Are travel agents merely middlemen?


There are many agents for different services provided by large corporations in various types of industries.

There are also many middlemen for manufactured goods, raw materials, and farm produce. For example, the Federal Agricultural Marketing Authority (Fama) had set up 780 pasar tani (farmers’ market) nationwide, which are participated by over 32,000 traders.

The farm-to-market arrangement for vegetables and fruits, and direct sourcing from the fisherman’s jetty for fish and other marine products, has reduced prices by around 20 per cent.

Middlemen that deprived producers and consumers a fair price to gain excessive profits had earned a bad rap and are bypassed when produce are sold directly to end users.

But only bad middlemen are bad, and some are in a different league altogether. In Japan, sogo shosha (general trading companies) helped rebuilt Japan after the Second World War into an economic powerhouse second only to the United States.

By the late 1990s, the sogo shosha controlled about 10 per cent of the world’s exports and over 50 per cent of Japan’s overall trade.

Today, giant online travel agencies (OTAs) dominate most of the global bookings for airline seats, hotel rooms, tourist attractions and travel services. Suppliers had to offer them rock bottom rates or be left out.

There is no way brick and mortar travel agencies can compete on price, with many buying from OTAs and reselling to customers.

Before the advent of the internet, travel agencies were the darlings of airlines and hotels. Airlines offered five per cent commission for domestic flights and nine per cent for international, as it was pointless for them to open too many branches.

If a customer goes to the office of one airline and finds that all suitable flights are fully booked, he will have to go to another airline.

But a customer has many options in travel agencies, as they are agents for several airlines. Moreover, special fares for long distance flights may only be one-third of the standard economy fares quoted by airlines.

Customers who were naive and preferred to dispense with middlemen dealt directly with carriers, only to find a passenger at the next seat has paid considerably less.

But the honeymoon for travel agencies ended on January 1, 2008 when local airlines stopped paying commissions, forcing travel agencies to charge customers a service fee. This did not go down well with the travelling public, which soon learned to make bookings online with airlines and hotels, which by then were ready and prefer to receive bookings directly from end users.

Upon arrival at various destinations, passengers could use public transport such as trains and buses, or private vehicles through e-hailing if they prefer cheaper fares and no longer at the mercy of unscrupulous taxi drivers.

In fact, well over 90 per cent of the 26.1 million foreign tourists to Malaysia last year did not use the service of local travel agents.

The percentage was even higher for domestic visitors as reported in Domestic Tourism Survey of 2018, with 221.3 million domestic visitors making 302.4 million trips and spent over RM92.6 billion.

But the second highest expenditure was on automotive fuel, meaning an overwhelming number of visitors drove, including for balik kampung during festive holidays.

According to a Digital 2019 report, Malaysia emerged fourth globally in mobile social penetration, and is in the lead among Southeast Asian countries with Singapore in sixth place.

Being adept, Malaysian tourists looking for accommodation overseas or back home could easily find the best bargains using social media.

Travel agents suffer like many other brick and mortar retailers. For example, many shoppers try clothes and shoe sizes at physical stores to make their purchase online later.

Likewise, some travellers may get recommendations from travel agents and book directly with the hotels online.

Cuti Cuti Malaysia travel fairs promoted by Tourism Malaysia are bound to draw large crowds. Participating resorts and lesser known attractions will enjoy roaring sales, whereas it may only be lukewarm for tour packages that charge for transport, accommodation, and other services.

Domestic tourism, which benefits mainly local hotels, restaurants and shops is set for a boom in the second half of the year and next year when holidaymakers are still apprehensive of overseas trips, as they do not wish to be stranded indefinitely in a sudden lockdown.

Travel agents will miss the boat if they remain merely as middlemen by adding another layer of cost without increasing value to their service.

Only the inventive will succeed while the majority will fall by the wayside, which is the norm in a digital and vulnerable world that will be continuously disrupted by innovations and pandemics.

YS Chan,

Petaling Jaya