As Internet bookings rise, travel agents are fighting back
Last month, Eric Tan sold his thriving storefront travel agency in Vancouver’s upscale Kerrisdale neighbourhood to set up shop on the second floor of a quiet medical building, away from walk-in traffic. It’s not that Tan, who specializes in Alaska cruises, wants people to stay away—on the contrary, he needs drop-in business. But now, instead of customers arriving through the front door, Tan is counting on them coming in over the Internet.
Tan launched his Web site (www.cruisealaska.com) in September, 1996. Tie made his first sale from the Net the following January. “By the end of 1997,1 noticed it was a very important part of the overall business,” he says. By mid-2000,
in fact, leads generated from the Web had grown to the point that they equalled the business ofTan’s Kerrisdale storefront. Believing he could not divide his attention and excel in both arenas, Tan decided to concentrate on the Internet half of the business: “I had to focus on one or the other. I thought the Internet offered bigger potential.”
Tan’s bet is backed up by analysts who predict exponential growth in the online travel business. As Canadians turn to planning winter holidays in the Caribbean and other sunspots, many will use the Web to research trips, book tickets, reserve hotel rooms or buy package vacation tours. And although e-business for travellers is still in its infancy, more travel is sold over the Internet than any other consumer product, according to Cambridge, Mass.-based Forrester Research
Inc. “We are expecting that in 2000, $662 million will be spent for travel on the Web by Canadians,” says Henry Harteveldt, a senior analyst with Forrester. “It could go as high as $4.2 billion by 2004.”
Beth Hickey is one consumer sold on the idea of buying airplane tickets on the Net. “It kind of saves the hassle,” says the 23-year-old Montreal marketing assistant. Hickey booked her first online ticket about a year ago. While “just surfing around” to check the best price for a trip to Europe, she found a $750 return flight from Halifax via Reykjavik to London on Icelandair. Hickey says that with the technology available at her fingertips, she rarely uses a travel agent and is unlikely to in the future. “It’s almost as though the need for a travel agent is gone now,” she says.
The Internet is also affecting where consumers purchase their tickets. Traditionally, travel agents have managed approximately 80 per cent of Canadians’ travel plans.
On the Web, consumers have a choice: to use an online travel agent, such as Travelocity.ca or Exit.ca, or to go directly to the supplier, such as Air Canada. The early numbers suggest about half of consumers go direct. At Air Canada, for instance, about four per cent of its tickets are bought through electronic channels, says Marc Rosenberg, Air Canada’s vice-president for sales. About two per cent are bought directly from the airline’s site.
So where does all this leave the traditional travel agents? They were already feeling beleaguered by dramatic cuts in commissions. Agents used to receive about 10 per cent of the price from the airlines on every ticket sold. Today, Air Canada, like most of its U.S. counterparts, pays 5 per cent, with a cap of $60 on domestic flights and $ 140 for international. The embattled agents’ response has been to charge a service fee of between $5 and $40 to their clients. Now, customers with access to the Web—typically the wealthier, better educated consumers, who are more likely to travel—can bypass agents altogether.
It’s an issue the Association of Canadian Travel Agents is tackling head on. In a $600,000 ad blitz to be launched this week, the association is telling Canadians: “Connect with the world’s most powerful travel search engine ... your travel agent.” The campaign argues that agents have the time and expertise to find deals not readily available to casual Web surfers. Randy Williams, ACTA’s president and chief executive, is the man pressing the case. “You could probably do your own income taxes,” he says. “You could probably sell your house without a real estate agent. You can cut your kid’s hair, too.” Williams, who left a post with Tourism Saskatchewan to head up the travel agents’ association 10 months ago, says he wanted to work on
WHERE TO GO Some key travel Web sites catering to Canadians: www.aircanada.ca www.bonvoyage.com www.canada3000.ca www.exit.ca www.travelocity.ca www.travelprice.com www.tripeze.com
the retail side of the business while it was undergoing radical change. “I don’t see it as me overseeing the end of the travel agency industry in Canada,” he says.
Williams insists his members need not worry—even though he does not contest a common industry prediction that the agents’ share of the business will drop to about 60 per cent. “That’s obviously a little disconcerting to travel agents,” Williams admits. Still, he adds, tourism and travel is a booming segment of the economy. “There will still be a need for a storefront, sun-destination location in Selkirk, Manitoba,” says Williams. Travel agents need to specialize, either by focusing on a specific local clientele or by finding a niche, he says.
Paul Verhoeff, chairman and chief executive ofTripeze.com Inc., one of Canada’s few independent travel Web sites, says
his own experience convinced him of the future of the travel e-business. In July, 1997, Verhoeff left his post as co-owner of Uniglobe travel franchises in Calgary and Vancouver and set off with his wife Cobi and their four children for a yearlong tour of the world. They travelled through Europe, Africa, Southeast Asia and the South Pacific. In the mornings, the younger Verhoeffs did schoolwork with their mother, while Paul planned the next phases of their trip. He used the Internet to do research, and to make bookings and reservations. “I just thought, Wow, what a tool. Everything is available to me wherever I am’,” Verhoeff says. On his return in 1998, Verhoeff establishedTripeze.com. He says he expects fully half of all travel arrangements to be booked online in coming years.
For the time being, though, travellers are using the Internet mainly for research. As Forrester’s study says, they are lookers, not bookers. Tan agrees. “The Internet hasn’t matured to the point where people are willing to spend $10,000 electronically,” he says. “You almost always end up in a phone conversation.” But, as Canadians prepare for the annual mini-migration to warmer climes, their growing comfort level with the Internet will lead to more Web-booked travel plans.
The story you want is part of the Maclean’s Archives. To access it, log in here or sign up for your free 30-day trial.
Experience anything and everything Maclean's has ever published — over 3,500 issues and 150,000 articles, images and advertisements — since 1905. Browse on your own, or explore our curated collections and timely recommendations.WATCH THIS VIDEO for highlights of everything the Maclean's Archives has to offer.