Singapore’s Old-School Travel Agencies Struggle While Innovators Thrive

Editor’s Note: Skift launched a series, Gateway, as we broaden our news coverage geographically with first-hand, original stories from correspondents embedded in cities around the world.

We started with regular reports several times per month from tourism hubs Beijing, Singapore and Capetown. Gateway Beijing and Gateway Singapore, for example, signify that the reporters are writing from those cities although their coverage of the business of travel will meander to other locales in their regions. Read about the series here, and check out all the stories in the series here.

While it may seem that travel agencies are dropping like flies in hot and humid Singapore, the trade is far from languishing, although it is not without challenges.

Figures from the Singapore Tourism Board (STB), which oversees the sector, show the total number of agencies has remained constant in the past few years at around 1,200, as has the rate of new agencies opening and exiting.

The 104 agencies that ceased operations in the first six months are nothing unusual from figures in the same period past years (149 in 2016, 119 in 2015, 116 in 2014), with STB expecting the total number of agencies to remain roughly the same for the whole of this year.

What jangled some nerves was the recent death of household names like 23-year-old MISA Travel and 40-year-old GC Nanda & Sons, which revives the question of whether old agencies could adapt to a new operating landscape.

Former CEO of the National Association of Travel Agents Singapore (NATAS) Robert Khoo, a retiree who now lectures part-time at Kaplan Singapore, said: “Even when I was with NATAS [from 2000-2013], the cessation rate was very high. The only difference was the agencies that closed were usually small and unknown. The closure of prominent outbound agencies such as MISA get more publicity because Singaporeans’ holidays get disrupted.”

Who Bites the Dust and Why

Singapore’s agency sector is well-regulated: All licensees must always maintain a paid-up capital of S$100,000 (US$73,000) and net worth of the same amount. Agencies have a two-year license and must renew the license before it expires on December 31 of the following year. Thus, most agency closures are orderly and cause little consumer impact — i.e., there are few scammers.

STB data shows 40 per cent of agents specialize in outbound, 40 per cent do both outbound and inbound, and close to 20 per cent focus on inbound only. Unsurprising therefore that most of the closures are outbound and ticketing rather than inbound agencies. The latter aren’t spared, however.

Singapore is small and easy for tourists to explore on their own, while “hotels put more focus on reaching consumers direct via their website deals,” said Judy Lum, general manager of Diethelm Travel Singapore. But Singapore’s strategic location is ideal as a jumping pad to the region, enabling regional inbound companies such as Diethelm, part of Bangkok-based Diethelm Travel Group, to continue to thrive.

So what ailed the outbound businesses that died? Agents interviewed blame mostly the inability of the small and medium-size enterprises handling outbound to adapt to changing consumer buying patterns. Those that handle corporate ticketing meanwhile were under pressure from global corporate travel agencies on pricing, incentives and global deals. The rest could be due to some consolidation or dormant agencies.

“A weaker economic outlook may result in slower traffic growth that affects inbound and outbound travel,” said Ong Ling Lee, STB’s director for travel agents and tourist guides. “With changes in consumer travel habits, and various intermediaries such as online booking sites that consumers and suppliers of travel products can access directly, there is also impact on travel agents’ business models and sustainability. A tight manpower situation is further exacerbated by gaps between available travel agent jobs and aspirations of Singaporeans.”

Are Fools Rushing In?

Still, Singapore is seeing as many new agency registrations as those that have exited. Barriers to entry are low, but importantly, newbies see opportunity in travel and tourism. Singapore’s population is 5.6 million, but it welcomes 16.4 million arrivals and sees 9.5 million outbound departures by air/sea (all 2016 figures).

“We have noticed that current and new travel agents are increasingly innovating, going beyond ticketing and order-taking towards becoming designers of travel experiences,” said STB’s Ong. “In terms of their business models and product offerings, they are focusing more on areas such as bespoke travel packages, developing online platforms and diversifying the channels and formats of reaching their target segments.”

Ong said STB was also working to support the industry with grants and initiatives aimed at helping travel agents transform their businesses and better use technology.

These new players may give old ones a run for their money, unless the established companies can change.

“If you look at the number of travel agents that have entered the market, it is apparent that there is still opportunity for growth,” said Robin Yap, president of Travel Corporation Asia. “Our brands — Contiki, Insight Vacations, Trafalgar and Uniworld — have all experienced growth in the past year through our travel agents, so it is indicative that customers are buying from them. However, the market has become more competitive, and customers have also become more demanding in their expectations. Customers now want travel agents to develop more personal relationships and offer expertise on travel products that helps them maximize value and savings.”

Sabre Travel Network Asia Pacific’s vice president of sales and market development, Todd Arthur, added that while online travel sales in the region are expected to double to over US$160 billion this year from 2013, its research shows brick-and-mortar agencies, including those in Singapore, still play an important role in the traveler’s journey.

More than six in 10 (64 per cent) of respondents expected to use a travel agency for their next trip. Corporate travelers too, continue to rely on the value travel agencies bring in simplifying complex travel itineraries that cover multiple segments within a single trip.

“Whilst there is more information readily available on hand, travelers and corporations alike want help in navigating complexity; more than half of respondents we spoke to in our research said that one of the biggest barriers to traveling is having too many travel options and information available, when it was the other way around three to five years ago,” Arthur said. “The opportunity, hence, arises for travel agents to position themselves as the trusted travel expert who can help their customers navigate this complexity and choose the best experience to fit their needs.”

Renewal in the City

Industry members in fact believe more new agencies will enter, pointing to changes to be considered in Parliament soon that they say will actually make it easier for new entrants. The proposed amendments to the Travel Agents Act and Regulation include license exemption for entities providing walking or bicycle tours, restricted license with a lower paid-up capital and net worth requirement for entities selling or arranging tours without accommodation, removal of the Banker’s Guarantee option in lieu of meeting the net worth requirement, and expansion of consumer safeguards.

Ong says STB believes the travel agent industry “holds much potential for further growth and can be an innovative and lean industry that continues to contribute to Singapore’s economy and provide high value jobs to Singaporeans.”

Based in Singapore, Raini Hamdi is a business journalist and has been covering the Asian travel trade and the hotel industry for more than 20 years.