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What will the travel agency of the future look like? Is it as simple as looking at nancial services today?!
! Travel management and nancial services a valid comparison or not?!
Many people in the travel management industry would take the view that travel is such a unique business that there arent really any meaningful parallels in other sectors of the economy.! Every industry sector has a group that fervently believe their industry is special but this normally consists of people who have limited experience of other categories and perhaps should get out more.! The reality is travel intermediaries operate in a very similar way to many other intermediated industries once the jargon is stripped out, and one of

the most applicable industry categories is, in my opinion, nancial services.! In studying the way the nancial services industry has evolved in line with market trends provides some real insights into how the travel industry may be impacted, and with that travel professionals may be able to be better prepared for their future, as they observe the ways nancial services has adjusted to the sweeping global changes that have occurred in that industry over the past quarter century.!

The relevance of using nancial services as a model to determine the likely travel agency of the future!
Having experienced both at a senior management level, I am struck by the similarities between the travel intermediary in its widest sense and the nancial services world (banking, insurance, pensions and investments), which has gone through unprecedented change over the past two to three decades in most parts of the world. Taking it further, I would pose that nancial services has gone through similar changes but ahead of the travel industry, and there are some signicant lessons to be learned and pitfalls to be avoided by taking an open mind on this issue.! But theres a problem with taking this view. Because when I look at the issues that have been addressed in nancial services and how this may impact the travel agency of the future I cant help but conclude the travel industry may be in for more than a few bumps and a hard landing; taking this perspective it seems

reasonably clear some business models in travel just wont survive in their current form.!

The Traditional Need for Professional Expertise!

The nancial services intermediary a bank branch/manager, a life insurance agent or insurance broker, a securities broker/dealer, etc was a reasonable response to the simple fact that the level of sophistication and knowledge required in that area of nancial services, along with the complexities of actually making any transactions in that part of the industry required highly specialized staff, with processes and systems developed specically for the needs of that discipline.! In past years there was simply no way an individual that did not have specialized training and access to the tools, processes and systems could possibly make sense of the range of different products or choices that were available; they had no way without help to compare the available options and tailor what they decided to be the best mix of options, and then there was simpluy no way that they could then buy, sell, apply, or transact in any way without going through the established and orderly channels.! Given that context it was inevitable for the role of nancial intermediary to be born and this intermediary whether an individual or company became an indispensible bridge between the consumer and a world of nancial complexity and specialization whether that meant investments, foreign exchange trading, stocks and bonds trades, or borrowing ranging from treasury bonds through to payday loans.!

Of course market economics where there is monopolisation or an effective cartel controlling supply meant that in many cases the alchemy involved entitled the nancial intermediary to retain an attractive margin after all, if you are a licensed stockbroker and people must use a licensed stockbroker to purchase shares, its natural that stockbrokers would wish to ensure that the stockbroking industry was protable, so they would no doubt agree on a industry pricing strategy and also ensure that new licenses were only given to applicants who werent going to threaten this cozy arrangement.! Doesnt this also describe the role that the travel agent has also had, with striking parallels? For many years, only an IATA accredited travel agent was allowed to sell most air fares; and it was only an agency with access to the fares, schedules, booking systems, payment systems and related infrastructure that was able to make sense of the complex, disjointed products out there and make travel actually work for a client.! But this has changed dramatically over the past 20 years or so in the nancial services world, and the same trends are also impacting on travel.! What are the key drivers and trends?"What can we learn from nancial services that could provide insight or possible competitive advantage for the travel industry?!

