Abacus Travel Predictions for 2006

Don Birch, President and CEO of Abacus International, Asia Pacific’s leading travel facilitator, recently shared his key predictions for Asia Pacific travel in the year ahead.

Asia Pacific consumer habits are rapidly changing

“The growing number of travellers is fast changing the travel landscape in Asia. Their needs are becoming more complex and demanding. For example, mass travellers prefer the traditional travel agent service, competitive pricing and travel more often; while on the other end, the elite travellers seek authentic experiences and customized itineraries,” Mr Birch predicted.

“Travel is no longer a luxury for most people throughout Asia, it is a necessity. This demand from travel is for both business and leisure travellers, and although airlines continue to be affected by higher fuel prices, the increase in ticket prices and added fuel surcharges have yet to deter the Asia Pacific traveller,” he said.

Not only are habits changing, but according to a recent MasterCard survey, Asia’s aging population is also producing a new group of wealthy frequent flyers with more leisure time. Household incomes are rising with the number above US$100,000 per annum set to increase by 13% to 17 million by 2014. Similarly, their travel spend is predicted to double in 10 years, reaching US$17.6 billion. 

Female travellers are becoming the fastest-growing sector in Asia Pacific. The survey claims that by 2010, an estimated US$13.4 billion will be spent by women in four leading Asia Pacific destinations – Seoul, Hong Kong, Singapore and Bangkok. 

Moreover, women are not only shaping travel demand patterns by travelling independently, they are also the travel organisers and decision makers for the entire family, making around 70% of all travel decisions, according to the Pacific Asia Travel Association (PATA).

Airlines will be looking for new ways to incentivise travel in the region

Mr Birch predicted that although 2005 was a golden year for LCCs in Asia, 2006 will see new LCC players as well as further consolidation of LCCs in other markets.

“The low cost carrier (LCC) in Asia has begun to mature and expand. This expansion is good for the entire travel industry, stimulating demand for travel across the board, driving the development of tourism infrastructure, creating jobs and delivering choice and convenience for travellers. Airports such as the new Budget Terminal at Changi Airport in Singapore opening in March this year will attract more visitors and expand the market for both LCCs and network carriers,” he said.

“With the need to operate under tighter costs and offering increased discount fares, LCCs will increasingly see the benefits of working with Travel Agents and GDS’s. As LCCs find their place in Asia, more will adopt GDS distribution, particularly in markets where the effectiveness of direct distribution is limited by the availability of the Internet.

“Full service airlines will look at new ways to incentivise travel and provide good deals for their customers on both their long-haul and short haul routes. It is anticipated that the business traveller will remain one of the key customers of full service traveller, retaining loyalty for their reliability in service, flight times and added membership and alliance benefits,” Mr Birch predicted.

Technology will shape the way the travel industry does business

Abacus believes the Internet will perhaps be the single-most important factor in the future and growth of the travel agent industry.

While travel and tourism is the second largest industry in the world after agriculture, it has yet to fully tap the potential of this new technology. Currently, many travel service providers either do not use Internet Protocol (IP) standards or do not take full advantage of the greater speed, functionality and connectivity IP offers.

Don Birch predicts that while online travel in Asia continues to rise, so does the complexity in travel solutions and the abundance of information. “This is why the need to adopt IP is acute for airlines, but even more so for travel agents,” he explained. “Travellers overwhelmed by the choice or those with multi-segment travel plans, will begin to rely more heavily on travel agents to provide solutions to their complex travel itineraries and to seamlessly manage their composite door-to-door itineraries.”

IP technology will make it easier for travel agents to automate systems, such as ticket refunds, and provide access to on-line services such as e-mail. In the longer term, travel agents that understand what IP technology can do for them will seize a competitive advantage and pave the way for their future expansion and growth.

“To best support travel agents to retain loyal customers and increase their revenue opportunities, GDSs will need to focus on continually evolving and developing their IP solutions bringing with it better service and convenience to the traveller,” said Mr Birch.

