Travel Industry - UAE (Dubai) :
Travel Industry has evolved over the years. Industry has gone thru a rollercoaster ride in the past decade. As we can recollect, Travel Agents network was the only channel available for airlines, hotels and other supplier to sell and; promote their products and services. Travel Agencies thrived during this period, enjoying hefty commissions, backend profits from suppliers hence gaining higher Return on Investments. Airlines came up with innovative schemes for travel agents to boost sales; productivity linked bonuses, incentive deals, corporate deal, route deals were a few of them.
Changes in Aviation Industry since 9/11 :
Post 9/11 things got changed. Airlines evaluated various ways on 'how to cut costs' to keep their operation successful. First option was to look at unproductive routes and; shut them down, downsizing was another mantra to control cost and finally, airlines had no option than to chop commissions paid to travel agents and; to bring on zero percentage commission on ticket sell. Sumani, bird flu and; other natural calamities further damaged airlines revenues and; dissociated them from any payouts for travel agents.
Surge in oil prices :
As the industry was recovering, we saw oil prices touching new highs. It was the worst nightmare for airlines, when oil prices hit all times high of $150 per barrel and was expected to go even higher. This was a panic situation that forced some airlines to hedge Aviation fuel at these levels. Fuel prices started sliding south, after reaching its peak; manifesting bigger losses for airlines who’s hedging went wrong.
Meltdown of Financial Institutions and worldwide recession :
We witnessed the meltdown of ‘Financial Institutions’, triggering 'Global Recession’ during the last quarter of 2008. Bigger economies collapsed, big corporate houses had higher redundancies and airlines did dry runs on routes that were always lucrative. Markets all over the world faced liquidity crunch.
Travel Industry in Dubai :
Global meltdown of financial institutions has spiral effects in Dubai’s economy. Multinationals were quick to slash down travel budgets by tweaking ‘Travel Policies’. Premium travel was a thing of the past and budget carriers intruded in corporate travel territory. Travel business was entirely driven through internet. Airlines started cracking deals directly with big corporate houses, devaluing travel agent’s role. Airline website made things easier for corporate traveler to book online & cut-off travel agent completely. Non-unity & insecurity between Travel Agents has built unsolicited, fierce competition within travel agents. Travel Agents in Dubai are ready to work on lower profit margins to acquire multi-national accounts.
So the bigger question that pops up is “How is the Travel Industry in Dubai going to survive?”
