Price War vs. Expertise: Which will win when it comes to representation business in the travel industry?

In the late 90’s, a business model was introduced that brought a paradigm shift in the outbound travel business in India – The Representation business. However, over the years, representation business is getting increasingly fragmented, losing its core essence – outsourcing of sales, marketing, and PR services required by international tourism products in India. There are various reasons why the business model is rapidly losing its core value:

1. Industry members on the other side of the table (mostly travel agents) think of “representation” as an easy source of Income. They charge low fees or commissions giving a hard time to the representation companies who actually put in hard work to grow their clients’ business. A professional sales and marketing office requires funds to deliver results, this is rapidly decreasing as these newer small-time companies who have other travel businesses too, are picking up accounts at lower retainers.
2. Young employees having worked with big representation companies start their own venture after gaining just 2-3 years of experience. They too pick up a small time operator / DMC of a country where they work for a similar or slightly higher pay scale, an approach which shows their short-sightedness towards a larger goal.
3. The third reason is representation companies owned by a bigger group of companies. Barring a few, the goal of these companies is to add more accounts to their portfolio at any cost. Here, the parent company has the cash flows to pump in money, so their main focus is to get accounts – even if they have to slash their retainer fees. This becomes an issue for proprietorship driven companies, as their main source of income is the fees + commission structure which is diminishing as these other newer rep companies create a price war.

Running a sales and marketing office includes office expenses, salaries, and travel expenses to other cities as a part of operational cost, besides the years of expertise and knowledge that is provided to clients to drive their business in a particular country. I would like to put through a question to international products and tourism companies – if you can afford to pay a fat salary package for employees then why not choose a company based on their expertise in the business, their trade relations, and sales and marketing skills? When choosing a “best fit” representation company, why does it eventually boil down to price instead of the value of expertise? Cost is obviously a concern but it should be justified vis-à-vis the quality of services provided.

In conclusion, I think we should leave the business to the experts to do what they do best in their respective field and maintain a cohesive industry standard!

The above article is an observation of the last half decade and is not intended at any specific company. It’s a view of where the general representation business model system is headed towards in the Indian subcontinent.