May 02 2017
Australian business travel has surged over the past five years, supported by improving economic conditions and cheap domestic airfares. Corporate travel services providers have been quick to capitalise on booming business travel, with industry revenue growing strongly over the period. However, not all travel agents have been so fortunate, as new technology has led to significant structural change and increasing competition.
Business tourist nights, a measure of domestic and international business travel in Australia, are anticipated to increase at an annualised 8.5% over the five years through 2016-17. Corporate travel services providers have benefitted from this trend, providing convenient packages that arrange flights, accommodation, transport, entertainment and other services for corporate firms. Revenue for the corporate travel services industry is expected to increase at an annualised 3.9% over the five years through 2016-17, on the back of the booming business travel market. The proliferation of online technology, especially online sales platforms, has also provided a boost for the industry. Online sales platforms have allowed operators to increase automation and trim operating costs, boosting profitability. In addition, online booking platforms make it easier and more efficient for time-poor professionals to arrange business travel. Many firms have found a niche by offering personalised and complex travel plans in a simple and efficient process.
In contrast to operators tailoring to corporate travel, many travel agencies and firms specialising in tour arrangement services have struggled over the past five years. Traditional bricks-and-mortar travel agents tend to be reliant on high commissions and service fees. However, the proliferation of online sales platforms has caused a strong increase in competition, putting downward pressure on commissions and profit margins. Despite these challenges, upstream demand for travel agencies has remained strong, with inbound and outbound tourism increasing steadily over the past five years. As a result, the travel agency and tour arrangement services industry is expected to expand at an annualised 1.7% over the five years through 2016-17.
New and emerging technology has caused significant structural changes for both corporate travel services operators and travel agencies. While online sales platforms have allowed many operators to increase automation and reduce labour costs, they have also increased competition. Metasearch websites allow consumers to compare prices among accommodation and airline providers, providing links directly to their sites. This has allowed airlines and hotels to compete directly with travel agencies and corporate travel services providers. Increased competition has placed downward pressure on commission-based revenue models, like those used by many travel agencies. However, corporate travel services operators have proved more resilient to this trend, as industry firms usually generate margins through professional service fees, rather than commissions.
The outlook remains strong for corporate travel services providers, despite ongoing challenges from technological change. Business travel is forecast to continue increasing, although at a slower rate than over the past five-year period. Overall, industry revenue is forecast to grow at an annualised 3.6% over the five years through 2021-22. The outlook for travel agency and tour arrangement services operators is also positive, due to strong tourism growth and the integration of new online technologies. Overall, industry revenue is forecast to increase an annualised 2.1% over the five years through 2021-22.