Closure of in store travel agencies and further digitalisation of model marks a turning point in travel retail

31 March, 2021

There is no argument that COVID-19 has accelerated the digitisation of the travel agent model, creating more shop closures as in-store agencies switch operations online. This is a necessary adaptation to changing consumer preferences, according to data and analytics company, GlobalData, which sees this an obvious turning point in travel retail.

The rising popularity of online platforms has meant the future of travel agents has been under question for some time. The value of face-to-face consultations has been diluted putting the long-term survival of such businesses in doubt, an issue that has only been exacerbated by the current health crisis.

Success in 2021 “will largely depend on good levels of cash-flow, an area in which online travel agents (OTAs) continue to be a step ahead of traditional brick and mortar style agencies, thanks to their asset light business models,” says Johanna Bonhill-Smith, travel and tourism analyst at GlobalData.

In the company’s 3Q 2019 consumer survey less than one in five (17%) global respondents declared they booked with an in-store travel agent, highlighting that prior to COVID-19, booking in-store was already decreasing in popularity. A subsequent consumer survey on the recovery in Dec-2020 found that 47% of global respondents would buy more products online rather than visiting a store and 60% would do banking transactions online in the ‘new normal’.

“Lack of revenue and high demand for refunds has taken its toll on many traditional travel agencies. High fixed costs including high street rents would have depleted cash reserves further for in-store agents in comparison to OTAs. Store closures were considered essential for many to simply stay afloat during 2020 and some have been made permanent,” says Mr Bonhill-Smith.

With working from home remaining a key barrier to COVID-19 spread the opening of economies will likely see a more hybrid model than a return to the traditional methods. This, according to Ms Bonhill-Smith, now “boils down to survival of the fittest”.

It is certainly a challenge for the industry. The Flight Centre brand is one of the most recognised in travel circles. The company, through its retail and corporate brands, provides a complete travel service for leisure and business travellers alike in Australia, New Zealand, the US, Canada, the UK, South Africa, Hong Kong, India, China, Singapore and Dubai and its corporate travel management network, FCM Travel Solutions, extends to more than 40 other countries through strategic licensing agreements with independent local operators.

Flight Centre CEO Graham 'Skroo' Turner has explained that the pandemic, and specifically the government responses to it “have had devastating impacts on businesses worldwide” and on the airline, travel, tourism and hospitality industries in particular. “This has severely impacted us and our people and some very tough decision have been made, ”he said.

The potential impact of the pandemic was clear to Mr Turner from an early stage. This time last year when Australia’s prime minister Scott Morrison encouraged people not to travel out of Australia in Mar-2020 and President Trump in the US stopped flights from Europe, he said “we knew we had a serious problem on our hands”. From that day on “it was about survival initially, I think a lot of other people felt the same way,” he added.

Speaking during presentations during the Mar-2021 edition of CAPA Live – a monthly virtual summit, offering insights, information, data and live interviews with airline CEOs and industry executives across a next-gen virtual event platform – Mr Turner has offered a more positive expectation that as the coronavirus vaccination is rolled out international travel to major destinations will begin to open up in Jun/Jul-2021 and that will support the group’s own activities.

“From a strategy point of view, we’re trying to make sure we maintain our assets in all of the 23 countries we operate equity in, that was important from the start… Now, it’s a matter of taking advantage of the vaccination rollout and we hope that on the road to recovery, we can bring people back as time goes on,” he said.

Mr Turner said North America and the UK are likely to recover “much more quickly” than Australia due to the vaccination rollout. He added: “Combine that with a high infection rate, which is not good while you’re going through it but coming out of it means a lot more people will have a level of immunity whether they’ve been vaccinated or not”.

The travel executive has been very vocal in 2021 regarding border restrictions, vaccination rollouts and the future of travel in Australia and across the world. In Australia he has called for a national coronavirus protocol “that everyone agrees with and states must trust each other to deal with hotspots as they come up.”

According to Mr Turner, the opening and closing of state borders in Australia has caused widespread frustration and caused travellers to be “gun-shy about travelling interstate”. “We have our fingers crossed that the [Australian state] borders will stay open from Mar-2021,” he said, adding he believes domestic confidence will return.

You can watch his full CAPA Live interview with CAPA – Centre for Aviation founder and chairman emeritus, Peter Harbison here:

CAPA Live is the most sought-after monthly global aviation event. Taking place on the second Wednesday of each month, thousands of industry colleagues from across the globe tune in for their monthly dose of aviation and travel news, analysis, and in-depth interviews with industry leaders. You can access the latest agenda and register to be part of its growing community to access the latest edition and archive content at: CAPA Live