Mr Birch further predicted that as technology in air travel becomes more widely accepted in Asia Pacific, value added services such as electronic ticketing will begin to see the phasing out of paper tickets this year. “Once adopted, savings can be as high as Sin$25 per ticket for airlines, providing ease of convenience for travellers and airport ground handling staff and the ability for travel agents to more effective management their customers itinerary.”

“I predict that as fuel prices increase and low cost carries (LCCs) continue to shape travel in Asia, airlines will continue to look for ways to reduce their overheads and maintain positive profit margins. Service providers such as GDSs will come under the microscope, with systems such as the ticketing and pricing systems being squeezed to provide more functions and functionality for the same cost. Tailored solutions and pricing systems will become a necessity, with the relations between GDSs and the airlines playing an increasingly important role in ensuring the right balance is met,” predicted Mr Birch.

“Airlines will need to work closely with GDSs to discover smarter ways for technology to provide efficiencies and help reduce operating costs,” he added.

Evolution is the key

Mr Birch predicted that with the changes facing the travel industry in the short and long term future, the travel agent’s role is expanding and becoming more important now than ever.

“The challenge for the travel agent is to create sustainable value for the traveller in this new travel environment. Increasingly, travellers are turning to multiple channels to look for the best travel deals, with the Internet one of the most popular channels. As a result, airlines are now going direct to the traveller and impacting the traditional role of the travel agents in the matured economies,” said Mr Birch.

With increasing pressure on costs and rising operational costs, the old way of doing business is no longer sustainable and travel agents must change, just as some of the major airlines have done.

“Ultimately, agencies are faced with two choices. One option is to move towards agency consolidation. This is already happening as the traditional mom and pop shops are not big enough to invest in the technology to survive. By becoming big, they will be able to adopt various channels to engage their customers on all fronts. The second option is to carve out a niche that allows them to use their competitive advantage of being small to provide specialized and personalized service in niche markets.

“As part of this change, the GDS model will also have to expand its travel offerings in its sphere as the single point of sale for travel. In addition to its air content, the non-air content and travel information must be rich, easy to book and drive travel agent usage.

“The key to success for the entire travel industry will be built upon understanding the individual customer and delivering genuine value,” he said.

Markets influencing travel in 2006

“Regional travel will continue to be driven by the growing economies and populations throughout the Asia Pacific region. We are expecting that most markets across the region will achieve a modest travel growth rate in excess of 4-6%, with star markets such as India and China set to reach 9 and 12% travel growth respectively,” revealed Mr Birch.

Growth from the Middle East will play a large part in shaping travel in Asia this year, with the anticipated expansion of its airports and home-based carriers– Emirates, Etihad Airways, Gulf Air and Qatar Airways. Airports where these airlines are operating from are spending nearly US$19 billion to modernize and expand (source: Orient Aviation, Feb 2006). With new cities, routes and services being added almost weekly by one of the airlines, new stopovers and varied destinations are quickly becoming a priority. And Asia is perfectly positioned for the stopover between continents between the Middle East and Australia, the US or even Europe.

Intra-Asia travel on the Abacus system is set to continue to outstrip all long-haul routes in 2006. Business relationships between Asia and the Middle East will carry on being forged, inter-regional trade with China will be high on the priority list for many businesses and governments, and the aviation industry will continue to contribute to the increase in bookings.

“However, to support this growth, some of the markets around the region are lacking in adequate aviation and technology infrastructure,” said Mr Birch. “Hence, as an industry leader in the region, it will be up to us to assist in helping markets work around these issues whilst providing airlines and travel agents with the best tools possible to facilitate seamless travel.”

Challenges around the region that may impact the travel growth include the possibility of an escalation in the situation with Avian Bird flu, geopolitical uncertainties such as civil unrest, the ongoing threat of terrorism, lack of liberalisation of the aviation industry and internal market politics slowing the privatisation and development of infrastructure.

“My strongest prediction is that amidst all the possibilities and what-might’s of the year, travel outlook will remain fairly robust throughout and the industry will continue to work together to keep the customers happy, the region safe and the tourism dollar coming in,” said Mr Birch.

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