Amadeus, a global leader in technology and distribution solutions for the travel and tourism industry, released an independent report conducted by Hermes Management Consulting analysing current operations of travel agencies in Malaysia, and identifying how agencies can enhance profits in the changing industry landscape by increasing their use of technology.

David Brett, President, Amadeus Asia Pacific, said: “The report shows that travel agencies in Malaysia can thrive if they harness new industry developments, particularly where technology is concerned. Years ago, many feared that the internet would mean the death of travel agencies. Clearly that isn’t the case, as it is the agencies using technology to their advantage that are emerging as the most successful businesses.”

The Amadeus-commissioned report is a critical undertaking for a sector that is yet to fully capitalise on the sustained growth in the travel market, both inbound and outbound as well as domestic. According to Hermes Management Consulting, the research company that compiled the report, tourism is one of the biggest drivers of Malaysia’s economy.

Hernan Goyanes, Hermes Management Consulting, said,  “Over the past six years, the Malaysian travel industry has grown 9.4 percent a year, and, according to www.tourismmalaysia.gov.my, is the second-largest foreign exchange earner for the country since 2004. However, travel agencies are not necessarily seeing this growth transfer into increased profits. The changes in the travel industry, including airline commission cuts and the emergence of Low Cost Carriers and direct online booking channels, are increasingly challenging the business models of Malaysian travel agencies.

“This report shows that they need to tap into new strategies, such as optimising technology, to harness their business model for sustainable growth,” he added.

The study shows that drastic reductions in commissions, low-cost carrier growth and changing consumer behaviour have created a dent in traditional income channels of travel agencies. Despite these challenges however, the study shows that there are some steps that can be taken by travel agencies to maximize revenues.

For example, the report found that leisure travel agencies’ total revenue is 85 percent higher than their business travel counterparts. This is largely due to the fact that leisure agencies have moved away from older commission-based models in favour of mark-ups. Leisure travel agencies receive 90 percent of their revenue from mark-ups, whereas corporate travel agencies receive 47 percent of their revenue from commissions, relying heavily on stand-alone air ticket sales. 

The report also indicated that in the current environment where consumers often visit countless websites before determining the most attractive fares, agencies that offer convenient, well-priced packages and assume the role of destination specialists are seeing the best results. Investment in technology is therefore critical, to ensure agencies have accurate, timely information, and to automate the packaging process so that agents are free to service customers. Technologies also enable greater cross-selling/upselling, increased information management, and streamline needs assessment activities.

“As a leading global technology partner to the travel industry, Amadeus offers a wide range of solutions that enable travel agencies to increase efficiency and streamline operations, as well as ensuring they are providing the widest range of content available for their customers, to give them more choice in their travel options,” said Brett. “We also believe strongly in a ‘think global, act local’ approach to customizing our offerings to suit the needs of each market. Research reports such as this allow us to look closely at the market conditions on the ground and challenges that travel agencies are facing, so that we can develop solutions to address the issues.”

“In Malaysia as well as the rest of Asia Pacific, we are seeing an increasing number of travel agencies now looking to technology to remain competitive in the growing travel market, and more integration between travel agencies and airlines to ensure a seamless travel experience,” said Brett.