The biggest challenges for Asia’s inbound agents in 2018 (part 1)

When asked what they foresee as their biggest challenge this year, it’s clear that the growing tentacles of online platforms is the elephant in the room for many inbound agents across Asia. Other bugbears include geopolitics, which affects their market mix, and a lack of destination marketing wherewithals.

Indonesian inbound travel companies consider the rapid growth of online travel businesses as their biggest challenge moving into 2018.

Eddy Sunyoto, managing director of Terimakasih Indonesia Tours & Travel, said: “The biggest challenge is the international online travel companies that have big budgets to promote and sell their products without any boundaries. In the long run, these companies will kill the local medium and small (brick-and-mortar) travel companies.”

Adjie Wahjono, operations manager of Aneka Kartika Surabaya, concurred: “For us, the digital marketing and OTA era is the biggest challenge.”

Previously, OTAs primarily dealt with airline tickets and hotel bookings, while more complicated ground arrangements would require real agents and consultants.

“While the latter is still true, technology keeps on evolving and online companies also keeps developing. (What if they progress from) airline ticketing or hotel bookings to include booking transfers, activities and sightseeing? Soon they might be able to arrange multi-day trips or overland tours,” Adjie said.

Eddy added: “Currently, (with no regulations in place), anyone can act as a travel agent and do business online. My concern is that while the online booking capabilities may increase the number of arrivals, the quality (of services) may decline.”

Adjie also pointed out that the line between wholesale and retail travel companies is being blurred.

“We are a B2B tour operator through and through, but in the past few years, we have seen many new faces and companies introducing themselves as (online) platforms, inviting us local operators to feature our products there. It is a very tricky situation. Once we are inside, our B2B tour operator partners will accuse us of bypassing them,” Adjie explained.

But there is no stopping technology, and industry players have no choice but to follow suit.
Eddy, who is also a board member of the Association of the Indonesian Tour and Travel Agencies (ASITA), said the association will be launching an online platform to help members enter the digital world.

Adjie shared: “We are observing ways to multi-channel – just like what many airlines and hotels have done – through our own brand website, through selected platforms, yet still retain our good relationships with our long established B2B partners worldwide.”

Other agents meanwhile are planning to adapt or adopt business models.

Tanto Ruwiyadi, Look Asia Holidays’ managing director, said: “We have no other alternative than to review and change our business strategy to follow the digital era. To continue to survive as an offline travel agency and compete with an OTA, we have to do (what it takes).”

“For example, we need to note what clients’ concerns about OTAs are, and we then find ways to serve them better,” Tanto said. As an offline travel company, his staff also needed be more active, and quicker and more efficient in relaying information to customers.

Sebastian Ng, managing director of Incito Vacations, hopes to find a way to tap clients in their homes, as new gadgets have made searching for information easier, and the distance between would-be clients and destinations is closer.

“What we are doing is to improve our tools to reach both direct customers and through tour operators,” Ng shared.

Apart from this, Ng wants the government to step in and help build traveller trust, as there have been cases where travellers book a tour through a fraudulent online travel company. – Mimi Hudoyo

Inbound agents in Malaysia generally believe the market will continue to be soft in 2018 as it had been in 2017, and this will lead to lower revenue and profit margins due to undercutting, and new entrants fighting for a smaller market share.

Adam Kamal, CEO, Olympik Holidays, elaborated: “A few years back, OTAs used to offer only hotel bookings. Today, they offer the whole package which includes transfers, tickets to attractions as well as accommodation. It will be a challenge for us to compete on price alone.”

Explaining the difficulty in competing with OTAs, Ally Bhoonee, executive director of World Avenues, shared: “Hotels pay OTAs a minimum 15 per cent commission for each booking, and a sales incentive at the end of the year. OTAs are also spared the country’s six per cent GST charge as they are based overseas.

Some local hoteliers in Malaysia have also resorted to providing the same rates to OTAs as that enjoyed by local wholesalers in order to sell their rooms.

