Future Agency Revenue Model

Ugh! I've already grown tired of all the discussion around GDS agreements and direct-connect strategies, knowing that it's only going to get worse between now and August. It's going to happen, time to move on. The bigger picture that's being missed is what this means to the future travel agency and how will they react to change. [more] Will companies simply see higher transaction fees (i.e. CWTs recent announcement adding $3 to every transaction) which doesn't bode well for long-term agency survival or are agencies going to figure out alternative ways to make money and provide the same level of service at the same (or even lower) price points? My recommendation is the latter. It will take some innovation and partnering but to the innovator goes the spoils.

As content becomes more fragmented, direct connects become the booking channel of choice and consumers find it more difficult to trust their favorite online solution, the value of an individual willing to take a call and search across multiple sources to find the best solution increases tremendously. While one could argue that this will justify higher agency fees, I think there's an even better strategy to consider. Agency days are numbered if they rely only upon a higher transaction fee and only sell content that the traveler can get on their own.

Where's the value? Don't charge higher fees but leverage the ability to promote and sell preferred vendors through a "non-public", direct booking channel and use point-of-sale technology that enables the agent to shop and book across multiple sources for content without spending more time. In addition, having the ability to sell "non-public" content slows the migration of the traveler to the online "opaque" channel as online agencies now have a rate advantage.

Agencies have to remember that they work for both parties during each transaction and are obligated to do what they can for both sides to benefit from the transaction, as well as share in the costs. Companies should continue to pay a transaction fee that covers a "portion" of those costs and suppliers should be willing to pay an incentive or a commission for those agencies that can effectively sell their products.

While online agencies have a significant advantage in their ability to consolidate content across multiple channels, traditional agencies have a supplier advantage with greater ability to shift share to preferred vendors and access to rates and fares outside the public domain.

The end result of all this: online agencies will lose their current advantage of "special" rates and fares, and traditional agencies will have greater ability to provide more value to their corporate customers. It's time to stop hanging on to the the traditional GDS incentive and see the bigger picture and potential money to be made. Create some new tools, establish some new vendor agreements, and move on.