Life is a mix of good and bad phases. Make the most of the good times, and never lose hope during the bad times.― Dr Prem Jagyasi, Indian award-winning global speaker, publisher, global consultant and a bestseller author
Total damage caused by the Covid-19 outbreak is difficult to ascertain. Obviously, fear had turned many people into panic buying of masks, sanitisers, foods, drinks and even toilet papers. Such irrational herd mentality is fuelled by alarmist news coverage, social media and monkey see, monkey do.
Last December 31, the World Health Organisation was informed of pneumonia cases with unknown cause in Wuhan City, Hubei province, China. On January 23, Wuhan and surrounding cities were locked down to quarantine the epicentre of the novel coronavirus outbreak.
The next day, China’s Ministry of Culture and Tourism ordered travel agencies and tourism companies to stop selling tour packages. It affected world tourism, as Chinese outbound tourists form the largest number and spent the most globally, and China is among the top four destinations for international tourists.
On average, 55 percent of Chinese tourists buy tour packages and 70 percent for those visiting Thailand or Malaysia. Others make their own travel arrangements by booking directly with airlines and internet sites.
Although those who have booked earlier and due to leave China during the recent Chinese New Year holiday were not affected, cancellations and postponements started to pour in. Tours to China by foreign tourists were similarly affected, and the fear of travelling spread rapidly to other parts of Asia.
With many international flights suspended by governments or by airlines due to low load factor, hotel occupancy plunged, tour buses idled more than running, and popular attractions, shopping malls and restaurants turned eerily quiet.
The entire tourism industry has been badly hit, and none harder than travel agents. They are suffering from a triple whammy: loss of income, customers seeking compensation and bogged down by antiquated regulations.
Travel agents are a generic term used by industry players and often cause confusion. While everyone is clear about an insurance agent as one authorised to sell life or general insurance, there is no accreditation for travel agent.
The closest are travel agencies that are members of Iata (International Air Transport Association) but membership is more for companies than individuals, just like in travel associations. The Tour Operating Business and Travel Agency Business (Tobtab) regulations only licence private limited companies, not individuals.
Travel agencies are companies that act as agents for major service providers such as airlines and hotels. Airlines used to pay out five percent commissions for domestic air tickets and nine percent for international flights but stopped paying commissions from 2008.
With the advent of internet in Malaysia in 1995, many people started to search and make bookings online, including air tickets from budget airlines, and prefer not to pay for service charged by travel agencies.
Except for a relatively small number of travel agencies that specialise in government and large corporate accounts for airline ticketing or for cruises, the majority in the travel trade are into tours. Those specialising on inbound can also cater to domestic, while others prefer outbound tours.
Large tour companies have separate divisions to focus on each market with many operating their own tour buses, vans and cars, while some specialise in managing tour vehicles that come with or without driver, such as hire and drive vehicles rented out by car rental firms.
Among all the tour companies, the least affected are the lean inbound and domestic tour operators that do not own tour vehicles. Their overheads are mainly staff costs, office rentals, utilities and depreciation of office equipment, which is miniscule compared to tour buses that could be repossessed if loans are not serviced or given moratorium.
The drop in sales for many companies has turned positive cash flow into negative, and operations will cease once depleted. Everyone is trying to reduce overheads and companies in a stronger position are cutting losses with no one in the travel industry thinking of profits.
The hardest hit are big outbound tour operators that raked in good money during boom times and are now suffering just as much. Before the Covid-19 outbreak, they have collected several hundreds of millions of ringgit from customers for tour packages departing over the next few months.
As they are merely intermediaries for tourism service providers, they must pay airlines, hotels and other suppliers in advance to secure bookings and delivery of services, but service providers have differing and complicated policies on cancellations and refunds.
For example, Air Asia offers full or partial refunds to passengers that booked directly with them but not for travel agents that have placed group bookings. As a result, travel agents have been wrongly accused of cheating.
Dissatisfied customers are dragging travel agents to the Consumer Claims Tribunal after reading terms and conditions in isolation. Even if travel agents win, the exercise would be overly taxing when they are struggling hard to survive in the business.
The views expressed are those of the author and do not necessarily reflect the official policy or position of the New Sarawak Tribune.