A revolution in 15 steps!
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The market pressures, industry response and eventual outcomes within nancial services can be summarised into 15 stages, and this is where some of the parallels with

the travel agency of the future become graphically evident.! 1. Consumers started to believe intermediaries were charging too much for the value they were providing! 2. There were ongoing issues of conict of interest between the interests of the client and the intermediary; in many markets requiring regulatory intervention to protect consumers! 3. Product providers started to sell direct to consumers, bypassing intermediaries. Initially this focused on simple transactional or commodity products, but over time this moved into more and more sophisticated product areas! 4. Intermediaries began to move away from a sales approach and more into a service proposition. Remuneration followed suit, with the trend toward intermediary remuneration matching the value provided to the client over time, not simply an initial transaction! 5. Product providers increasingly developed parallel multiple distribution channels, the intermediary being but one. Pricing often varied between channels! 6. Pricing increasingly became transparent and unbundled, enabling the client to see exactly what they were paying for each aspect of the product! 7. Exclusivity became increasingly rare, with both product providers and intermediaries not willing to position themselves in an exclusive relationship!

8. Consumers became increasingly empowered, able and willing to manage and execute their own nancial affairs in ways they did not do previously! 9. Technology began to provide the bridge between complex and disparate content and the ability to manage and transact this content. Over time, products evolved to become platforms, and platforms evolved to become wraps or wrappers, and they evolved to become a commodity! 10. Restructuring and M&A activity was constant, with participants chasing the holy grail of scale. Mostly, their hopes were never realized as the rules of the game changed just as rapidly! 11. The value chain from product supply through sales and service/ delivery began to fragment, and a competitive set started to appear for each of these segments, not just across the entire chain! 12. Client loyalty became less and less dependable. The debate over who owns the client never stopped, but was also never resolved. Only the client really owns the client, and client loyalty became an increasingly rare commodity.! 13. New entrants, unencumbered by legacy cost bases or infrastructure, began to appear often exploiting niches in the value chain and assembling their offer somewhat like a Lego model. In many cases, their value proposition could not be matched by the legacy industry participants who faced the neverending task of restructure and cost reduction, but always unable to catch up to the new entrants! 14. Margins became squeezed in distribution but a vicious circle started to appear as the more simple types of transactions migrated to remote/direct/

self-directed distribution styles. With these bread and butter transactions no longer supporting the intermediarys cost base, the intermediary was forced to try to migrate towards more complex and higher value clients and products. But the conundrum was that many of the higher value clients were also the ones leading the move toward managing their own nancial affairs and transactions resulting in the intermediary nding themselves increasingly between a rock and a hard place with business slippage and margin erosion occurring on multiple fronts! 15. Increasingly top-heavy, nancial intermediaries began to crumble under their own weight to evolve towards a more efcient and leaner industry that focuses to a greater extent on advice and lifetime customer value, rather than transactions and initial acquisition. Empowered consumers within an increasingly transparent industry were in a position to choose their method of interacting with suppliers; new entrants began to appear with tools and technology to place power in the hands of consumers to a much greater extent, and the number of people earning a living as a nancial services intermediary of one kind or another plummeted! Naturally, there are many generalizations within this list and there is a tendency for these trends to be more muted in emerging markets however the same basic dynamics can be seen. What Are The Implications on the Travel Agency of the Future? To what extent does this portray the recent past, the present, and the future of the travel agency or TMC? Are there things that can be learned, early warning that should be heeded, or is travel so distinct that there is nothing of value to be gained by this sort of questioning.! Some will take the view that the travel industry will not follow the same path and be affected to the same extent as nancial services. Secretly, however, I suspect these folk will also have their ngers crossed that things can hold together long enough for them to retire, after which it will mercifully become someone elses problem.!

I envy those that can adopt such a position just as I would have envied the composure of the band that bravely continued to play to the very end, had I been a passenger on the Titanic.! Its only my opinion, but I dont see too much to get excited about when looking at the likely shape of the travel agency of the future unless of course you are a fan of blood, toil, tears and sweat. So I guess time will tell.!

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The author, David Christensen, is a former Asia Pacific Vice President for Supplier Management both with American Express Business Travel and Carlson Wagonlit Travel (CWT).

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http://inversionpoint.com/travel-agency-future/

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