Kenya Travel Agents will have to quickly adapt, if they are to survive in a rapidly changing business environment.
This is according to Mr. Sunil Kumar, President of the Universal Federation of Travel Agents Association (UFTAA), who spoke to KATA members during a breakfast meeting, held in Nairobi recently.
“The travel industry like many others has witnessed dramatic changes since the arrival of the digital revolution, bringing with it disruptions that have changed the form and practice of the trade. Matters have been complicated with the recent changes announced by IATA that are set to fundamentally alter the travel trade as we know it today” observes Mr. Kumar, who is also the President of the Travel Agents Association of India (TAAI).
Tourism and Travel is Growing
Amidst the changing landscape, global travel trade has continued to record impressive numbers year on year pointing to an industry that is set for exponential grow in the next decade. “Global travel tourism is currently valued at 7.6 billion dollars, according to statistics of 2016 and growth continues. It has 292 million people in employment, 3.9% annual growth predicted year on year. Destinations worldwide received 561 million international tourists in 2016 which is 21 million more than 2015. On average 3 million people are travelling everyday” he says. By 2030 it is estimated that 4.5 billion will be travelling.
The Asia-pacific region is experiencing a boom in travel driven by a younger, urbane and a growing middle class population keen to explore the world. In 2016, 135 million people travelled out of China alone with another 25 million leaving India for overseas travel. This trend is likely to spread across the other developing countries of the world.
Currently, the African continent contributes a paltry 2.2% of the global travel industry meaning that focus will shift to the continent in a bid to woo new travellers. This presents a huge business potential for Travel Agents in Africa. “We as travel agents need to understand the future in order to connect with it” says Mr. Kumar.
From Online to Mobile
Travel agents need to understand that a mere presence online is not good enough. It is surprising that there are travel agents who still don’t have websites in this era when business has shifted online. In fact with increased desire for personalization, the trend has now moved to mobile devices. “We are seeing an emerging trend where most of the travel searches are happening through a mobile device. However, transactions are being closed outside the mobile channel probably through desktops or traditional travel agents” observes Mr. Kumar.
In a rapidly changing environment like this, it is apparent that the future workforce will need to be aligned to relevant skills set. It is therefore important for travel agents to ensure that they have in place personnel with necessary skill sets to navigate the digital world. Having realized this shortcoming among travel agents in India, the Travel Agents Association of India (TAAI) has signed an MOU with a technology company to bring these services to their members. “TAAI has about 3,300 members out of which less than 40 are online. About 50% of these are in very small towns and they don’t have large markets to invest money on online strategies. We want to make them as capable as expedia.com. The company will help these agents set up a website which will have a portal integrated to the GDS, interfaced with local carriers and provide a payment gateway directly connected to the agent’s bank account. This is an effort to empower travel agents with online capabilities” explains Mr. Kumar. A quote by a speaker at the World Economic Forum concludes his view on surviving the new transformation, “in the new world, it is not the big fish which eats the small fish, it is the fast fish which eats the slow fish”. I believe that as travel agents we need to be fast and quick to survive the onslaught.
IATA Changes Muddies the Water
In an effort to remain relevant and forestall the dwindling number of travel agent interested in its accreditation programme, IATA is seeking to move away from its “one size fits all model” through the introduction of the New Generation IATA settlement system (NEWGEN ISS). The new system proposes to introduce four key changes- a new accreditation model, a new holding remittance capacity, introduce a new payment model through IATA Easy pay and new Global Default Insurance Programme.
The new accreditation model literally opens accreditation to the many non-IATA travel agencies that have stayed away due to the stringent accreditation requirements. In addition, any large corporate can now become a travel agent because they will be able to get IATA accreditation. This is a real threat to our business.
Consolidation is the Future
To address the concern of shrinking revenue streams for travel agents occasioned by the decline of commissions from airlines, consolidation is taking root in many markets. In India for instance, if you had a hundred agents sitting in a room and asked them how many of them ticket from their offices, you will find more than 70% book the tickets but they are issued elsewhere. Why is this case? This is because of what is called PLB-Productivity Linked Bonus, which has taken over commissions in India, says Mr. Kumar. “For example, Emirates may be offering 1% commission on a ticket, but they are offering 5% PLB on the same ticket. So if I am a small agent, I issue an Emirates ticket in my office, I receive only 1% commission. But because I buy from a consolidator who is a champion of Emirates, I receive the 1% commission plus 4.5% PLB,” he further explains.
Consolidation started in the USA market and has grown so big in India to the extent that that 80% of ticketing in India is done by 20% travel agents. “This is a new trend and it is not too far from happening in this market”, he says. Consolidation is what the airlines are encouraging because they do not want to invest money on marketing to many agents but rather want to focus on fewer ones.
In his parting shot, Mr. Kumar asks travel agents to be more creative and adventurous in order to adapt to the changing environment. “If you run, you stand a chance of losing, but if you don’t run you have already lost. This an exciting time. The travel industry is growing, the trends are very interesting, and we have to find ways of making money by ensuring that we offer value to our clients. If you want to stay in this industry as leaders then we need to change our approaches and embrace change.Back to news articles