New Delhi: The deterioration in the business of bricks-and-mortar travel agencies was brought home last year by the suicide of Raj Travel World owner Lalit Sheth, who, industry executives said, was burdened by debt.
Online travel agencies (OTAs) now dominate the ticketing business to the detriment of old-style firms, but for some of them at least a symbiotic relationship makes sense. Smaller bricks-and-mortar travel companies have been tying up with bigger online travel agencies over the past few years. They, in turn, sell inventory from the OTAs.
Online travel companies such as Cleartrip Travel Services Pvt. Ltd and Expedia India are doing precisely this to reach out to a wider customer base. The online travel industry has been coping with narrowing commissions from its biggest revenue generator, air ticketing, since last year. The model is less expensive than setting up a franchise from the ground up.
Cleartrip has more than 2,000 such legacy travel agents using its inventory and accessing the full range of products.
“We started a year back and every month we see 10 to 15 travel agents getting on to our network,” said Noel Swain, executive vice-president, supplier relations, Cleartrip. “It is the value proposition that they are getting, by getting to use centralized source for making bookings to all our products. We have made an investment in the product and we expect sizable revenues coming out of this going forward, though at present its contribution to our overall revenues is marginal.”
Expedia India, which set up a travel agent channel a year after it entered the local market in 2008, plans to expand the model aggressively in order to increase business from tier 2 and tier 3 cities.
“When we started out in India, the low hanging fruit were online and more evolved consumers. But to expand and reach a wider customer base and tap the cash economy, we have to reach travel agents directly,” said Manmeet Alhuwalia, marketing head, Expedia India. “This year we have a huge focus on our travel agents’ channel and signing up travel agents.”
The company is working with two partners that help it sign up travel agents; one of them was hired earlier this.
The company did not disclose the number of travel agents it’s working with, but Alhuwalia said the channel contributes around 10-15% of revenue in India.
Alhuwalia said the avenue allows the company to “reach out to wider distribution, especially in tier 2 and tier 3 cities, to the customers who either don’t have credit cards or access to the internet.”
Pramod Singla, director of Services International Ltd, a travel agency that deals directly with customers as well as small travel agents, said the trend was indicative of the future.
“When dealing with wholesalers like one of the online travel agencies directly, they will be able to get 10% to 15% commission, which is profitable for them,” Singla said.
The approach has led to the revival of travel agents on the verge of shutting down, industry experts said.
“It is all a matter of mix and match. Travel agents are looking at ways to survive. Even though we are trying to tell travel agent community to find different niche areas or additional revenue streams such as tour packages, car hire, insurance and SIM cards, it is not working very well,” said Rajji Rai, special advisor for the Travel Agent Associations of India lobby group. “In order to survive, they are taking services from OTAs, because 90% of their revenues coming from the airlines is finished.”