I have been lucky to have been part of the hospitality industry for the past two and a half decades.
I recall a very specific moment around 2000. I was in the sales office of my first Ritz-Carlton opening where the team was discussing the volume of reservations that week from Booking.com. My senior team members thought that this would bring travel agencies to their knees and that we would see a major change in the landscape of the travel industry in a couple of years.
This wasn’t completely incorrect, as online travel agencies definitely have had an incredible impact on how hotels get booked and have of course evolved to offer bookings for flights, cars, tours and much more. But this did not bring to an end the role of the travel agent.
A couple of years later, on March 31, 2002, I was reading an article in the Los Angeles Times on how the American Society of Travel Agents denounced a move by Delta and all major U.S. airlines to stop paying commissions to International Air Transport Association-certified agencies. They called this an ‘anti-consumer’ move and lobbied to have it blocked, but failed. This then spread internationally, and it has been the norm for some time that airlines do not pay any commissions to travel agents.
Slightly more recently, about six years ago, Marriott International announced that it would no longer be paying commissions to travel agents. Many of the other major hotel chains soon announced similar moves.
Even more recently, travel agents were relying heavily on their preferred bed banks who had static contracted pricing. In some cases, rates were lower than the published rate of hotels, and they were able to showcase value to their customers and make some margin at the same time. But in a world where rate parity is the sword for revenue and commercial hotel leaders to live and die by, it is becoming nigh on impossible for a travel agent to find a hotel at a better deal than the end consumer. This is due to static pricing coming to an end in all major markets and of course all major chains, along with many of the smaller ones.
Looking out to the rest of 2024 and beyond, does this mean we will finally see travel agents disappear?
I honestly don’t think so. I believe they will continue to pivot; some will become more focused on high-end travel and charge a management fee, some will become mini TMCs or travel management companies, servicing small and medium-sized enterprises and large local corporations. Some will focus on meetings, incentives, conferences and exhibitions business. Some will work with tour operators to buy packages for holiday makers. A few will make a move on the tour series bulk travel model, and some will add inbound to their repertoire and morph into destination management companies. And some will do all of the above under one umbrella.
In all cases, this type of conversation cannot be generalized globally as there are markets where travel is very frequent and the use of travel agents has not been relied upon for many years now, such as the U.S., United Kingdom, Singapore and Australia. But some areas of the world still rely on travel agents, such as the GCC, Latin America, Russia, China and Japan.
The thought of going to a third party to get a better deal is not the case; it’s all about the service, expert recommendation and convenience of doing everything with one party rather than dealing with multiple payment platforms and websites.
Hotels don’t seem to have an appetite to issue static agreements anymore, and not just for the leisure and travel industry, but also for corporate accounts. They are pushing everything toward the dynamic pricing model all in the name of streamlining their pricing structure, reducing labor-intensive processes and to manage their rate parity across all segments and channels.
If you would look at the average daily rate of the luxury and upscale hotels within places such as Dubai, New York City or Singapore for 2023, you will see that best available rates are actually higher than all other "negotiated or contracted" segments. With all the above insight, you might be tempted to think that focusing efforts through online distribution channels is the most profitable and more advertising and effort would be pertinent.
But you would be mistaken. Like everything else in life, balance is key. That is why revenue managers have become directors, and a significant portion of the global teams leading the biggest brands from a commercial perspective are neither sales or marketing people. Rather, they come from a revenue background, because it has become the most complex and significant discipline to the success or failure of a hotel or chain.
Contracted rates still count, MICE counts, corporate bookings matter and even the lonely travel agent contributes to the demand picture, especially for larger and more complex hotels. A healthy mix between all segments allows for a base occupancy, and this is one of the most important reasons for the best available online rates having the highest average. Not because they are higher, but because it is possible to yield this channel more easily than its now smaller siblings.
Reliance on specific channels also hurts a hotel’s other revenue-generating streams, can affect its forecasting abilities, negatively affect its day-of-week and seasonality business levels, and can even damage its room-type utilization, especially for the more expensive rooms.
To be successful in 2024 and beyond, the key in my opinion is diversification. Every source matters. Sales calls matter, trade shows matter, contracted rates play a part, MICE is important and travel agents still can play a part in the great big puzzle that hoteliers are having to deal with. They are still relevant and here to stay, in one form or the other.
Finally, remember that people-to-people business interactions still have a place within the hospitality industry and leaders need to ensure that their teams are sharp, well-equipped and trained to deal with their clients and marketplace. Doing business today is much more difficult and complex than five years ago. Our clients are getting smarter and harder to manage. Salespeople must improve and adapt.
Tareq Bagaeen is founder of aQedina.com and a veteran hotelier with more than two and a half decades in the business. He previously worked for five different Ritz-Carlton properties, then with with Hyatt, Banyan Tree Hotels and The Rezidor Hotel Group, all in senior property and corporate leadership roles covering Asia, The Middle East & Europe.
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