Online travel agents are a dying breed

I went to my a travel industry meeting today at Kelvin Grove in Cape Town, and the poor attendance got me thinking about how the travel industry as we know it is dying.   I wasn’t just thinking about how young upstart online agencies have been replacing traditional bricks and mortar agents, but about a second evolution I predict in the online world, whereby Google displaces online agents.

The last decade has seen online travel agents creating havoc with traditional agents business models.  Running an online travel agency is very different to the traditional bricks and mortar agency.  Your traditional offline agent  has an office, perhaps in a shopping mall, where clients enter and chat to a real live warm person (think Flight Centre). 

Contrast that with South Africa Travel Online, which is run out of our garage!   A crucial difference is that an online agent has a far lower cost base; not having to pay rent for a shop in a fancy mall, and not having to spend as much time face to face with clients.  (However, it must be said that a couple of times a month we do have clients visiting our office to see that we really do exist!).  

The lower cost base allows online travel agents to charge less, although the service obviously isn’t as personalised.  And what’s become apparent over the last 10 years is that most people prefer the ease and low cost of booking over the internet, to using a traditional travel agent.

Traditional travel agents are also facing competition from sales outlets like Shoprite selling tickets.  With all these headwinds, friends of mine who are traditional travel agents are going through seriously tough times at the moment.  The market they are left with is mostly high end travellers looking for specialised holiday experiences, and corporate companies.

So the last decade has been bliss for online travel agents, but I predict the next decade is going to be very thorny.  The online world is a rumbling volcano of value destruction and creation – we regularly contend with changes in Google formulas playing havoc with the traffic you get through to our sites, and if you don’t innovate you die (look at how Facebook ousted Myspace);.  However it’s my view that what lies ahead of online travel agents is far worse than those those challenges. 

You see, the lifeblood of an online agency is getting traffic through Google, and I suspect that Google is on the threshold of competing with online agents.   Have a look what happens if you search for “Johannesburg to Cape Town”.  Google has recently started showing the schedule of flights and a list of airlines with links to their booking engines (i.e. bypassing the online travel agents who are listed in the organic results below).

This is the thin end of the wedge, and I reckon it wont take long before Google start showing flight prices there as well (they own airfare software company ITA).   Life is about to become seriously tougher for online travel agents, as Google eats up more of their part of the pie.


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