The travel agency business must be brutal.
Traditionally the industry has been made up of many small agencies. But the past decade has been rough.
First the airlines started cutting the commissions paid to travel agents to book tickets. Eventually they eliminated commissions altogether. At the same time Internet travel websites grew. Then came September 11 and a worldwide travel slump.
The result? The travel agency industry is consolidating at an astonishing pace. In two years the number of agents declined 24%.
Travel agencies are going out of business right and left — especially the smaller ones that can’t leverage economies of scale. Or they are being absorbed by other agencies.
The ones that are surviving have changed their business models dramatically. No longer are they the intermediaries who book air tickets.
Instead they have improved their operations, by cutting overhead. They are developing niche specialties, such as planning cruises, safaris and tour packages. And they are developing high degrees of customer service and creating an “experience” for the consumer.
What’s in store for the future? A Forrester spokesperson says the worst is over now. The U.S. Department of Labor predicts less demand for travel agents, but says the rate of decline will be partially offset by increased air travel and an increase in foreign visitors, whom travel agents are assisting. But expect more consolidation in this stressed out industry.