Is booking travel over the internet causing the decline of high street travel agents?

University Degree Business and Administrative studies

Emma Forward

Student Number: - EE0802224

Assessment No 1

Book 1 – Understanding the Travel and Tourism Industry

Is booking travel over the internet causing the decline of high street travel agents?

During the decade leading up to 2007, ways of buying tourism products as changed a lot. Ten years ago people choosing a holiday more often than not a package holiday, by going to the travel agent and choosing one from a number of brochures and after chatting with the travel agent. Many people still chose this method but a lot more people are buying packing holidays, more people now buy online, or over the telephone, through teletext. People tended to find it cheaper to and more flexible to buy their flights from one internet site, their accommodation from another and book a hire car with another site, rather than buying a package holiday out of a tour operator's brochure. They are not always financially, protected when booking travel separately.

Holidaymakers are "turning their backs on the traditional high-street travel agent in favour of booking trips online", reports sundayherald.com.

“Between 2000 and 2004 there was an 11% drop in the number of bookings made at travel agents, with only 47% of overseas holidays now being reserved through a high street travel agency, according to figures from market researchers Mintel. Many people book breaks by phone, and just 31% of overseas trips were booked in person in 2004," says the report. "The research shows that traditional sun, sand and sangria package holidays are the main type of trip booked on the high street, with just one in five domestic trips booked at travel agencies."

Richard Cope, international travel analyst at Mintel, reportedly said consumer confidence in the internet was driving people away from booking in person. "Mintel's research shows that almost one in five UK holidays are now booked online, with consumers becoming increasingly confident about making their own travel arrangements."

Mintel figures also indicated that, overall, more holidays are being taken. In 2004 65% of British people went on holiday, compared to 62% in 2000. Some 44% of holidaymakers now take more than one holiday a year, up 14% since 2000. Altogether, Britons took 43 million holidays abroad
in 2004.

Technological changes within tourism surround several different factors from medical advances to the innovative space tourism. Similar to tourism, technology is an ever changing and sometimes unstable business. Better communication, transport and safety have encouraged new consumers to the industry. Improvements in water supply, medicine and knowledge have meant areas are opened up which were not possible before technological advances. In today’s society in which a consumer wants easier, quicker and cheaper service only technology has helped tourism fulfil the customers demand.

Another massive effect on tourism is the rapid increase in online booking that has given consumers more opportunity to make a holiday.

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Another massive effect on tourism is the rapid increase in online booking that has given consumers more opportunity to make a holiday.

Through technological advances, online booking has been one of the biggest factors in affecting tourism, leisure and recreation in today’s world. There were 37,600,000 Internet users in the United Kingdom (representing 62.3% of the population) in March 2007, according to Internet World Stats. This was up by 144.2% compared to 2000. (, March 2007) and a new Google Survey has shown that surfing the web has topped watching television as Britain’s favourite past time. On average residents in the UK spend 164 minutes online every day compared to 148 minutes watching television (Daily Mail, Friday 10th March 2006). This shows how much the internet is now an integral part of life and has had an effect on other aspects influencing the tourism business.

More and more people are now booking their holiday on the internet, as many people are looking for a better priced deal than they’re being offered by their travel agent. Both holiday and airline bookings have not dramatically rose in sales from the travel slump of 2001-02 due to the massive consequences of September 11th and the threat of terrorism which has increased (it saw similar slumps although smaller after the Madrid bombings and 7/7 terrorist attacks). The Iraq war, the SARS/bird flu epidemics and very consistent hot European summers have persuaded the usual long haul travellers to stay at home.

This has seen a loss in sales and therefore profits causing one of the hardest aviation crises of the industry. The number of job cuts that were announced in 2003/04 was well over 100,000 according to BBC News, November 2005. Routes had been slashed and several European carriers were barely clinging to life. The turmoil in the industry went from Aer Lingus to XL Airways, but times were changing and the industry needed something new. Survival tactics started to emerge and online travel started to show evidence of bucking this gloomy trend.

The , as cited in a May 21, 2002, Financial Times article had cited for many years that online spending was increasing and predicted it to triple at the end of the decade. Looking at e-commerce data overall, the firm counted travel as the biggest online sector, followed by electronic products and apparel. IMRG also said British shoppers were buying larger and more expensive goods online, such as furniture and kitchen appliances. This showed a large gap in the sub-market that needed to be exploited.

At the start of the boom these were seen as survival tactics by the airlines and the government also pushed for more progress in online booking to make the travel industry more prosperous. The economic realities forced travel companies to be more efficient in running their business. Websites, for example were able to promote the latest ticket prices, particularly at a time when they were being slashed on a day-to-day basis which was used to tempt travellers back into the air. Similarly travel sites e-mailed a wide customer base with relative ease to promote special deals. It is seen as the cheapest method of booking a holiday, the LogicaCMG (a marketing body) has said that phone bookings typically cost about £30 to service. By contrast net bookings cost around 75p.

