Tuesday, November 29, 2005

Dynamic packaging: Time for agents to act

When will travel agents ever learn that the business world has moved on?
Thomson's announcement that it is cutting commission to 7% - followed in a blink of the eye by Thomas Cook and First Choice - took no one in the industry by surprise. MyTravel has remained non-commital but it's surely only a matter of time before it, too, follows suit.
And almost as inevitable as the cuts themselves was the response from high street retailers. Anger and a vow not to accept 7%.
While the anger is understandable to a point, agents need to realise that the business world has been turned on its head in recent years, a change fuelled largely by the Internet.
Thomson, First Choice and Thomas Cook have all spent millions developing e-commerce strategies and driving business online. They are enjoying considerable success, with Thomson and Thomas Cook in particular among the most popular online travel brands.
By 2008 Thomson predict 50% of its mainstream package business will be booked on the web with Thomas Cook aiming to drive 20% of sales online as early as next year.
These are not small numbers.
This, of course, means that traditional high street agents - particularly third party ones - will be a far less important avenue of distribution for mass market operators.
This is the way it is. It is not operators becoming spiteful and seeking to deliberately put agents out of business. They are attempting to bring their holidays to market at the cheapest possible cost which may, or may not, result in cheaper prices. And if that means cutting commission, so be it.
What we may now see, or at least what we should see, is a genuine explosion in dynamically packaged holidays. Until now, the growth has been relatively low-key, despite what some people may claim. Yes, it's been growing, but we're still talking low numbers.
That could now change. If agents can no longer afford to sell Thomson and the like at 7%, then it's simple. Don't.
There are dozens of companies clamouring to work with agents to develop dynamic packaging and all the main consortia have developed systems to cater for this market. If the systems are half as good as head office claim they are, then members should have no trouble building a package from scratch and earning a decent margin.
The traditional agent/operator business model is effectively at an end, at least with the mass market firms. It's time for retailers to stop talking about dynamic packaging and actually do it. And the commission cuts have given them the green light to do so.

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