Intermediaries Please Do Not Disturb

The traditional supply chain had travel agents and agencies as the intermediary between the supplier and the customer. The supplier, in this case, is the airlines and hotels offering their products and services to the customer.The primary function of the travel agent is to use the information to sell travel products. They handle other functions for both the customer and supplier as well, including assisting customers in searching and evaluating travel options, providing advice, and limiting risk by bonding. On the supplier’s side, travel agents not only distribute information, but they can also influence customers, and return customer information to the supplier for various market research (Dilworth, 1996).In the old business model, hotels and airlines relied on travel agents to bring business to them. Hotels gave agents a net rate to sell their rooms and make a profit, without having to make the customers pay any more than they did if they had booked the hotel themselves. Meanwhile, airlines gave agents a commission for every ticket they sold.The disintermediation resulting from the new business model has considerably reduced the number of agency locations. In the U.S. alone, agency locations had been reduced to 29,018 in 2001, from 33,500 in 1995. This reduction was due mainly to agencies closing down because airlines had reduced their commissions, from which they generate about 54% of their revenue. The airlines and hotels, having saved on intermediary costs, had consequently been able to lower their prices, gaining more competitive advantage. Due to this price reduction, travelers had also increased in numbers, contributing to the demand for travel services. However, even with this increased demand, the number of travel agents continues to decrease. In 1997, the U.S. Census Bureau reported 183,178 travel agents in employment (Hill amp. Hill, 2001). In 2004, this number has reduced to about 103,000, with 14% of these agents self-employed. This constitutes a 43% reduction in travel agent jobs in a span of 8 years, and this decline is expected to continue up to 2014.

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