Eden Travel

The idea struck Suresh Hindawi like a flash. Although he had founded Eden Travel 16 years ago, he suddenly had a better understanding of his business, but now he was worried. He had recently heard someone say that travel agents are basically information brokers. He had never thought about it this way but believed this might help in thinking through the long-term directions for the travel agency. Thinking of his company as an information broker led him to wonder what would happen when computers made travel information readily available to anyone.

Looking back at the history of his firm, Hindawi remembered when his agents had to call the airlines directly to make any reservation. Later, computerized reservation systems allowed them to make reservations through a terminal without making a phone call. Recently, several agents mentioned that some customers seemed to be using the Official Airline Guide themselves and requesting specific flights instead of waiting for suggestions from the agents. Yesterday, an agent told him that one long-time customer had started to make airline reservations using a personal computer hooked up to a public information service that included airline reservations.

Hindawi didn't see this trend as an emergency situation since it was happening slowly. However, in the long term he thought that there would be some growth in the number of individuals making their own reservations. He saw big trouble for travel agents if the airlines started giving these individuals small rebates instead of paying 10% commissions to travel agents. He wondered if that would happen. Meanwhile, he decided to analyze the different segments of the business. His agency's business was currently 70% business travel and 30% holiday travel. About 80% of the business was linked to major corporate accounts, with about 65% of revenues coming from airline reservations. The rest came from other reservations, such as hotels, cruises, and car rentals. Suresh wants your help in developing a long-term strategy.

Questions:

1. Who are the travel agency's customers? Describe the customer's value chain in this industry. If different customers have different types of value chains, describe the differences.

2. Use the positioning map to characterize the travel agency's offering as a product versus service, and as information versus physical objects. Use the positioning map to identify some possible strategic directions.

3. Use ideas from the chapter to argue the pros and cons and practical implications of the following proposition: A small travel agency like Eden Travel doesn't have a chance against larger agencies. Suresh should try to sell his business and go into something else.

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