Online booking will not fully replace travel agents’ role

Traditionally, passengers buying ferry tickets or booking a cruise had to visit a travel agent; today, many prefer to complete the process online but John Bertell* discusses possible limits to this trend

Travel agents who do a good job – those focusing on their product and maintaining good contact with their customers – will always prosper. Nevertheless, the emergence and growing popularity of new distribution channels, such as direct business-to-consumer online services, portal websites and fully Internet-based travel agents, means that travel providers are faced with new practical and technical challenges.

Arguably, many of these new distribution channels are no longer that new. Internet booking, for example, has been around in the ferry industry for close to a decade, following the introduction of the first ‘book and pay’ enabled website by Eckerö Line, based on the Åland Islands, in 2001. Yet while the major Internet travel providers such as Travelocity, Expedia and Orbitz evolve and grow, electronic booking continues to exert an impact on smaller concerns operating with traditional distribution models.

There is also marked variation in the extent to which different geographical markets have responded to and adopted new technologies. In Scandinavia and the UK, the Internet was quick to become the most important distribution channel for ferry products, but where agents have traditionally held a stronger bond with their customers, such as in the Mediterranean countries and in Germany, such agents have retained their status as the most important sales channel. That said, it is probably only a matter of time before these regions follow the same development path as those in more mature markets.

Therefore, it is worth asking whether the Internet can work as an effective sales channel for all travel products in the maritime sector – especially for more complex products such as cruises. And what would be the consequences on travel providers of migrating to an online distribution model?

The commercial aviation industry may provide a clue. Airlines were one of the first to adopt the Internet as a direct distribution tool for reaching their customer base. They remain in the vanguard of evolving innovative sales, distribution and pricing strategies. It is likely that, as far as Internet distribution is concerned, other travel sectors will in the future adopt the same approach.

If simple point-to-point ferry transport is comparable to the airlines, recreational cruises and more complex ferry products (such as package holidays) can be likened to the charter flight business. Even in countries that have readily embraced the Internet, such as Scandinavia and the UK, charter operators struggled for many years to create usable booking engines for direct online distribution. However this is not an impossible undertaking and the more successful ones have been rewarded with a significant boost in Internet bookings.

One example is the Swedish flight charter operator Ving, which is a part of MyTravel. Since revamping its online booking site two years ago, taking into account how customers typically act and react during the booking process, the company’s Internet booking ratio has risen from just under 25 per cent to 45 per cent.

Today, while most major charter flight operators offer some form of online booking facility, many customers use these as a catalogue – searching through the various options, comparing different services and prices – before contacting their chosen call centre or travel agent to make an actual booking.

The ratio of customers visiting a site to plan a purchase to those who proceed with a purchase is often referred to as the ‘look/book’ ratio. Ving, for example, found that while 86 per cent of their customers had used the website, only 45 per cent made their bookings there.

This insight into customer behaviour reveals another dimension to online services. Customers do not simply want to book online; rather they are utilising websites as ‘interactive brochures’ to investigate services/routes and check availability and prices. These factors inform for a final purchase decision, which is then carried out through another channel.

There are a number of methods open to an operator to influence customer behaviour and to encourage them to finalise a booking online rather than aborting the process when asked for credit card payment details. For example, it can offer special online rates/discounts or allocate priority availability to online bookings. More important still is to make the payment and confirmation process as painless as possible by using techniques such as remembering details from previous bookings and ensuring that the backend infrastructure for processing payments is secure, reliable and speedy.

However, this combination of a secure, speedy and reliable process is becoming increasingly difficult to achieve due to the introduction by credit card clearing houses of new security standards for their online payment interfaces. To encourage travel providers (as well as other Internet-based stores) to adopt these standards – typical examples include Verified from Visa, MasterCard SecureCode and JCB’s J/Secure – they are raising the fees charged to companies who use simpler, more straightforward payment interfaces. The rationale is that simpler systems are more at risk of being infiltrated by fraudsters and that businesses should be prepared to carry a premium to continue using them.

While stronger security is, of course, to be welcomed, some of the new interfaces require so many extra logins, passwords and other additional steps that customers are put off from using them and instead make bookings in other ways, such as by telephone. Certainly, these new security measures make good sense for online stores selling high value products, which have to be sent to a recipient, since it can be difficult to verify the identity of the recipient and follow-up if the genuine card owner later discovers and reports fraudulent activity. Yet, for ferry operators working in the travel industry, the product is a service that, in the majority of cases, requires the user to identify him/herself with a passport or other officially accepted form of ID.

Looking at more complex products, charter operators started out by providing online brochures together with a separate booking request that the customer could print out or e-mail back to the company. Gradually, this simplistic approach was replaced with more sophisticated methods that connected a company’s website to its inventory database, thereby allowing real time online booking. This resulted in increased usage and greater customer satisfaction.

