Death of the travel agent: Covid-19 an existential threat for an industry without ‘any product to sell’ | Business

Qravel agencies are facing an “existential threat” as continuing border closures mean they “don’t have any product to sell”, with business analysts predicting the phasing out of government wage subsidies is likely to mean most larger agencies survive.

However, some travel agencies, despite reporting “zero revenue” since the pandemic began and having to pay back fees for canceled holidays, hope that – by sparing their clients lengthy phone calls with airlines by negotiating refunds on their behalf – they will have demonstrated their value to customers eager to travel when restrictions allow it.

Travel websites’ surging share of holiday bookings over the past decade – Webjet recorded 52% growth in bookings between 2013 and 2019 – has seen smaller travel agencies close and larger firms move to compete with the online and corporate travel markets.

But agencies that have exclusively relied on jobkeepers are concerned they will not be able to recover like other sectors when the scheme is wound back after September.

Flight Centre’s founder and managing director, Graham Turner, told ABC radio on Tuesday the sector needed federal and state governments to be clearer on whether they were pursuing elimination or suppression, and bring certainty for what travel will be allowed.

“We really need the domestic borders open initially and then the international borders to open,” he said. “The jobkeeper helps a bit but that’s not the real issue. Our main problem we’ve got is we don’t have any product to sell.”

Flight Center founder Graham Turner says jobkeeper is not the real issue. ‘Our main problem we’ve got is we don’t have any product to sell.’ Photograph: Glenn Hunt/AAP

As a result of travel restrictions, Flight Center has had to reduce staff numbers from 22,000 to 5,000. Helloworld Travel this week launched a $50m capital-raising exercise to bolster its balance sheet, with transaction volumes expected to remain at 10%-12% of previous levels until state borders fully reopen. It has reduced operating costs from about $23m to about $2m a month, and has stood down 700 of its 1,500 staff, with the other 800 working reduced hours.

When new figures released on Thursday showed unemployment had risen to 7.4% in June, the opposition minister for employment and small business, Brendan O’Connor, held a press conference with a travel agent to call for an extension of jobkeeper to keep tourism workers employed .

Andrew Buerckner, the Melbourne travel agent appearing with O’Connor, said 23 of his 25 staff would not be employed without a jobkeeper, and predicted “98% of travel agencies in Australia would be gone” without the subsidy.

“As much as I hate the word ‘pivot’, there is very little chance for the travel industry to pivot into another area,” he said. “Hospitalities have the opportunity to look at takeaways and minimize their operations but still have incremental revenue. For us, we haven’t really had any revenue since March.”

Gloria Gammo, who runs Sydney-based luxury travel specialist GG Inspired, has relied on jobkeeper as income for her and her assistant since international borders closed at the beginning of the pandemic.

Gloria Gammo, who runs GG Inspired, has relied on jobkeeper as income for her and her assistant since international borders closed. Photograph: Gloria Gammo

She told Guardian Australia that not only had income ground to a halt, her small business “now spends all of our time repaying money back to clients” and negotiating refunds with airlines for trips that have been cancelled.

Gammo has also “been getting commission recalls on past bookings” for holidays that never go ahead.

“We now make zero revenue,” he says. “Not only are we working for free to negotiate refunds with hotels and airlines, but we’re having to pay back money, and our future revenue that we had projected is gone because you only get paid when the client stays.

“You have to make peace with how many thousands you’ve had to return.”

However, Gammo says forced cancellations of holidays have shown the value in booking through a travel agent, as they chase up refunds on behalf of clients and have their own access to booking systems.

She says clients who had their trips canceled are rebooking intrastate getaways with her, and that those who had to postpone international honeymoons are organizing domestic, multi-leg “mini-moons” in the meantime.

“I remember being on hold with Scenic tours for two hours, and this was on their line for travel agents, and then speaking to them for six hours to organize a refund for a trip happening that day,” she says. “Those clients will only ever remember what you did for them.”

Official complaints about online travel bookings have risen fourfold since the pandemic began, with the Australian Competition and Consumer Commission receiving 9,941 complaints from 1 January to the end of May, compared with 2,324 complaints in the same period in 2019.

Despite the complaints, Brian Han, a senior equity analyst at Morningstar, believes “pure bricks and mortar” stores that have become “increasingly marginalised” with the growth of online now faced an “existential threat”.

“Coronavirus has accelerated the migration of shopping behavior from physical stores to online in many sectors,” he says. “There are fewer and fewer reasons why you would physically walk into a store now, and that will extend to travel agents [when travel restrictions are lifted].”

Han says while travel agents have traditionally survived on larger commissions, “online players take a smaller cut and still do pretty well” because they don’t have to pay for real estate.

Han predicts that when pandemic-induced restrictions are lifted, “bigger players” such as Flight Center will “become even stronger because smaller agencies have fallen by the wayside” and won’t be able to hibernate their businesses for long enough to ride the wave of “pent-up demand for travel”.

He says this is because businesses such as Flight Center have already begun moving into overseas markets, building online brands (BYOJet and Aunt Betty) and targeting corporate clients.

Pierre Benckendorff, an associate professor of tourism business at the University of Queensland, also believes smaller travel agents “are in quite a bit of strife”.

“If anybody is going to survive, a big organization like Flight Centre, with deep pockets, will stand a pretty big chance,” he says.

Benckendorff says many independent travel agents based in suburban and rural centers were forced to specialize in complicated itineraries or became part of bigger chains around the time of the dotcom boom.

Han says this trend will intensify, and that most travel agents will exist for complicated, luxury trips and corporate travel.

“For a seven-stop itinerary across Africa you might think ‘bugger it I’ll go to a travel agent’,” he says. “But for a three-night trip to Melbourne, online is easier and cuts out a very expensive middleman. Why would you bother going to an agent?”