Expedia.com®, the world's leading online travel site, recently announced sweeping changes to its service policies, removing change and cancellation fees for all hotel, car rental and cruise reservations and on virtually all flight reservations. And, following a trend in the online travel market, Expedia.com no longer charges online air booking fees.
According to the Wall Street Journal (May 28,2009), "Eliminating the fees, which usually run between $7 and $12 a ticket, allows the online agencies to list the same prices that can be found on airlines' own Web sites. The agencies hope the move will encourage more people to book with them directly, rather than using the sites to do price comparisons and then going to the airline sites to book."
This news comes on the back of a weak outlook for the global travel industry this year. According to Euromonitor International (June 10, 2009), hotel occupancy was forecast to grow by 4.8% in 2009 but is now expected to shrink by 3.6%. Similarly, air travel was originally forecast to grow by 5.3% but will now decrease by 2.3%. Travel departures, hotel and air value sales are now predicted to contract by 1.1, 0.9, 3.6, and 2.3, respectively, in 2009.
Travel companies have no choice but to dramatically reduce costs to survive. "There is little doubt that most markets in the current economic climate are challenging at best and growth will be hard to come by for most operators," said Michael Fishbin, National Director of Hospitality Services, Ernst & Young LLP. "As a result, this year we will see hotel operators continue to focus more of their energies on cost reduction, improving operating efficiencies in their hotels, reaching out to guests via enhanced Internet communication and strengthening their brands through an emphasis on green principles in activities related to both development and operations," he added.
Outsourcing is one strategic lever that can ensure immediate cost reduction and build sustainable competitive advantage through enhanced customer service. To underscore the point, an online travel agency was able to reduce its cost of operations by as much as 30% within nine months of outsourcing.
Let's not forget customer service – an element that cannot be compromised. Outsourcing customer care can deliver an improved customer experience through faster responses to queries, more efficient processes, and dedicated CSAT programs. Providing superior service is viewed as a differentiator in purchasing travel online—a purchase which is trending towards commoditization. Retaining customers is key to increasing booking volumes which, in turn, increase revenues, partially offsetting the revenue loss from the elimination of booking fees.
This trend is noted in a recent E&Y study entitled "Top 10 thoughts for the hospitality industry." As a result of the uncertain economic conditions and the decrease in demand forecast for the next year, owners are acting quickly to increase profitability at the asset level. Current labor agreements limit the opportunities to reduce payroll costs, so owners will require more creative measures to reduce operational expenses. Some of the areas in which they are achieving the most return on their investment are implementing energy efficiency programs, outsourcing business functions and monitoring capital expenditures.
There is no doubt that the travel industry is going through one of its toughest periods in recent history and the keys to survival are innovation, creativity and flexibility. Introducing or expanding your outsourcing model can assist in weathering the storm.
- By Todd Dirks
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