German travel agents are successfully defending their position but must respond to new challenges, fvw’s Ira Lanz says.
You have to hand it to travel agencies in Germany. They don’t give up easily. Once again traditional agents have defended their market position with stable sales and the number of branches has even increased slightly. About 400 agencies closed their doors during 2016 but even more opened for business. This was despite the challenge from OTAs which generated mid-single-digit growth last year.
What’s certain is that nowhere in Europe are there so many travel agencies as in Germany. This is a good sign. There are still plenty of customers who want to book the best weeks of the year in a travel agency. This view is shared by tour operators, particularly the top three who all want to expand their controllable sales distribution channels in order to sell more of their high-margin and information-intensive holiday products.
But big challenges remain. The rapid digitalisation in all walks of life brings the danger that traditional agencies will become outdated. For example, compared with technology giants such as Amazon, Google & Co, travel agents know remarkably little about their customers. This is hardly a surprise given that consumers only visit a travel agency 1.3 times a year on average. The instructions from agency head offices to update customer data urgently in order to improve marketing reflects the concern that customers could be lost. Moreover, many agencies show little interest in experimenting with new technologies. For example, Virtual or Augmented Reality are not being used in many agencies yet. Instead, many are relying on their core competence of providing quality advice.
But this is no longer enough in view of competition from the internet. Online sales are growing faster than in traditional outlets. OTAs are scoring in particular with bookings for crisis destinations such as Turkey or Tunisia. The new package travel directive, which will enter force on July 1 next year does not make things easier. Counter staff will have to give customers forms to cover their legal position, which will not necessarily contribute to creating confidence. On the internet, in contrast, one click will be enough and the booking can go ahead.
The internet is challenging the business model of travel agencies more and more. Flights and hotels have long been mostly booked online. Even package holidays – the core business of travel agents – are expanding more and more in the internet.
For travel agents, this means two things. On the one hand, they need to switch sales more strongly away from ‘me-too’ standard offers towards high-margin and advice-intensive products such as luxury holidays. On the other, they need to present themselves digitally as innovative retailers with websites, apps and so on. One thing is certain: customers are already digital experts.