One of the biggest online travel sites Expedia, took an initial knock from 11 September, but then saw its transaction volumes recover by 80-85% during October.

“Like every travel company, we experienced a downturn, but we then recovered a lot more quickly than the traditional industry” said James Vaile, managing director of Expedia in the UK.

Online travel sites are also well positioned to exploit the recent procrastination by consumers in booking holidays. People are booking later than usual in recent years and the internet is seen as the obvious and natural place to hunt down last-minute bargains. As this bar chart shows travel sales online rose rapidly from 2006-2007 and it is expected to continue to rise to over $30 billion.

The consumers weren’t only using the internet to book their holidays but also to research and gain knowledge of the destinations they wanted to go to. The search engines were flooded with searches over cheap flights, accommodation and new destinations (as shown in the rankings). From the bar chart below it shows that web-search is the preferred method of obtaining travel information with it being preferred nearly twice as much as personal recommendation, the second most preferred method. This is then followed by TV programmes, but the travel agents became the fourth option of consumers to collect travel information. Web-searches are high due to people liking to make their own decisions at their own pace and this can’t be done in travel agents where they are pushed, poked and pressured. This is unpleasant for the consumer and has changed the trend in which consumers went to travel agents for advice, whereas now they would rather use the internet.

As this pie chart to the left shows the internet has had a huge impact on the booking of a holiday, with 79% of all booked holidays using the internet in the process. Also, the internet has seen a large increase in the number of “last minute" business as many tourists feel it is better-placed and they can search for the best priced, most suitable holidays or excursions. Furthermore, since the growth of the internet, online advertising has been used as a huge marketing tool, where holiday and travel providers can target large quantities of potential

customers and keep advertising costs low. This has also been used to great effect as they appear to be a successful method and an efficient way of gaining business from the wallet-conscious consumers, whereas high street advertising receives less notice.

Moreover, the internet has caused the high street travel agencies to close, therefore creating job losses within the businesses. This is mainly due to the fact that more people are booking direct with the holiday providers, thus cutting out the middle man and saving money by doing the research and booking themselves. This is usually done by using the internet or telephone booking where the overhead costs are much lower as an outlet has to be staffed and incur running costs such as electricity bills and also because of the larger volumes of people that are able to access the service.

A recent example of this is was in 2001, when Airtours, the UK’s largest tour operator had to cut one-in-seven of its high street branches in an effort to return to profitability. According to finance director David Jardine, around 120 shops going under the name “Going Places” were closed as the business stated that they were finding there was an “increasing trend in customers wishing to book direct".

On the other hand, online companies such as Expedia.com have seen their profits on the rise over the past few years as would be expected, although they had not anticipated such a large growth. For the last three months of 2001, Expedia saw its net income surge to $19m according to BBC News, compared with a loss of $2.6m in the same quarter of 2000 and also the firms revenues were in excess of $80 million for 2001, over double that for 2000, showing how quickly it has established itself as an efficient internet booking service.

So in conclusion online booking for travel has dramatically changed tourism in the world. It has provided a less time consuming, cost effective and an overall efficient/productive method in organising tourism which has seen triggered a rapid rise in sales. Airlines are now recovering after effects that were unforeseen. BAA Limited, formerly the British Airport Association said seven UK Airports handled a total of 11.5m passengers in August 2006 making it a record summer with the highest number of passengers ever recorded over a two month period. BAA also revealed here was a 6.8% increase in passenger traffic for the 12 months to August 31st 2006. Bigger discounts and better security could tempt more people to book holidays online, a LogicaCMG survey () found.

However, the future of online booking although seen as prosperous can also turn, but due to the recovery in airline business they are starting to hit back. Prices are starting to rise and now you must book early to get the best price. The same survey revealed that online discounts were still not high enough to tempt potential customers onto travel websites and that the process was still too complicated for some consumers. A serious issue with online booking is the fear of fraud. Consumers are not convinced that any personal and financial information they hand over would be kept secure by online travel shops and this is slowing the potential growth that could occur otherwise.

The Association of British Travel Agents (ABTA) sees the online travel market having a long way to go before it replaces high street travel agents. ABTA estimates that by the end of 2007 online travel will be 17% of the UK’s £28bn travel market but this growth will only occur if trends continue as it relies on steadily growing numbers of people happy to book holidays online and as well as improvements in technology and the creation of better websites by travel firms. Issues over security, faults and complications need to be solved if this method of booking is to prosper. The travel industry although brash will always be around due to the need and want of consumers to travel.

"For my part, I travel not to go anywhere, but to go. I travel for travel’s sake. The great affair is to move." Robert Louis Stevenson, 1879