The Collapse of Thomas Cook Could Bode Ill for More Travel Agencies
The massive collapse of global travel group Thomas Cook could just be the beginning of more failures to come, as economic uncertainty exacerbates the ongoing disruption in the travel industry, industry watchers said.
"The travel agency industry is in trouble the world over, and we should expect more such departures both locally and overseas," said Dr Seshan Ramaswami, associate professor of marketing education at Singapore Management University (SMU). The value-add and information that travel agents rely on to ply their trade are no longer privy just to them. "Information on routes, reviews of hotels, destinations and the actual booking of flights, transfers, hotels... are now available on a 24/7 basis via a combination of information sites," Dr Ramaswami explained.
London-headquartered Thomas Cook Group, whose founder invented the concept of tour packages 178 years ago, collapsed suddenly on Monday with a debt of over US$2 billion and left 150,000 travellers from the United Kingdom stranded abroad.
While many have pointed at disruption from online travel companies as a chief reason for the tour operator's failure, experts told The Business Times they believe that in this case, poor business management may be more to blame than disruption.
Dr Wong King Yin, a lecturer in marketing at the Nanyang Business School, pointed out that despite being an online outfit, travel agent Zuji closed down early this year, adding that cashflow problems at its parent company were the main culprit.
In Singapore, about 120 to 140 travel agents cease their licence voluntarily every year for various reasons, according to the Singapore Tourism Board. In the five years to March 2018, 680 tour agencies closed. In the last few years, prominent closures include Konsortium Express and Tours, Misa Travel and Five Stars Tours.
"The travel industry is already very vulnerable to economic uncertainty and whatever is happening, such as a terrorist attack. Although travel demand is growing, it's a tough industry if you don't have the business sense and acumen to work around them," Dr Wong said.
She also said the key lies in providing a convenient experience for customers, and traditional travel agencies previously did this by having stores in convenient locations, but this also increases operating costs. So the way forward could mean going asset light - by having fewer physical stores - while beefing up their online platforms, she added.
Victoria Chong, marketing communications executive at Chan Brothers Travel, said the company does this by using webchat and a WhatsApp hotline to answer customers' questions immediately, underscoring the pervasiveness of mobile use.
In the same vein, Marcus Yong, regional marketing director for Southeast Asia at online travel booking platform Klook, said the company has noticed that travellers are bringing their mobile devices to manage every aspect of their trip. He said more than 75 per cent of all Klook bookings in 2019 were made via mobile devices, adding that same-day bookings increased nine-fold from 2016 to 2018.
Beyond mobile offerings, Dr Wong said it is important to have a unique selling proposition given the industry's low entry barrier, adding that it should not be something that is easily copied by others. For traditional agency Dynasty Travel, this means having differentiated travel products instead of focusing on destinations like Tokyo or Bangkok that are popular with free-and-easy travelers. Alicia Seah, the firm's director of PR and communications, said: "We need to innovate new packages differentiated from the mass market. For example, we have packages to less-explored destinations like the Antarctica, Mexico, Cuba, Iran and Bhutan."
It boils down to having a niche. Dr Hannah Chang, associate professor of marketing at SMU, said if the market is fast evolving, it is hard to keep up with every consumer segment unless one has the resources. "If you don't have this type of resources, it's better to focus on a niche and build it up before you expand to other segments of consumers," she noted.
Source: The Business Times