Singapore: Internet-savvy travelers drive travel agencies out of business

SINGAPORE — As more and more travelers go online to book flights, hotel rooms and tours, a rising number of home-grown travel agencies have been forced out of business.

Singapore: Internet-savvy travelers drive travel agencies out of business

SINGAPORE — As more and more travelers go online to book flights, hotel rooms and tours, a rising number of home-grown travel agencies have been forced out of business.

A total of 86 travel agencies shut shop in the first five months of this year, surpassing the 80 new ones that obtained operating licences, Singapore Tourism Board (STB) data showed, signalling a shake-out in the industry segment.

At the current pace of closures, the number of firms going out of business this year is also set to exceed the 114 that ceased operations last year.

This will extend the trend since 2011 when closures have risen year after year. Meanwhile, 159 new travel agency licences were issued last year, down from 163 in 2013, STB data showed.

Dr Michael Chiam, senior tourism lecturer at the Ngee Ann Polytechnic, said wafer-thin margins and cut-throat competition continued to push smaller players into the corner, while Internet-savvy travellers are assembling their own itineraries and cutting out agents.

Ms Kay Swee Pin, president of Singapore Outbound Travel Agents Association (SOTAA), said: “In fact, there are far too many travel agents in a small market such as Singapore.” As of December, there were 1,201 licensed travel agents here, up from 973 in 2010 and 735 in 2005.

Main Street Travels went defunct last month after the company ran out of cash.

Mr Sameer Gupta, owner of the agency, said: “Corporate bookings need capital and credit. We have had many corporates not paying up. To fight them meant spending more money. High local salaries, paid-up capital requirements, rentals, audit costs and a host of other pre-requisites made survival tough. Many general retail travel agents are out of business and many others will soon be.”

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Bigger travel agencies have also gone out of business. Asia-Euro Holidays pulled down its shutters abruptly last month after 13 years in business, leaving hundreds of customers in the lurch. Five Stars Tours, another well-known travel agency, went bankrupt in January last year.

Some travel agencies are calling for more regulation to curtail such closures that are casting the industry in a poor light. Smaller operators often undercut the competition with low rates, but eventually collapse when their business model becomes unsustainable.

“STB as a regulator should tighten current rules in terms of paid-up capital requirements and conduct annual audits on travel firms to ensure public money is not at risk. After all, in the event of a closure, the Government and banks are paid off first and consumers mostly get nothing,” said Ms Alicia Seah, director of marketing and communications at Dynasty Travel.

“There have to be stricter rules around the use of funds collected from clients,” Ms Kay of SOTAA said.

As consumer behavior changes, Ms Seah said continuous innovation is needed to survive in the intensely competitive market.

“We are aggressively embracing technology, innovating product offerings and payment solutions besides increasingly banking on loyalty programs. It is not easy for smaller players to compete,” she said.

Tour operators have to restructure and remodel their businesses, said Mr Ram Samtani, secretary-general of the National Association of Travel Agents Singapore (NATAS).

“People today are looking for experiences and not only simple holidays,” he added.

A company official at Grassland Express and Tours’ outlet at Golden Mile Complex said: “Our target audience for traditional travel has changed. We are now focused on customizing tours for the elderly and for family groups. We are looking for ways to get the younger lot back.”

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