Travel agent sector expects shrinkage

The travel agent community is expecting to see its number decline over the next 18 months, Federated Association of Travel and Tourism Agents (FATTA) president Iain Tonna told The Sunday Times last week.

On the whole, however, the largely diversified sector will be resilient enough to weather the current storm, even though fewer Maltese are expected to travel this year.

There are about 200 travel and incoming tourism agents in Malta, around 70 of which are International Air Transport Association-certified.

"The sector has seen many travel agents merge or form alliances, joining forces to benefit from enhanced buying power," Mr Tonna says. "There have been a few spin-offs, as some professionals branched out and set up their own destination management companies. In reality though, it is the same people - generation of new blood in this sector is low.

"Most travel agents double as incoming agents, ostensibly to spread business, although even that sector is suffering. Business has become tougher for travel agents because of the way airline commerce has developed," Mr Tonna says, pointing to online bookings and nominal airline commissions as the foremost detractors.

"I cannot think of a single agency which survives on airline commissions alone. The economic climate's effect on inbound tourism is also a factor. Besides, 25 per cent of GDP depends on tourism, so that is affecting our disposal income too. And this year, fewer Maltese might travel."

The shoulder months, at least, seem to be picking up: on Friday, figures released by the National Statistics Office showed that 19,754 Maltese went abroad in January, 1,356 more than January 2008. Most travelled within the EU, with Italy and the UK remaining popular destinations. It has to be seen what the numbers for the more lucrative periods will be like this year.

Asked how bookings were faring for the Easter holidays, Mr Tonna says it is difficult to tell. He explains that travel industry patterns began to change about five years ago. Before then, travellers made arrangements weeks in advance, so agents could feel the pulse of business.

"Now, people are making their travel arrangements independently," he points out.

"With airlines and tour operators offering discounts on 'early bird' or late bookings, travellers keep track of price changes very carefully and book online when it suits them best."

Mr Tonna, whose firm deals in incoming and outgoing travel and conference and corporate business, says agencies still have run-of-the-mill clients who might not be tech-savvy, not have access to the internet or may not even possess a credit card.

Many Maltese travellers carry out their research online but often make final arrangements with an agent, especially as distrust of online payment security is still common among local travellers.

Corporate travel business, which involves managing clients' bookings and dates, is fairly healthy.

"Travel agents are often seen as an unnecessary link in the chain, but most people do not understand the mechanics of booking flights online and the importance of reading the fine print," Mr Tonna says. "Airlines' yield management is what causes fares to fluctuate, often within the same day. Fares are tiered to allow people to make instant purchases or reservations that may be changed.

"Travellers do not realise that bottom rack fares are very risky and often discover that they are not entitled to make changes or to refunds too late. Travel agents cannot cheat clients and have to quote the same fares that are shown online. They will also give clients the information they might have missed had they booked online.

"Many people still do not know where to look. For those who do, booking flights online just to travel from A to B makes sense. But if there are more complicated travel arrangements like connections and hotel rates, it is advisable to go through an agent."

Over the past nine years, Air Malta, which holds 50 per cent of the market, has progressively cut its commission to agents from nine to one per cent. Many other airlines followed suit.

When the airline commission stood at four per cent, Mr Tonna says the writing had been on the wall for two to three years that it would drop to one.

"British Airways started it in July 2007 and some airlines went the same way. Some airlines' commission still holds at four per cent. Air Malta and other airlines say they are following the trend: the point is Malta's economy lost hundreds of thousands of euros when airlines' commissions were slashed. We used to be entitled to four per cent of €150. Now we get one per cent of €70 fares.

"Air Malta does not offer the same levels of commission in all countries. If commissions to agents are higher in other countries, it offers a similar percentage so it is able to compete with that country's national airline."

It is not all doom and gloom, though. Mr Tonna says the US, where the zero commission trend originally took root, things have gone full circle and American travel agents have found niches where their services have been beneficial and profitable. The same must happen in Malta, he says.

"A few years ago, travel agents introduced a service fee, despite many being sceptical. Consumers realised the value of the fee when travel agents helped them save on their travel costs.

"Many agencies do not even see the client they are making travel arrangements for nowadays, so their business location is not important any more. That's why many have relocated.

"Many agents have downsized and some are still in business out of passion. The ones who are doing well are the ones who succeeded in diversifying their business and were more creative. The ones who struggled are those who lived in denial that the one per cent commission age would never dawn.

"The glitz and glamour of this business has faded, but the thing is, if travel agencies were squeezed out of the market, it would be dangerous for consumers: the real choices would become more obscure.

"Where incoming tourism is concerned, last year beat 2007's record numbers. This year will be tough, but we will hold our fort. All the stakeholders must help to make this year work."

Meanwhile, in its efforts to protect travel agents, FATTA is to ask a Brussels expert to analyse a consumer claims tribunal decision upheld by the appeals court early last month which found an agency liable after a flight delay.

Mondial Travel Agency was ordered to pay five travellers €1,500 in damages after a delayed flight caused them to miss the Kiel Canal leg of a 12-day Scandinavian and Baltic cruise in August 2007. The ruling had shocked local travel agents who feared the case would set a precedent.

Mr Tonna says the travel agent community worldwide is lobbying to be able to seek legal redress from airlines in the same way as travellers do.

"There is a clearly itemised set of rights to compensation available to consumers. The European Union, for example, has very clear guidelines on consumers' right to make claims for compensation from airlines in the case of travellers booking directly with airlines. Tour operators, including travel agents who put travel packages together to sell, should be entitled to the same rights to claim damages."