Closure of in-store travel agencies a necessary turning point in travel retail, says expert

Melbourne, Australia: April 10, 2018: Street view of a Sta Travel Agency shop on Acland Street in St Kilda. STA caters mainly for students and young adults.

With the COVID-19 pandemic accelerating the digitisation of the travel agent model, creating more shop closures as in-store agencies switch operations online, one expert says this is a necessary adaptation to changing consumer preferences.

Johanna Bonhill-Smith, a travel and tourism analyst at GlobalData, said the “long-term survival” of in-store travel agencies has been discussed for several years due to the rising popularity of online bookings.

“Success in 2021 will largely depend on good levels of cash flow, an area in which online travel agents (OTAs) continue to be a step ahead of traditional brick and mortar style agencies, thanks to their asset-light business models,” she said.

Only 17 per cent of the 29,744 global respondents in GlobalData’s Q3 2019 consumer survey declared they booked with an in-store travel agent, showing that prior to COVID-19, booking in-store was already decreasing in popularity.

A more recent GlobalData survey in December 2020 found that 47 per cent of 5,766 global respondents would buy more products online rather than visiting a store and 60 per cent would do banking transactions online post-pandemic.

“Lack of revenue and high demand for refunds has taken its toll on many traditional travel agencies,” Bonhill-Smith said.

“High fixed costs including high street rents would have depleted cash reserves further for in-store agents in comparison to OTAs. Store closures were considered essential for many to simply stay afloat during 2020 and some have been made permanent.”

STA Travel, a long-haul flight specialist with more than 50 shops in the United Kingdom, had to cease trading in August 2020 as costs were racking up at a time when there was little income.

Flight Centre closed 421 out of 740 of its stores during COVID-19, while Hays Travel has declared it expects to operate a ‘hybrid’ return to retail with some shops reopening and others to remain closed in relation to the UK Government’s roadmap.

Many staff have declared they are happy to work from home, which may see more permanent shop closures as a result, GlobalData said.

TUI is the most recent to announce a downsizing, with plans to close a further 48 branches in 2021. This, in addition to the 166 TUI shops that were shut in 2020, leaves the company with around 314 branches as it aims to digitise its operations, according to GlobalData.

Bonhill-Smith added: “It now boils down to survival of the fittest. The rollout of vaccinations worldwide, coupled with the supposed release of digital vaccine passports, has offered a beacon of hope for the travel sector.

“However, the news of new variants of COVID-19, coupled with ongoing lockdowns across Europe, suggests 2021 will still be a year that is far from normal.

“Traditional in-store travel agencies have been increasingly under pressure to develop their online directories to remain competitive within the global marketplace.

“The lower the fixed costs for travel agencies, the greater flexibility they will have in servicing the future travel space. Therefore, more shop closures are likely to follow as we enter the so-called ‘new normal’.”

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