The changing dynamics of travel business in emerging markets

Emerging markets have a large number offline travel agencies which have been operating comfortably. They provide personalized service, interactive agent-customer buying experience, flexibility in payments like part cash part check or even credit to end customers, customer specific discounts etc. These are the USP’s on which their business success is founded.  Their  business model was and is dependent on the personalization, they operate in limited geographies and normally are within reach of the customer. Till the coming of the OTA’s and Tripadvisor© they reigned supreme as the only source of travel information experts and their opinion was unassailable and customers relied on them only.

The market dynamics are changing with the advent of the funded OTA’s in these markets.  These OTA’s along with the likes of Tripadvisor© are making travel purchase more transparent.  By providing all information regarding the product and pricing they are changing  the way the travel industry operates. This is also changing the aspirations of the end customer as they are getting used to the online experience and also getting opinions from peers. So the offline agents opinions now is being measured against others. Also the funded OTA’s business model is:  grabbing eyeballs with heavy media investments, building and maintaining the customer base by providing largely discounted products, taking upfront online payments. All of these at the expense of the bottom line as they are first looking to drive the business through their portal and making profits is a long term goal.

But having said that, even after heavy investments true online companies are making slow progress in terms of business and customer acquisition has been at the expense of the bottom line especially in the emerging markets. The reason being these agencies charge upfront, they are not flexible in the mode of payments, do not offer customer differentiated pricing, and operating through third party call centers definitely does not make a case for personalization.  Customers in such markets are used to an interactive experience, credit line and travel agency doing all the work  etc.

But these does not mean that the OTA’s are not doing business. They are doing business and a lot of it from their turnover figures. Either this has to be new business or they slowly and surely are eating into the existing business of the travel agencies especially with the IPAD/tablet/smartphone wielding generation and this tribe is growing. These people aspire an online viewing->planning experience which currently is being provided by the OTA’s and this is where they get lured into buying.

Thus going online is not an option but a necessity for an offline business.  But at the same time going “smart online” is something that the offline agencies need to think about.  They need not go for a standard “Travel Agency software solution” as they do not need an OTA like solutions. The reason being they are not catering to anonymous global/national customer nor they have an unlimited amount to spend. So they need a smart “Online Travel Agency Software” which is relatively inexpensive fits their business model and makes the most of their USP’s. It should be able to give them online access to global inventory and provide an interactive online experience to the customer.  For them retaining and catering to the demands and aspirations of existing customers/agents  is of the utmost priority.

So what kind of Travel technology solution would work best  for offline travel agencies, depends on a number of factors. In addition what should be the expectations, costs and issues that would crop up once one goes online are the topics which will covered in our series of blogs.  We will also be covering strategies which would allow SME’s to successfully compete with funded OTA’s and share cases where they have successfully done so.

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