The Beat Letters: PhoCusWright On Canada, Commissions, Online Agent Use

To The Beat,

Excellent coverage (as usual) of the interesting developments in airline commission policies in Canada. The step by Air Canada would also seem to be (another) clear effort to disintermediate the global distribution systems in Canada.

I'd like to add a little color to your discussion of online share of travel agent bookings in the U.S. [more] PhoCusWright research suggests that online bookings by travel agents are closer to about 20 percent of aggregate agency gross sales in the U.S. Of that, nearly half is tour and cruise. Travel agent bookings on airline Web sites have grown dramatically in this decade. We sized it at approximately $10 billion in gross sales in 2007, a pretty striking number. Several major trends have driven this growth, including content fragmentation, leisure agency trends (moving to a lower-cost, home-based model and giving up GDS and ARC services), reward mile incentives airlines used to give for booking direct online, and agency efforts to skirt MIDT reporting to reduce airline visibility to agency booking behavior. We also found a fairly high incidence of travel agents booking online with their client's credit card, which makes such bookings impossible to track as true "agent" bookings.

We expect, however, that (at least in the U.S.) this trend may already be slowing if not reversing itself, and that agent bookings on airline Web sites as a share of their total air volume has probably been decreasing since 2008. This may continue as the GDSs close some important gaps in content fragmentation. Of course, the pending renewal of distribution agreements between airlines and GDSs could throw all of this up in the air.

~ PhoCusWright senior research director Douglas Quinby