Alternative distribution systems are cropping up all over as well. Retailers such as Costco have begun issuing discount airplane tickets. Southwest Airlines sells tickets through the Internet and is setting up big in-house reservations offices to handle telephone business. Upstart airline ValuJet does 80% of its business directly with passengers, saving about half the customary distribution cost. A company called Docunet is installing automated ticket-printing machines in locations such as offices and supermarkets; customers with reservations can swipe their credit cards through and get a ticket on the spot. Another company, Business Travel Contractors Corp. (BTCC), is attempting to set up direct relationships between the airlines and large travel buyers. Agents would still write tickets under the plan -- but they'd be working, in effect, for BTCC and would get only a flat fee for every ticket written.
So what's a travel agent to do? What, indeed, is any company in similarly uncertain circumstances to do? Ask travel agents that question, and a lot of the answers you'd get are predictable. Serve the customer better. Deliver more value. Cut costs. It's the usual range of business nostrums, and in ordinary times it might be enough.
But these are far from ordinary times, and a few companies in the travel business seem to know it. Instead of trying to do the same old thing, only better, they're trying to come up with new ways of adding value and hence new ways of making money. They're thinking, as the saying goes, outside the box.
On the next few pages, we profile six of those revolutionaries. Check out their strategies -- because your industry may be next on the new economy's Richter charts.
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THE MERCHANDISER
Company: Travelfest
Location: Austin, Tex.
Number of employees: 88
CEO: Gary E. Hoover
Strategy: Revamp the way travel is sold
Gary Hoover founded the Bookstop chain of book superstores, which he and his partners then sold to Barnes & Noble for close to $42 million. Looking for another business to get into, he cast an incredulous eye on the travel-agent industry.
"It was as if all the retail revolution of the past 20 or 30 years had completely missed the travel business," he says. Agencies closed at 6 o'clock. They weren't open weekends, though their ads typically ran on Sundays. Their offices were drab and uninviting. They did most of their business over the phone, rather than face-to-face. Resolving to yank travel out of the retail Stone Age, Hoover created what he styles as the Home Depot of the industry.
Walk into one of Hoover's two Travelfest stores and you know you're not in Kansas anymore -- or at least that you don't want to be. Fourteen video monitors are going at once. Four backlighted walls show slides from different parts of the world. The light fixtures are globes, the ceiling a giant mural. A full-size replica of an airplane wing projects from the wall over the reservations center.
The stores -- one with 6,000 square feet, the other with 10,000 -- sell some 20,000 travel-related items: Books. Videos. Maps. Luggage. Water purifiers. Customers can pick up visa applications and check out the Hotel and Travel Index, widely used by travel agents (and almost never by their clients). Europe gets its own room, complete with language books and tour information. So does the United States, as well as Asia and Africa, and Latin America and the Caribbean. Kids get a room of their own: Geofun, it's called. A "learning center" offers 20 classes every month on travel-related subjects, from Spanish classes to how to overcome the fear of flying.
Oh, yes: the store is open from 9 a.m. to 11 p.m., seven days a week. It also accepts mail and telephone orders.
Hoover's business model? More than 80% of his revenues, he says, come from ticket sales, mostly to leisure and small-business travelers. He doesn't sell a lot of domestic flights priced at more than $500, so the commission cap doesn't affect him greatly. (The cap doesn't apply to international flights.) Then there's all that other stuff. It accounts for less than 20% of the stores' revenues, says Hoover, but considerably more than 20% of the profits. And it gets customers in the door, where he can sell them travel.
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THE CONTRACTOR
Company: Capitol Prestige Travel
Location: Sacramento, Calif.
Number of employees: 128, excluding home-based agents
CEO: Derek Messenger
Strategy: Change the service-delivery model
Derek Messenger of Capitol Prestige Travel, which is a franchise of Carlson Wagonlit Travel, likes to market big: he spends $1 million a year on statewide travel ads and infomercials about discount cruise sailings. Call his toll-free number and you can sign up.
Other agencies, however, have foundered on these rocks. It's no trick to get people to call. The trick is to have enough trained people on hand when the calls roll in, without running up huge fixed expenses that eat into margins. No agency can just add agents and office space and computers unless it can produce a corresponding amount of revenues 40 hours a week.
Messenger's solution: Why rely on highly trained agents? Why 40 hours a week? Why not independent contractors working out of their homes -- agents who would pay for the privilege of affiliating with a well-known agency?
