May 4^th, 2000

The Internet is sending shock waves through the travel industry forcing travel agents to change with the times or risk losing their livelihood

As Travel Agents go, Ways Karani is fairly typical. His business in Singapore consists of one room, four people and a select group of corporate clients. He's available day or night customers often wake him at home to book tickets. And these days, he worries that the Internet is snatching his customers.

"Airlines are going directly to consumers on the Web," he says, while other players are rushing to form Net start-ups that can do his job. "I think we're dying slowly."

Worried travel agents are just one sign that although on-line travel still has a long way to go in Asia, it's already starting to shake up established relationships in the industry. Airlines, hotels and cruise lines are looking to deal directly with their customers via e-commerce, while Internet start-ups are trying to capture a chunk of the travel dollar. For the scores of traditional travel agents who sell the vast majority of tickets, tours and packages, adapting today is essential to protect business tomorrow.

It's not only travel agents that are changing. The industry as a whole is grappling with how to handle this new way of distributing its products. Hotels, for example, might offer different rates to different categories of guest, but on the Internet customers can discover those discrepancies and push for more uniform and transparent pricing.

Anyone familiar with the byzantine reservation systems, ticketing procedures and fare formulas that are the tools of the travel business would say a change is welcome. "It is probably the most complex, illogical industry I've ever dealt with," says Bill Bowers, the Asia-Pacific director of finance at Motorola, who has spent the past two years working on an internal, Web-based system to handle all of the company's travel (see box story on page 36). "The Internet is going to make this complex industry rather simple."

The first to feel the shift are the traditional middlemen. Travel agents say that, for now, the threat posed by the Internet is more of a headache than an actual drain on sales. "It's diluting some business, but the percentage is very small at the moment, "says Ken Chang, president of the Hong Kong Association of Travel Agents, or HATA. "It will change us, but not next week."

Boston Consulting Group estimates Asia's on-line travel market was worth $320 million in 1999, and Vice-President David Michael reckons that figure could double - or even triple- this year.

Recently, travel agents have come under pressure as airlines and hotels move to reduce or eliminate agents' commissions on bookings. That means agents may start to charge customers for their services - a new business model. "Instead of being the order taker that they were before, they have to be the entrepreneur," says Joseph Mclnerney, head of the Pacific Asia Travel Association.

In response to those pressures, travel agents are developing specific areas of expertise such as focusing on group Toru packages or specializing in complicated itineraries. Using the Internet to book a round trip from St. Louis to New York City several times a week is one thing, says Hata's Chang, but buying a trip up the Yangtze River on-line is another. Still, a lot of travel agents seem more or less resigned to losing the regional return trips of frequent travellers to the Internet.

Some also have tried to go on-line themselves. Of its, 1,100 member agencies, the Hong Kong Travel Industry Council says about 100 have their own Web sites. But about 60% of the total are small agencies with less than 10 staff, says Ronnie Ho, the council's deputy chairman, and around 20% don't use computers at all, instead relying on phones and faxes to make bookings.

Meanwhile, on-line agencies are faced with their own dilemma. Chiefly, most visitors to their sites are serial window-shoppers: They like to look, but only rarely buy. Despite the plethora of information now available on the Internet, consumer behaviour remains slow to change. On-line and off-line travel agencies say they have seen a lot of hybrid activity: Someone researches a destination on the Internet, checks out prices available on different Web sites, then calls a travel agent to make the booking.

Take asia-hotels.com, a Hong Kong-based directory of more than 1,000 hotels in the region. The site gets 5,000 visitors a day about 5% of whom make a booking. That's actually pretty good - the average is 1% or less on most on-line travel sites, according to the company's chief technology officer, Riyaz Moorani. Despite the low conversion rates of "lookers to bookers," companies from Hong Kong's tom.com to South Korea's SK Group continue to pile into the Internet travel market. As of last October, Boston Consulting Group found 126 travel sites in the region, not including Japan.

Newcomers be warned: "The only place where the Internet is providing better value is making some sense of the huge variety of ticket prices," says Fiona Swerdlow, a senior analyst at internet research firm Jupiter Communications. "To really change consumer buying habits, on-line must be vastly superior to traditional."

At asiatravelmart.com, a travel site with more than 300 suppliers from more than 100 countries, CEO Alex Kong thinks his company meets that standard. The firm compiles thousands of discounted prices on-line; recently it began offering paperless tickets for flights on Northwest airlines. Still, about 60% of the site's business comes from customers in Europe and the United States, while its Asian travellers are concentrated in Singapore and Australia. Kong describes his clients as "Net-savvy travellers who are very cost-conscious."

Airlines and hotels in the region have so far been tentative in their steps on-line. Cathay Pacific airways, for example currently posts only published fares on its Web site - or the top rates that travel agents, both on-line and off-line, can easily beat.

Traditional travel agents like Karani aren't waiting for them to get their act together. At a recent industry conference, he thought he saw a light at the end of the tunnel, courtesy of - you guessed it - the Internet. Karani discovered a Web-based product from a local start-up, get-tinghere.com, that helps travel agents deliver an increasingly tailored service to their corporate clients. Even better, he will be able to access it from home - so no more midnight runs to the office to fire up the computer.