“There needs to be proper dialogue and transparency between hotels and tour operators. Hotels should treat us as long-term partners. For years, before the OTAs came, we were the only distribution channel for hotels,” said Ally.

Meanwhile, Luxury Tours Malaysia’s senior manager, Arokia Das, predicted that price undercutting will continue into 2018 from 2017, especially for the high volume Indian inbound market, as inbound operators from low volume markets also want a slice of the Indian pie.

Arokia added: “Price undercutting is a means of breaking into a new market and quickly building up a clientele.

“A big chunk of the overseas outbound Indian market is made up of small and medium-sized tour operators who are focused on profit margins. They will go for lower prices, even if it means sacrificing on quality.”

Several inbound agents interviewed believed that the way forward is not to compete on price. Instead, it is to offer great service, and niche products where there is little or no competition.

Adam said: “We are developing unique, niche packages such as adventure tourism. These include off-road cycling, whitewater rafting and ATV excursions.”

Arokia’s company is offering value adds to business partners – such as free Wi-Fi in vehicles, complimentary tea and mineral water bottles with the logo of the agency partner – to encourage their loyalty.

Meanwhile, Nigel Wong, director, Urban Rhythms Tours, Adventures & Travel, opined that the political stability in Malaysia after the national general election may also affect the inbound business.

“(As well) the new tourism tax will affect arrivals this year but to what extent remains uncertain,” he said.

Wong said his company will invest more on online marketing this year to showcase Malaysia as a safe and desirable destination for holiday seekers. He also called for more training programmes to be done so that the travel industry could collectively rise and provide a higher quality of service, as well as explore newer and more innovative ways of marketing the country. – S Puvaneswary

Resiliency is the bottomline for inbound agents as they prepare to wrestle with challenges that the new year will bring, varying from stiff competition to the destination’s tarred image and marketing.

Competition mainly comes from foreigners who are allowed full ownership of travel agencies for a minimum capital of US$200,000.

In this case, foreign-owned corporations are nationalistic in nature that, instead of getting the services of local agencies, they tend to go for Japanese or Korean-owned agencies, said Paul So, secretary-general of Philippine Travel Agencies Association (PTAA) and managing director of Great Sights Travel and Tours.

While there are exceptions like Japan Travel Bureau – which has infused a US$3.5 million capital and employs 50 Filipinos in its offices in Bonifacio Global City and Cebu City – there are other foreign agencies that contribute much lesser to the local economy and are not monitored, he said.

“The government should put in place a safety net for small Filipino entrepreneurs and companies as foreign agencies are not supposed to eat into their business,” So suggested.

As well, competition also stems from online agencies offering basement price tours and accommodation, which is “one of our biggest challenges” said PTAA president Marlene Dado Jante.

Jante shared that PTAA will be coming out with a newspaper ad to warn the public about the risks of buying cheap online tour packages.

“The Department of Tourism (DoT) has no police power so they cannot monitor every ‘colorum’ agency, so it’s important to educate the public, and tell them to check the agency’s licence or DoT accreditation.”

Another major challenge is the Philippines’ negative image – a result of the continuing political, human rights and security issues.

“What kind of signals are we sending to the global community?” asked an irate travel consultant.

As such, many travel agencies have been advised to tap the domestic market, a reliable fallback as it is multiple times bigger than the inbound market and growing steadily. Philippine Tour Operators Association’s president Cesar Cruz said the association will continue to introduce special packages featuring new destinations and attractions.

Other companies such as Luxus Pacific Travel and Tours are tapping into new inbound markets like Russia, which is on the rebound for the Philippines.

General manager Mary Ann Ong said the company will also be tapping into the luxury Chinese market, which offers better yield than the mass. – Rosa Ocampo

Agents in Singapore are concerned with losing their hold on the market to online players, and are looking for solutions to secure a foothold in this digital era.

