This thesis examines the development of online travel agents and their impact on traditional high street travel agencies, with a focus on European — and particularly British — consumers. Drawing on a survey of 80 industry participants at the World Travel Mart in London (November 2003), the paper tests three hypotheses: that online booking is quicker and easier than using traditional agents; that price is the primary driver of online booking growth; and that consumers genuinely regard online agents as the superior option. The paper presents a literature review, describes the survey methodology, and analyses the findings across four respondent groups: traditional travel agents, online travel agents, holidaymakers, and media/PR professionals.
This thesis examines the development of online travel agents and their impact on traditional high street travel agencies, with a particular focus on European consumers. Online bookings for travel and tourism are increasing at a remarkable rate worldwide, and noticeably so in Europe — particularly in Britain.
The thesis considers this development in its social and cultural context by investigating the growth pattern through analysis of a survey undertaken among key players in the travel and tourism industry, who were interviewed at the World Travel Mart held in London in November 2003.
Three main hypotheses are considered throughout:
1. The characteristics of online agents make it quicker and often easier for people to book their own travel online than through traditional high street travel agents.
2. The prices offered by online travel agents are the main factor driving the growth of online travel and tourism bookings.
3. Consumers genuinely believe online agents to be a better option than high street traditional travel agents.
The thesis first examines the rise of online travel and tourism bookings, then presents a literature review addressing each of the three hypotheses. The methodology used to test each hypothesis is then discussed in turn, followed by a Findings and Analysis section presenting the main results of the research.
The research is based on answers given to a questionnaire distributed in November 2003 to delegates of the World Travel Mart in London. Respondents included people running traditional high street travel agents, people running online travel and tourism agencies, people using travel agencies, people using online travel and tourism agencies, and those responsible for promoting travel and tourism within the UK (journalists, PR professionals, etc.). The questionnaire is reproduced in the Appendix; the findings and main conclusions arising from respondents' answers are discussed in detail in later sections.
The high street travel agent has been steadily declining over recent years. According to brochure distributor BP Travel Services, the number of UK travel agents slipped from 9,097 to 8,863 between 1999 and 2002 — a 9.7% drop. Many cite the internet as the primary reason for this decline, as advances in technology and people's growing familiarity and comfort with using the internet have reached the point where many consumers prefer to make their travel bookings online.
Highlighting the stepped-up demand for interactive travel booking, American Express recorded a 500% increase in reservations made via corporate online booking tools in 2001 compared with the previous year. Interactive travel bookings came to represent over 6% of all American Express corporate travel reservations in the United States. Many firms were spurring further growth by providing system training and usage support to business travellers, administrative assistants, and other employees who used corporate online booking tools.
There are clear threats to high street travel agents across Europe as people — both private individuals and companies — realise that it is often cheaper and easier to arrange, book, and pay for their own travel online.
A report from the Association of British Travel Agents (ABTA), covering around 6,600 agencies, concluded that agents must adapt if they are to survive. Keith Richards, ABTA's Head of Consumer Affairs, stated: "The fact is that there is less demand for traditional travel agents, who may find themselves in for a shock if they don't adapt to the changing nature of travel. Agents must begin to focus on the kind of things which reflect extra value to the consumer."
In October 2002, a MORI survey reported that 60% of respondents booked through a travel agent, compared with 78% in 1990. Direct bookings had increased during that period from 19% to 36%. In addition, a survey by PhoCusWright predicted that traditional travel agencies would represent just 18% of hotel sales by 2005 — down from 21% in 2001 — as hotel sales moved online. The firm forecast a 49% increase in online hotel sales in 2002, reaching $6.3 billion.
The most significant blow to traditional agents struck at the heart of their business: the package holiday, of which around 20.6 million were sold in the reference year according to the Central Statistical Office. A Goldman Sachs report, widely documented in the national press, warned that it was significantly cheaper for consumers to package their own holidays by booking flights and hotels separately. Around 70% of holidays reviewed were cheaper when booked separately, by an average of 26%. With the growth of online booking engines, price and the supposed "hassle" of self-booking were no longer the saving grace of traditional agents.
