Why “David” Virtuoso can coexist with Goliath “Expedia”

January 29, 2008 | Online Travel

Faced with becoming extinct due to the rise of online travel channels, luxury travel network Virtuoso worked with its network of elite travel advisors to transform the travel agent profession as well as the entire industry.

Kristi Jones, president of travel�s preeminent agency network, Virtuoso, drew a standing-room-only crowd when she recently addressed The Luxury Marketing Council in New York. Members of the professional organization, including top marketers from upscale brands in fashion, real estate and financial services, gathered at The Carlyle hotel to hear Jones speak at the event, which was co-hosted by Virtuoso�s strategic partner, MasterCard.

Jones�s message played on the David and Goliath parable, demonstrating how a relatively small network, with the single mission of creating and enhancing personal travel experiences, overcame the prediction of its own demise. Faced with becoming extinct due to the rise of online travel channels, Virtuoso worked with its network of elite travel advisors to transform the travel agent profession as well as the entire industry.

According to Jones, the travel agency community was up against a perfect storm of obstacles several years ago. Between the loss of airline commissions, the $30 billion hit that the travel and tourism industry took in the wake of September 11th, and finally the launch and subsequent growth of online travel sites, the Network and its Member travel agencies faced an uncertain future. However, a change in focus, a clear and differentiated business model, and some strategic partnering have ensured that the Network�s Members have not only survived, they have thrived, and demand for luxury travel serviced by travel professionals is at an all-time high.

�With the advent of travel web sites, convenience and cost-cutting led to both the commoditization of travel as well as the speculation that travel agents were not long for this world,� says Jones. �The travel advisors associated with this Network have been able to reinvent themselves in spite of, and really because of, the onslaught of online travel options. Frustrated consumers have returned to the comfort of having human interaction and the expertise of their travel consultant.�

With online travel sales projected to be $150 billion by 2010 and an estimated 50% of all travel booked online, travel web sites are certainly the �Goliaths� in the industry. However, as Jones pointed out, they are not invincible. There are indicators that the exponential growth previously seen by these channels is slowing. According to a report released in October 2007 by Forrester Research, 9% fewer people booked travel online this year than 2005; the first time this category has experienced a decrease. With the average online ticket price at $400, Virtuoso, by comparison, says its member agencies� sales were up 17% with transactions averaging $7,000. Lending further credibility to this statement is a November 2007 study released by TravelCLICK stating that the average rate for rooms booked through travel agencies was 45% higher than the average Internet booking.

According to the World Travel and Tourism Council, travel and tourism generate over $7 trillion dollars, or roughly 11% of the Gross National Product, annually. Jones explained that an industry of this size leaves room to maneuver, especially with the key �Baby Boomer� and �Affluent� markets. The lucrative Boomer generation encompasses 78 million people, accounting for $2 trillion in income and 50% of discretionary consumption within the U.S. The Affluent market is even stronger, with 11 million households controlling 70% of all wealth. For the affluent, travel is their number one discretionary purchase, at 88% annually according to the Marketing Leadership Council. The super-affluent are 40% more likely to use a travel advisor. These numbers indicate a receptive audience who are willing to pay a premium for service, knowledge and a superlative travel experience.

As for the future of luxury, Jones cited several studies that support the theory that luxury travel is fairing better than luxury goods. Merrill Lynch predicts that US luxury sales will slide from 25 to 17 percent over the next ten years and Europe luxury sales will slide from 26 to 20 percent. Unitymarketingonline.com further explained that the amount spent by affluent consumers on luxury dropped 21 percent in the second quarter of 2007, from $15,283 to $12,142. (October 26, 2007). However Unitymarketingonline.com went on to explain that while luxury consumers spent significantly less on luxury goods, their spending on luxury experiences actually rose 11 percent. And with a 30 percent expansion in cruise capacity and 2,000 new hotels coming available in the next five years, demand for high-end, customizable travel experiences shows no signs of diminishing.

While stating that David can coexist with Goliath, Jones left the audience with a few words of wisdom on maintaining brand and pricing integrity:

- �Product without context is a commodity. Marketing provides context, the internet does not. And nothing provides context like a personal relationship.�
- �Use your assets to focus on your most valuable clients; they expect to be treated as if they are more important than the rest. They are.�
- �Affluent consumers today may aspire and acquire, but true luxury is authentic and participatory and limited.�
- �Product and brand are being diminished by their very easy accessibility online.�
- �The re-emergence of the sales consultant/advisor who can position your product and brand appropriately, and increase your yield and retention based on personal relationships.