Change or perish

With commissions rates going down due to easy availability of tickets, travel agencies surviving solely on ticketing need to reinvent themselves.

Now that booking an air ticket is just a click away, what with the online ticketing on airline websites and travel portals having made it all so easy and lucrative for consumers, the business of the neighbourhood travel agent seems to have taken a beating.

Travel agents in India have mostly been thriving on ticketing, making their money through the commissions given to them by the airlines. Over the last five years, these commissions have come down from 9 to 5 per cent.

In such a scenario, survival threat is looming large over these agents. After fighting a losing battle against commission cuts, agents have only two options before them "" either shut shop or value add and grow the business.

"The image of a travel agent is set to undergo a complete change over the next 2-3 years," says Rajji Rai, vice president, Travel Agents Association of India. According to Rai, already, the travel agent community would have lost at least 25-30 per cent business to online travel agencies.

Ankur Bhatia, executive director, Bird Group, feels that with changing market dynamics, there is a need to evolve, brace technology to the fullest, and reinvent as travel management companies for the clients. "With commissions heading towards zero, agents need to look at a service fee model," he says.

"The agents need to add value to their products. For instance, instead of just selling tickets to Switzerland, it would perhaps make better business sense to package it with a skiing holiday," says Capt Swadesh Kumar, managing director, Shikhar Travels. Many agents have already turned to selling hotels, car rentals and forex as well as travel insurance.

Smaller mom and pop travel shops will survive for another 5-7 years, feel industry insiders. Their costs are already low and they can even make decent profit by adding a few services.

In the medium size segment too, there have been some who took timely measures and veered towards safety. Take a look at the Nijhawan Group. Earlier, the group was the general sales agents for British Airways, with ticketing as its bread earner.

"But, over the last 3-4 years, we have added many new services "" a B2B travel portal which can be accessed by sub agents across the country, a hotel representation business as well as a car rental business," says Ankush Nijhawan, managing director, Nijhawan Group.

Anil Bhandari, managing director, International Travel House, feels that with reduced margins in ticketing, agents will need to go in for more automation to reduce cost of transactions, like his company has done.

Corporate clients, he says, would want to work with agents who offer a one-stop shop for all their needs instead of working with multiple agencies. They have recently ventured into rejuvenated leisure business as well. The recent past has already seen some consolidations in the travel industry and Bhatia predicts that 2007 will be the year of bigger consolidations.

Ideally, feel many, a number of medium-sized companies with different businesses and footprints in different parts of the country should come together, and then leverage on their combined strength.

A few medium-sized companies are also beginning to spread their wings using the franchise way. But whatever they choose, the sooner they do it, the better are their chances of survival.