Hundreds of thousands of people were turning to the internet to book their holidays, realising that it was both cheaper and easier to do so. Anyone who had spent time waiting in a UK high street travel agency to discuss a trip anywhere off the standard package tourist trail welcomed the internet with open arms — particularly as online prices were far lower than those offered by high street agents, and because booking at home was simply a more pleasant experience than sitting in an uncomfortable chair in a busy agency.
The internet revolution in travel booking was a particular boon for independent travellers who wished to direct their own trips. In the UK, many consumers saw online booking as a natural extension of the teletext holiday service, which provided cheap airfares and holiday packages via television. The transition from booking via teletext to booking via the internet was not a difficult one for many people, and so online travel agents found a ready and eager market. The internet also appealed to the many thousands of families who preferred villa holidays to package tours — these consumers became enthusiastic converts to self-directed online bookings.
The main advantages of using the internet to make travel arrangements include avoiding the high street travel agent entirely, with its often frustrating customer experience and inflated prices. A further advantage is the freedom to plan and direct one's own itinerary — choosing flights, accommodation, and extras to construct a personalised holiday. For many travellers, successfully arranging all of this independently is itself a source of satisfaction. Another significant advantage is the ability to shop at any time: for people who work throughout the week, the only opportunity to visit a high street agency may be Saturday morning, when thousands of others are trying to do the same thing. Online booking can be completed at any hour, in the comfort of one's own home.
Advantages cited at a Travel Industry Association (TIA) conference included the ability to compare prices, access up-to-date information, find easy-to-navigate destination details, and access a wide range of choices.
The main disadvantages include potential problems with ticketing — especially when flights are booked close to the travel date, though this issue was expected to diminish with the development of electronic ticketing, then being pioneered by British Airways. Another disadvantage is the potential for information overload: some consumers may be overwhelmed by the sheer volume of choice online and may prefer the guidance of a high street travel agent.
Disadvantages cited at the same TIA conference included customers preferring to speak to a live person, having plans that were not yet definite, concerns about sharing credit card details and privacy online, doubts that the internet offers the lowest prices, and finding the booking process too complicated.
Because the majority of people turn to the internet primarily to save money, one significant deterrent from online booking is price. When a flight on a specific popular date is prohibitively expensive, individuals might choose to travel on a cheaper day rather than abandon online booking altogether. In practice, once a consumer converts to online booking, they tend to remain an online booker.
Online agents are, by definition, internet-based. The most successful platforms — such as lastminute.com and cheapflights.co.uk — typically offer a complete travel experience, encompassing flights, accommodation, car hire, and other services.
Online agents pool information from airlines, hotel chains, and car hire agencies regarding availability and pricing. They present these products to the customer through interactive databases, which the customer uses to assemble their own holiday. Payment is taken by the host of the database, which retains a margin of the sale and passes the remainder to the service provider.
The chief explanations for the growth of online travel agents include the cost savings, convenience, and independence that online booking provides. Research by Jupiter Research found that 80% of online travel bookings in 2000 were for leisure and personal trips, and 60% of PhoCusWright survey respondents cited price as the single most important factor when making personal travel arrangements.
The market for online travellers grew by 252% between 1996 and 2001, rising from 28 million internet travellers to 95 million. The incidence of internet use among travellers increased from 19% in 1996 to 68% in 2001. As the quality of travel websites improved, 94% of the 65 million travellers who planned or booked travel online reported satisfaction with their experience.
The message from industry regulators such as ABTA and the TIA was consistent: high street travel agents needed to become more flexible and to invest in improving the customer experience if they were to maintain their market share. They could not afford to remain static, and needed to make a concerted effort to win back clientele by making the in-store experience more comfortable and inviting.
"The characteristics of online agents are quicker, meaning that it is quicker, and often easier, for people to book their own travel through online agents, than through using traditional high street travel agents."
"Literature support for speed, price, and consumer preference hypotheses"
"The prices offered by online travel agents are the main factor that drives the growth in online travel and tourism bookings."
It is also widely understood that people prefer to book travel online because it is considerably cheaper — both in terms of the base price of travel and tourism products, and in terms of the savings made by not travelling to a high street store. This view is strongly represented in the literature reviewed above; the questionnaire research is intended to provide supporting evidence for this assumption.
