.asp.