By Martin Kelly
WHOLESALING sounds like something that should only happen at a fruit and vegetable market. Yet the middleman is an intrinsic part of the travel industry, and has been since ancient times.
The question now is whether the wholesaling sector is headed for rocky times unless the traditional single-channel business model – selling through travel agents – changes.
Senior industry executives privately say that wholesaling is vulnerable, lagging as air and hotels have moved forward, using the Internet to bypass traditional distribution channels and sell direct to consumers.
At first glance, this argument makes sense, at least for small wholesalers.
They simply don’t have the capital to invest in new technology, or the time to develop fresh strategies, while the complicated nature of international holiday packages demands personal service.
But what about the big boys, who can pretty much do what they want – why haven’t they changed?
The answer, according to the likes of Qantas Holidays and Creative Holidays, is that the agency distribution system works, Internet or not, especially for international travel.
For smarter wholesalers with good product and service, the traditional agency channel is working overtime
Head of Qantas Holidays, Simon Bernardi, says the direct/travel agency split has remained static: at 10% direct and 90% through travel agents.
“The Internet has been good at selling air and capital city hotels, but certainly land is still being booked through traditional means,” says Bernardi.
“People prefer to make a phone call or get a brochure – that hasn’t changed.”
He says there’s been some disintermediation with many people now buying land and air separately.
Bernardi also adds that the Internet offers no real price on holiday packages, which can be bought cheaper through the big wholesalers.
Creative Holidays Managing Director Justin Montgomery claims there is a big opportunity for wholesalers selling exclusively through travel agencies in the low-cost low-commission airfare environment.
On July 1 standard Australian domestic airline commissions fall from 5% to 1%; while in many cases international rates have already fallen from 9% to 7%.
“Travel Corporation has taken the strategy of staying with the trade and not going direct because every other competitor seems to be doing that, and at some time there’s going to be a breaking point,” Montgomery says
Montgomery believes agents will become more selective about who they deal with, and ignore wholesalers selling direct.
“We are now at watershed period, and I think agents are saying we can make money (in the new environment but) if a supplier is selling direct, why would we support them?”
Peregrine and Gecko’s takes a similar position, although from a slightly different perspective, as it has always sold direct and marketed its brands heavily through consumer media.
“The vast majority of Gecko’s sales come through travel agents in Australia and the proportion is very stable,” Gecko’s Brand Manager Steve Wroe says.
He adds that a web presence is essential because “it’s what consumers want” but Peregrine and Gecko’s believe there is no need to fiddle with the standard approach – even when entering new, web-savvy markets such as the UK.
Why? Because if it ain’t broke, don’t fix it.