Domestic tourism is playing a large part in reaching the government’s 2020 goal of $115 billion in overnight visitor spending. And clearly there are some big dollars at play, so how are bricks and mortar agents going at capturing their share? Steve Jones investigates.
In the 12 months to December 2015 – the latest figures available at time of publication – Australians took 87 million domestic trips and spent almost 322 million nights away from home. In the process they parted company with $57 billion, half of that forked out by holidaymakers and a quarter by business travellers.
They are significant numbers. Compare that to the $36 billion generated by 248m international visitor nights and it starts to become clear how critical a role domestic tourism is playing in achieving the government’s target of generating at least $115b in overnight spend by 2020. It is a role often overlooked in the higher profile pursuit of the overseas tourism dollar.
What is less clear is the role bricks and mortar travel agents are playing in the sale of domestic product.
While we can all agree – at least to a point – that a sizeable percentage of international travel will continue to be booked through traditional retailers, the same cannot be said with the same level of confidence for domestic holidays.
Such a conclusion is supported by Roy Morgan Research which found travel agents are continuing to be a pivotal seller of overseas holidays but “are not so necessary” for Australia-based breaks.
In its study from late 2014, Roy Morgan found only 8% of consumers who last holidayed in Australia used a bricks and mortar agent, with online agencies only marginally ahead on 10%. Airlines meanwhile captured 18% of bookings while 34% bypassed them all and booked direct with their hotel.
Furthermore, in a ‘state of the nation’ report on travel, Roy Morgan chief executive Michele Levine observed: “Travel agents are being usurped by anything online except where there is a level of complexity like international travel.”
She reiterated the widely held and oft-cited view that travel agents excel if they add value and provide unique product, something they can perhaps more easily demonstrate when booking international travel.
Simon Latchford, head of marketing and strategic partnerships at Visit Sunshine Coast, agreed with the Roy Morgan findings by explaining Gen Y consumers in particular are cutting out both bricks and mortar and online retailers on straightforward domestic transactions.
“What is happening increasingly is consumers are finding a price, contacting the property and saying ‘can you better this rate if I do business with you directly’.
“Nine times out of 10 the hotelier will say yes because they don’t have to pay commission. Even if it’s the offer of a bottle of champagne or a box of chocolates it’s enough to get the consumer over the line.”
Yet while acknowledging that trend is unlikely to change, and in all probability will accelerate, Latchford said the Sunshine Coast will continue to work directly with travel agents to cater for an older, less digitally savvy demographic who will simply never book online.
He highlighted a campaign with Flight Centre last year which saw the Sunshine Coast heavily promoted through 750 stores. The marketing activity coincided with the first of three back to back periods of record visitation for the destination.
“What you need to remember is these campaigns are not necessarily about conversions,” Latchford explained. “Even though that is the end game, part of it is about destination awareness. People can’t buy what they don’t know exists so it’s about raising awareness of the Sunshine Coast and getting into the mindset of consumers.”
The shift to booking domestic travel online and, increasingly, direct with properties was recognised by some state and regional tourism bodies whose sole concern is driving visitation, no matter where the booking originates from.
Tourism Western Australia said booking habits have evolved since 2010.
“In the past people would use traditional travel agents to make their travel arrangements including booking flights, tours and accommodation,” a spokeswoman said. “Now we’re seeing more people preferring to book their domestic holidays themselves online.”
Nevertheless, Tourism WA recognised that some consumers still prefer to use a travel agent to book domestic travel, citing “older people and those booking more complex and expensive itineraries”.
“So we ensure agents are part of our domestic marketing strategy through webinar training opportunities, famil programs and marketing in trade publications,” the spokeswoman said.
Gold Coast Tourism also said the “consumption of travel has certainly shifted to the adoption of new technology and media”.
“However, there remains a portion of the market that looks for a person to person interaction via a traditional travel agency shop front,” a spokeswoman said. But such a view is at odds with data from Tourism Research Australia (TRA) which suggests agents have been used sparingly by consumers booking domestic breaks for at least a decade.
Figures from TRA show agents were used as an “information source” in only 2.1% of domestic overnight trips in 2007, a figure which dipped to 1.1% in 2014.
The internet meanwhile was used in 31% of trips in 2007, rising to 34.4% in 2014.
Despite the general trends, retailers remain typically bullish about the future of domestic bookings and, far from being dispirited, claim they are experiencing a resurgence in sales of Australian product.
Travellers Choice admitted it saw a “fairly significant” dip in domestic business but is now witnessing “strong double digit growth” that began last financial year and has continued into 2015/16.
Managing director Christian Hunter told travelBulletin a number of factors lay behind the upturn.
“Consumers are realising that playing the role of a travel agent themselves is not always as it seems,” he suggested. “Yes you can jump online and book a flight and a hotel but it’s not always that easy.
“There are a lot of different sites and as the online space gets more competitive it becomes more confusing for people to find what they think is the best deal.
“We are seeing consumers are moving away from the concept of ‘do it yourself’ to one of ‘do it for me’. They know where they want to go and are saying ‘just organise it for me’.”
Hunter added that the way domestic tourism is being promoted has also evolved which has played to the strengths of traditional retailers. Rather than focusing on the sale of basic flight and accommodation packages, more add-ons are being included that are not so easy for a consumer to book.
