By Robert Bryant
Travel is one of the most popular online purchases for Australian consumers – which is bad news for Australia’s travel agency sector.
Few industries have suffered as badly from the rise of the internet as the travel agency sector. Discount travel products such as air travel and hotel rooms are among the most popular items for online shoppers, who no longer feel the need to consult a travel agent for advice.
As a result, growth in the travel agency sector has slowed. IBISWorld estimates that this industry will only grow by 1.6% over the five year period, primarily due to significant growth in direct on-line bookings and payments and the airlines paying reduced commission on sales to agents.
Industry revenue is expected to experience slightly stronger growth in 2007-08 as the economy strengthens and discounted travel continues to be offered. Further industry restructuring and consolidation is expected following the sale of integrated travel services company S8 and the merger between Jetset and Qantas Holidays.
The major barrier to future industry growth comes from continuing price-based competition, reducing airline commission payments, as well as increased online booking by the industry's client base.
In the future, technological changes will be the major driving force behind the operations and growth of this industry. The industry will, eventually, have to move towards a fee for service basis of operation in order to survive financially.
Products and service segmentation
Major market segments
IBISWorld forecasts that this industry will grow by 1.5% over the five year period to 2012-13. Although revenue growth is anticipated to be hampered by continuing strong competition from direct online booking, it is expected that there will be some increase in domestic tourism as well as good growth in international tourism, both to and from Australia, during the outlook period.
During 2008-09 the industry is expected to experience revenue growth that will be generated from charging service fees to clients to prepare quotes and itineraries as well as from increasing commissions on sales of travel insurance, accommodation, cruises and car hire rather than from airlines. Industry consolidation will continue as Australia continues to be well oversupplied by travel agents.
Revenue growth is expected to continue in 2009-10 but at a slower rate due to forecast lower economic growth. Significant industry consolidation is expected during this year before a return of better economic growth for the rest of the forecast period.
It is expected that the remainder of the forecast period will be an improved trading environment for operators, although competition will remain high and industry revenue growth will be relatively low.
Significant restructuring of operators will continue to occur over the outlook period as the industry will by then have consolidated into only four or five key travel agency groups. Consequently, price-based competition will be high and profit margins will continue to be low over the outlook period.
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