Wednesday, December 29, 2010

Will Online Travel Agencies Go the Way of their Bricks-And-Mortar Brethren?

In a recent article starkly titled "High Paying Jobs with No Future", the CBS site MoneyWatch listed "Travel Agent" as its fourth pick, noting that the number of travel agencies have been sliced in half in recent years, from a high of 44,000 in 1997 to just 20,000 today.

Most cite the rise of such online agencies as Expedia, Travelocity and Orbitz as the reason behind the demise of the bricks-and-mortar travel agency. And certainly the ability of customers to see pricing options, flight itineraries and other info online--and without the help of a travel agent--did a job on agencies' revenue streams.

(Photo by Disparky)
But another development was just as significant: the decision by many of the world's airlines in the late 90's to stop paying commissions to agents. It was a body-blow for the industry, sending many agencies reeling into bankruptcy and others scrambling to come up with new and ever more innovative ways of making money.

History seems to be replaying itself online.

In just the last several months Delta Airlines has announced that the online agencies, and will no longer be able to sell their fares. American Airlines is taking this hard stand with mighty Orbitz, and just last week won a court settlement giving it the right to restrict its sales in this fashion. In protest, Expedia has announced that it will no longer "feature" American's fares, which basically means that it will still sell them, but that they won't appear at the top of searches.

So will this lead to the demise of the online travel agencies? Expedia certainly seems to be worried that it will. Why else would it be standing with its big rival Orbitz rather than capitalizing on Orbitz' loss? At this point, its hard to know whether or not the other airlines will try this strategy (a bald attempt, once again, to pay as little as possible in commissions).

Looking at the history, its also unclear whether this strategy will actually help the airlines' bottom lines. When the carriers cut off travel agents their amount of business eventually diminished and fares sank lower and lower over the ensuing decade. Now that couldn't have been the result they were expecting. There's an argument to be made that agents who have a personal relationship with clients (or at least the trust of clients) might be able to sell a higher airfare more easily than airline websites could.

What's clear today is that consumers need to work with the entities that don't have a proverbial "dog in the fight". I'm speaking of the online travel search engines such as, and to a lesser extent These three "google" travel information rather than actually sell travel. I'd say the first two may have the upper hand as they list ALL the airfares out there, even those that don't kick back a finders fee (so that means you'll likely find Ryanair, JetBlue, and Virgin Atlantic fares on the first two, but probably won't on Kayak).

(Note from Pauline: In an earlier version of this article, I said that Southwest could be found on Do Hop and Though I've found that airline's fares listed there in the past, I'm not currently seeing them, leading me to assume there's been some sort of change in the search paradigm to exclude Southwest, likely at the carriers request. My apologies for not catching this change before I posted.)


  1. Southwest's pricing does not appear in any of the online search engines such as Kayak,, Momondo, Dohop. Southwest's TV commercials even tout that their fares are only available through their own seems a bit embarrassing that a publication as reputable as Frommer's would say otherwise.

  2. I think there will be change but I don't see the online agencies going away. For sure, part of the reason that I say this is that work for TripAdvisor in charge of their Flights product.

    But the biggest reason is that while Delta and American want people to book directly, one of the big reasons that online travel booking took so much business from offline agents is that we like to compare and know we got a good deal... so long as we can do it with ease. Now it might be that this comparison moves from GDSs to Meta search engines, but the bottom line is that companies that add value survive.