Dominic Ong, managing director of Star Holiday Mart, told TTG Asia that online players are “taking away opportunities” from traditional brick-and-mortar agents, as they no longer offer just flight and hotel bookings, but also tickets to attractions and tours.

This is exacerbated by operators that are pushing for direct bookings.

Ong observed: “Attractions and other ground tours are preparing for this wave (of online adoption), and some even create apps to support it.”

As a result, the market share is slipping away from agents, who are starting to innovate with both online and offline solutions.

For example, Star Holiday Mart is looking to strengthen its B2B partnerships by investing in an application programming interface, as well as buying packages from smaller agents and making them available online, said Ong. His agency hopes to grow its B2B relations in Asia, the Middle East and the Indian subcontinent.

Similarly, CSI Marketing is planning to “review (its) current business model, build up new digital capabilities and adopt different growth strategies”, said its senior director, Joseph Sze.

Such enhancements include mobile or app interfaces, chatbots, VR goggles and data analysis, which can be used “to effectively target different customer segments and market tour programmes to specific tourists”, explained Sze.

The sense of urgency is imminent, and Sze asserted that local players should capitalise on available government support to remain competitive.

He said: “Singapore travel agencies must transform and elevate to a higher level of enterprising travel business, equipped with forefront technology adoption…by leveraging Singapore Tourism Board’s (STB) technology support scheme.”

STB’s five-year Tourism Development Fund encourages the birth of quality tourism products and experiences, and capability and talent enhancement efforts among tourism-related enterprises.

Still, local agents remain wary of completely migrating online. Traditional players cannot compete in the arena of digital juggernauts, opined Ong, who plans to combat this competition by capitalising on his company’s strength of person-to-person service.

He observed: “There is a market of high-end travellers who still want in-person service. In order to stand out, we’re going to concentrate on upselling value-adds such as private transfers, express passes for attractions and restaurant reservations.”

This higher-spending segment is largely consisted of travellers from India, China and Indonesia, said Ong. – Pamela Chow

Various issues like a lack of funding and coordination between government agencies, the ease of Internet bookings essentially cutting out DMCs, and the overdevelopment of some of the country’s natural areas are the challenges moving forward.

Jeff Redl, managing director of Diethelm Vietnam, said lack of funding allocated to marketing the country is a constant criticism, suggesting that stronger support would help drive tourism growth.

Oleg Shafranov, Khiri Travel Vietnam general manager, agreed: “Among the biggest challenges remain the limited government effort – most probably due to insufficient funding – in promoting Vietnam in target markets, (and a) lack of coordination between local government agencies in promoting the country as a single destination.”

Pham Ha, CEO of Luxury Travel Vietnam, said increasing competition from South-east Asian rivals, including Indonesia, Malaysia and Thailand, is also becoming a problem.

Asia DMC’s director of business, Armand Cheveux, said the emergence of Internet bookings with B2C possibilities and tour operators, cutting DMCs and contracting services in destinations is another issue.

Redl added a slowdown in longhaul markets is expected to continue throughout 2018, with Brexit still affecting travel from the UK, Latin America still suffering from an economic crisis, and the ongoing Middle East crises.

“We [the travel industry] need to promote sales to alternative markets, especially shorthaul ones. We need to develop MICE business, and find and develop new destinations,” he said.

Shafranov said low return rates of international visitors – on average 10 per cent – also needs to be addressed, adding that the industry is working to turn this around, and “tour operators have been collectively promoting the country in international markets”.

However, Shafranov lamented that one of the largest and most complex issues the country faces is overdevelopment and excessive commercialisation of some of the country’s natural areas, and the degradation of heritage assets.

To tackle the problem, Khiri Travel has developed various forms of sustainable tourism aimed at giving back to the communities in which they operate.

Through its Khiri Reach project, it coordinates these efforts with others in the tourism industry, as well as NGOs, volunteers and local suppliers. – Marissa Carruthers

Sponsored Post