"Consumers really do genuinely believe online agents to be a better option than high street traditional travel agents."
It is widely suspected that people prefer online agents because they genuinely believe online agents provide a better overall service than traditional agents. This view is well supported in the literature reviewed in the overview section; the questionnaire research is intended to test and further substantiate this assumption.
In order to uncover the reasons behind the rise of online travel agents — particularly with respect to the three hypotheses proposed — it was necessary to consult people directly involved in travel and tourism. These included individuals running traditional high street travel agents, people running online travel and tourism agencies, consumers using both types of agency, and those responsible for promoting travel and tourism in the UK (journalists, PR professionals, etc.).
Only through a balanced analysis of the opinions of these different groups would a clear picture of the reasons behind the growth in online travel and tourism bookings emerge. A questionnaire — distributed in a setting conducive to obtaining honest and representative responses — was therefore selected as the most appropriate research instrument.
The questionnaire was designed to be as open as possible, in order to generate candid responses that would reveal participants' views on online versus traditional travel agents. A copy of the questionnaire is provided in the Appendix.
The questionnaire was distributed at the World Travel Mart in November 2003 as part of a broader research study into the sociology of e-commerce, with a particular focus on the online travel industry. Approximately 100 delegates received the questionnaire, divided equally among the groups described above — 25 questionnaires per group.
Each questionnaire was marked to identify its recipient group: 'T' for those running traditional agencies, 'O' for those running online agencies, 'Tr' for those using travel agencies (whether online or traditional), and 'M' for media and PR professionals. Eighty questionnaires were returned in total: 25 from those running traditional agencies, 25 from those running online agencies, 20 from those using online and traditional agencies, and 10 from media and PR professionals.
"The characteristics of online agents are quicker, meaning that it is quicker, and often easier, for people to book their own travel through online agents, than through using traditional high street travel agents."
The questionnaire included several questions directly targeting respondents' views on the internet as a means of booking travel. The questions most relevant to this hypothesis were:
1. Do you use traditional travel agents to book travel and/or tourism arrangements?
2. Do you use online travel agents to book travel and/or tourism arrangements?
3. If you use online travel agents, what made you decide to use this method? (Options: more economical; less hassle; easier and quicker; prefer to direct own arrangements; other.)
4. If you do not use online agents, why not? (Options: do not trust online payment systems; prefer a person to speak to; prefer agent expertise.)
5. Why do you think people do not like to use online agents? (Options: distrust of online shops; distrust of payment systems; lack of confidence in self-booking; other.)
6. Why do you think people like to use online agents? (Options: freedom to plan own holiday; cheaper arrangements; more comfortable than traditional agents; other.)
7. Why do you think people do not like to use traditional agents? (Options: uncomfortable; unhelpful staff; necessity to conform to package itineraries; other.)
8. Why do you think people like to use traditional agents? (Options: no need to manage booking personally; everything handled for them; other.)
11. Why do you think online travel agents are becoming so successful?
The answers to these questions were used to assess the validity of Hypothesis 1.
"The prices offered by online travel agents are the main factor that drives the growth in online travel and tourism bookings."
Several questionnaire questions were designed to assess the influence of price on the growth of online travel bookings, particularly questions 3 and 6, which asked respondents about their reasons for using online agents and why they believed others did so. The price-related response options — "more economical compared to traditional agents" and "the internet can provide cheaper travel/tourism arrangements" — were of particular interest in analysing the role of cost.
"Consumers really do genuinely believe online agents to be a better option than high street traditional travel agents."
This hypothesis is broad-ranging and required a thorough analysis of the full range of respondents. As discussed above, the questionnaire included numerous questions designed to assess respondents' overall impressions of online travel agents relative to traditional ones. The responses across all question types were therefore relevant to evaluating this hypothesis.
"Survey results analysed against all three hypotheses"
As established throughout this thesis, the high street travel agent has been steadily declining over recent years. According to brochure distributor BP Travel Services, the number of UK travel agents slipped from 9,097 to 8,863 between 1999 and 2002 — a 9.7% drop. Many cite the internet as the primary reason for this decline, as growing technological familiarity has reached the point where many consumers prefer to book travel online.
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