“We are not spending a lot of time promoting flights and hotel packages, it’s more around unique product around events or sports or theatre tickets where we can package a deal with flights, hotels and some value added items,” he said. “Those sorts of packages have been really popular and it has helped stimulate business.”
TravelManagers chairman Barry Mayo also claimed domestic business has shown a sharp year-on-year improvement.
Sales climbed 14% in 2014 and
are a further 21% ahead in the first seven months of the current financial year, he said.
But in figures which illustrate the dominance of international product, domestic product still only represents 6.7% of TravelManagers total revenue, a 0.6 percentage point rise on the previous year.
“It is a small overall percentage but it’s still a significant amount in dollar value,” Mayo said. “It is impressive growth which I put down to a mix of potential reasons. It’s partly driven by the weakening dollar, partly a result of terrorism and partly even down to the recent health threat of Zika. They are all possible factors, but it’s hard to be specific.”
Asked what value a travel agent could bring to a simple package to the Gold Coast, Mayo responded: “It may not always be so simple. Where it becomes more complicated for consumers is if it’s a family holiday and involves infants and cots or multiple uses of a room, or adjoining rooms. They are not always easy to book.
“Consumers will often turn to agents when there is anything that might make it a more complicated transaction.”
Another factor contributing to the upturn in domestic sales has been the “change in mindset of agents”, according to Hunter.
“There was a view that there was little margin in domestic bookings but that has changed,” he said. “There has been a realisation that there is money to be made and you ignore it at your peril.
“If you look at what the domestic product would compete against, such as the South Pacific or Bali or Thailand, there’s often not a lot of margin in those products these days.
“Agents have embraced the philosophy that domestic is a viable and worthwhile product to sell.”
While some tourism bodies such as WA and the Sunshine Coast openly acknowledge the swing towards online, all predictably insist bricks and mortar agents and wholesalers remain important partners.
Sandra Chipchase, chief executive of Destination NSW, described such partnerships as “vital“.
“Destination NSW’s level of partnership with travel wholesalers for domestic travel has remained consistent over the past few years,” she said. “We intend to maintain this level of partnership into the future as Destination NSW continues to work with all distribution partners.”
Chipchase highlighted recent campaigns with Helloworld and Flight Centre as examples of the on-going relationship with retail groups.
Tourism and Events Queensland also flagged its continuing collaboration with retailers while the South Australian Tourism Commission (SATC) said there remains a need to connect with people who “still like to plan and book their travel through travel agents.”
“In the past 12 months we have conducted cooperative marketing campaigns with Helloworld and Flight Centre,” an SATC spokeswoman said. “We have also hosted the TravelManagers Conference in Adelaide which saw over 200 top TravelManagers visit South Australia.
“Part of our role with travel agents is not only our cooperative marketing campaigns but also training of staff through our online training module SA Experts, in-person training, famils, a specially targeted agent e-newsletter and networking roadshows.”
Flight Centre, whose in-house wholesaler Infinity Holidays sells domestic packages to a range of destinations, said point to point airfares have indisputably moved online.
“We still do a truckload of domestic bookings and somewhere between 45% to 50% of tickets we sell every day are domestic tickets,” spokesman Haydn Long said, adding that Flight Centre and the state and regional tourism organisations continue to collaborate “very proactively”.
AccorHotels chief operating officer Simon McGrath backed up Hunter’s observations by suggesting consumers are becoming overawed by digital technologies and beginning to return to agents.
“It’s a bit like online and offline media. We are all doing online digital media but there’s often just too much to consume so we are now seeing better cut through offline,” McGrath said. “If you look at that in the travel agent space, I think there is a swing back to the travel agent because you can sit down and have a chat.
“There is also a greater story to be told by travel agents about a destination. There is no doubt they have a role to play in the future.”
He added bricks and mortar agents bring an “activity and animation” to sales that can’t be found elsewhere.
While consumers clearly book domestic travel through a variety of channels, some brands continue to rely heavily on the trade. One such operator, AAT Kings, estimated that 80 per cent of its guided holiday domestic sales come through the trade.
Managing director Anthony Hayes told travelBulletin he reversed a direct-toconsumer strategy when he took over in a bid to revitalise the brand.
“We have seen millions and millions of dollars of growth over the last three years because of our relationship with the trade,” he said. “If you are going on a beach holiday then doing it yourself is probably easy, but if it’s something that requires a bit more thought like a guided holiday then people still want to talk to an expert.
“Consumers will research online but still want that reassurance from an agent. There are also many different types of people out there. The older demographic, those living in regional Australia, not all of them want to book online or find booking online as straightforward as it may seem.”
Hayes also identified renewed passion for Australian product, not only among consumers but within the agency community itself.
“The focus over the past few years has been on selling international travel but what is exciting is that it seems to be turning around,” he said. “At the recent Flight Centre expos there was a lot of agency focus on domestic travel.”
Such a focus by the trade – assuming it is maintained of course – will be music to the ears of tourism leaders in Australia.
If the retail groups can lift their domestic sales even marginally, as the likes of Travellers Choice and TravelManagers have done, it could make the difference between the industry achieving its lower end 2020 targets or going some way beyond.
