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In many places in the U.S., the traditional travel agency storefront has disappeared as travelers book online and agents have begun working from home or as independent contractors.
But Flight Centre USA president Dean Smith says that visible storefronts in major U.S. cities will continue to be a priority for the company’s Liberty Travel brand.
From the new Liberty Travel storefront steps away from Manhattan’s bustling Union Square, Smith told Skift that Flight Centre Travel Group’s best-performing brands essentially foot the bill for Liberty Travel’s visibility; Flight Centre’s long-haul flight and corporate travel businesses, for instance, also work out of the same Liberty Travel location.
Smith talked about how Flight Centre’s recent acquisition of StudentUniverse fits into the company’s brand portfolio, why visibility is vital for travel agencies and the importance of introducing millennials to travel agents.
Skift: Most travel agencies are moving away from the storefront model, but Liberty Travel is embracing its large, visible agency presence in big U.S. cities. How has the model been working out for you?
Dean Smith: The model really does work for us because we believe very strongly in the physical and visual nature of our brands, particularly our retail brands. While there is obviously a very big trend in the market to go home and to cut your costs by being virtual, it undermines the industry to a degree because the customers just don’t know that the brands exist, although the service exists.
We want a billboard for our brand. Most of our inquiries still come either by email or over the phone. It’s not live people walking through the door. The fact that we have the billboard means that people see, recognize and acknowledge the brand. And the space really is an interactive space with the way the desks are designed; the customer and the consultant sit shoulder-to-shoulder. You’re not sitting across a desk in their old-fashioned selling model.
Skift: How does Flight Centre Travel Group’s recent acquisition of student travel service Student Universe fit into the company’s portfolio of travel brands? It’s something of a technology company.
Smith: When we looked at the whole life experience of a traveler, we saw that we had a gap. We have plenty of children travel with us. They travel with their parents. They travel with their grandparents, multigenerational travel, group travel, booked through our primary leisure brand, in this instance, Liberty Travel. Then we get people now who are millennials, in their late 20s, early 30s. We catch them at that honeymoon, that first time when they go, “Oh, actually, we don’t want to mess this up and do it ourselves.”
Often we’ll reconnect with that person who was our customer as a child at that point. But we feel that there is that bit in between. The StudentUniverse we think, ultimately, we want to see a system that feeds customers throughout that lifecycle, that we introduce them to different brands as they transition in life. The question is how do we, once we know that a child of a certain age, introduce them softly to the brand so that there is an opportunity for them to engage with StudentUniverse.
At that point when we know that they’re graduating and leaving college, they fall off the cliff for StudentUniverse. That’s the end of the experience with the StudentUniverse. They’ve got a short lifecycle with a customer. How do we reintroduce them to our leisure brands and potentially introduce them to our corporate brands as they’re entering into the corporate workspace? Strategically, that space in the market was really interesting for us. Also that space in the market is clearly tech-savvy and prefer to do it themselves.
Skift: What about the technology side of the acquisition?
Smith: StudentUniverse is a great tech company, it has some great innovations, particularly its validation piece around validating that a student is a student, which is valuable from a supply-chain perspective because suppliers won’t say no. They’ve got a really closed user group that validated that they are who they say they are, are willing to spend a little bit more on acquiring their customer. They also see a long lifecycle of a student. Then what can we take from that technology and apply into our other brands as well? We think that there is a great potential for that.
Skift: But isn’t there concern that younger people don’t want to use agents?
Smith: Not at all. If we can have an authentic connection between our consultants and the customer, and the customer can have an authentic connection within a destination as well, then I think we create the perfect triangle of that transaction. There is a continual relationship between the customer and the consultant. Now, that’ll change. A kid who is 18 doesn’t want to book with their parents’ travel agent. They don’t want to do anything that their parents did!
They may well reconnect with that same travel agent once they reenter the cycle. We certainly encourage person-to-person transactions within the Liberty space, which does not mean that there is not a space for technology in there as well. How does technology enhance that? If someone starts a transaction with us online, where do we know it’s appropriate to step in and assist them? Where do know it’s appropriate to add products that create that authentic experience in destination?
That’s what we want to work with the brains at StudentUniverse that we acquired with the acquisition to help Liberty become a more person-to-person business but using technology to enhance it. I think I used the example of a great restaurant. I love a great restaurant. I love the experience that I have in there. I love the product that I’m getting I love the interaction, person-to-person interaction, with the employee, but I don’t mind using OpenTable to book that reservation, right?
We want to ensure that when we expand the Liberty brand into the technology space it’s about enhancing the customer experience, not about cutting costs.
Skift: Is there a global strategic facet to the deal, as well?
Smith: That’s what we see the great opportunity with StudentUniverse in addition to StudentUniverse being a great business of its own and that opportunity for us to take that brand globally particularly into say, China and India for us, which is huge. The StudentUniverse market is really interesting because it’s both inbound and outbound. We think about U.S. students traveling. We can also be thinking about those Chinese students coming into the U.S. Then they spend more and more once they’re in location if they had that relationship with the brand.
Skift: What are the challenges that Flight Centre faces in Asia? The company is based in Australia, so you have probably had a head start in entering markets like China and India.
Smith: There is a lot of complexity in China, in regulation and access to the internet. I believe that a lot of the booking engines aren’t accessible in China, so how do you get an outbound license? I think the best way to do it is to be in situ on ground and to actually have a Chinese business. We acquired some Chinese businesses a reasonable way back. We’re looking for more opportunities in that market.
It is challenging, probably not as challenging as India. What’s also happening with India is that it’s become very competitive. While there is a huge market, and even if that segment of the market is still probably hundreds of millions of people,bthe competition there is now so strong. The margins are being compressed at the same time so you’re never quite sure whether that margin you’re making is real or not. India is an interesting market.
Skift: Overall, what would you say is the biggest challenge in moving forward under the travel agency model?
Smith: I think the biggest challenge is competing against the low price, is to have people understand the value that the higher price reflects the higher value, which therefore, reflects a better experience. You’ve always got that tension of people who may be budget-constrained. How do we ensure that they understand that that experience is the right experience for them? How do they understand that dealing with one of our employees is going to give them a better trip?