Today, customers take it for granted that they can both research and purchase travel products in a matter of several mouse clicks. From the operator’s perspective, this set-up will put the onus on developing the information and brochure side of the system, where it makes sense to have quite a complex, flexible and rich information structure, while the booking module remains simple and quick.

There are primarily two ways to handle complex bookings. The first is to provide several quick-shop streams (eg, travel, accommodation, packages and event tickets) and then allow a customer to place products picked from the different ‘shopping areas’ into the same shopping cart. This approach offers simplicity while allowing customers to create a personalised travel product from different shelves.

Many low cost airlines – including Sterling, Ryanair and Easyjet – have taken their booking sites in this direction by providing tabs at the top of their site with different types of travel products. However, these cannot be tied together and placed in the same shopping cart. Instead, the customer must pay for hotel, rental car and flight separately, to separate travel operators or online travel agencies.

This underlines a significant drawback, which is that the travel operator effectively ends up becoming a tour operator, taking complete responsibility for all products placed in the customer’s basket. However, in the ferry and cruise business, where the majority of operators already work in this way, this is not necessarily a problem.

A case in point is Southampton/Isle of Wight ferry operator, Red Funnel, which has found a lucrative niche in offering combinations of ferry tickets with concerts and other events taking place on the island. Indeed, it has recently launched a new website capitalising on this strategy, which is based on a technology that allows any type of product to be placed in the same shopping cart.

Other ferry operators are looking to devise similar systems, or following in the footsteps of Eckerö Line by providing a solution centred on a key product (such as package holiday) that can be personalised from a select range of fixed add-on options.

The second way of simplifying the booking of complex products, which is seen extensively in the charter flight industry, is to take advantage of upgrade options, also known as up-sales. At different points in the booking process, customers are encouraged to add optional items to their cart or upgrade to more expensive versions of a standard product. However, this approach has to be implemented with care since listing too many options at once reduces usability and risks alienating prospective customers.

Another danger is the temptation for companies to discreetly pre-select the upgrade options as the default offering. Indeed, the EU authorities have recently criticised budget airlines for this practice and have threatened to close down booking sites where it is unclear or difficult for the customer to select the basic product.

Other crucial elements in ensuring the success of direct distribution are the visual appearance and usability of the booking website, and the technical platform on which it is based. The sad truth today is that many major ferry operators and some cruise operators still use old custom-built legacy inventory systems hosted on ageing mainframe technology. These tend to be closed systems that are troublesome, if not impossible, to upgrade to the shopping-cart based concepts described above. Unfortunately, these database designs also tend to be quite inflexible, for instance, only allowing ferry bookings with one vehicle.

It is important that travel operators keep up-to-date with the technical requirements needed to interface with and take advantage of new and emerging distribution channels. A few years ago it sufficed to accept bookings through a Unicorn interface, but not today. In some sectors of the travel industry, there are established XML standards and web-service API interfaces that enable products to be easily distributed through a wide number of?outlets.

Meanwhile in other sectors, there are just as many standards as there are interfaces. In the long-term, the industry will have to agree on common standards, but until that happens, travel providers and their systems should be flexible enough to work with as many interfaces as possible.

Furthermore, if a travel provider wants to implement a shopping cart style Internet business model, it is not enough to be compatible with the interfaces required for its primary product line. A system must also be able to act as a distribution channel for other product types, such as hotels, flights, buses and sightseeing.

Some ferry lines have solved this simply by letting ‘sub-providers’ use their own core system. Eckerö Line, for example, offers smaller accommodation providers and other tourist services to set up and manage their inventories within Eckerö’s system. This approach kills two birds with one stone by providing the sub-providers a simple to use framework to offer their products online (which is often beyond the means of small or family run hotels), and gives the ferry operator full distribution rights to their products.

Moreover, even the interfaces on established global distribution systems (GDS) are evolving. Whereas in the past GDS operators relied almost exclusively on Unicorn to connect providers and distributors, they are gradually converting to more modern and powerful technologies.

These new distribution structures often bring new functional and operational requirements. Travel providers need to be capable of handling pricing logics of travel products with which they are not familiar. So called ‘finance functionality’ must be able to take care of the reconciliation between providers, distributors and sales channels; and management tools have to be sufficiently sophisticated to control the system without additional staff.

In conclusion, the industry will still have a need for travel agents, but their role and function will be very different from the past. Time is money but some people will always have more time than money, while for others the reverse is true. The former can justify spending hours on the Internet searching for the best deal, while the latter will happily pay a premium for convenience.

The upshot for travel providers is that no single distribution channel will be more important than the others. If a company cannot sell through the Internet, it will be at a disadvantage. However it will be at an equal disadvantage if it cannot sell to a ‘bricks and mortar’ travel agent. MEC

* John Bertell is sales manager for Hogia Ferry Systems in Finland