The Travel Agent Delivering More Value by Becoming an Operational by yououghtaknowme


									 The Travel Agent : Delivering More Value by
   Becoming an Operational Risk Manager

                                    Debély Joëlle
                                   Dubosson Magali
                                 Fragnière Emmanuel

                                   La Londe Les Maures
                                 30-31 Mai, 1-2 June 2006

The 9th International Research            1
Seminar in Service Management                     
1.       Loss commission of Travel agencies
2.       Redefinition of the Business model
3.       Perceived Risk: a literature review
4.       Our Research Questions
5.       Traveler Service Chain
6.       Cost-based Methods from environmental sciences
7.       Replacement cost, Substitution cost and Damage cost
         avoided Methods
8.       Contingent Valuation Methods
9.       Conclusion

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Seminar in Service Management          
 1. Loss commission of Travel agencies

• Commission IATA suppressed (International Air
     Transportation Association)

• Adopted pricing scheme inadequate
• Internet more and more competitive
• Only 1/3 of the voyages is still booked
  through travel agencies (Sept. 2005,

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Seminar in Service Management      
    2. Redefinition of the Business model
• Change or not the nature of service delivered to
  the customer ?
• Look for more value added services when
  consulting a travel agent
• Manage risk/annoyances

• Knowledge based service: are client ready to
  pay for it ?

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Seminar in Service Management  
                    Traditional service                                       Internet
      • Acting on the behalf of the customer                • Creating on their own their travel experience
      • Assistance if a problem occurs                      • Finding easily information on the Internet
      • Consulting services                                 • Same job done by a travel agent
      • Expertise of the travel agent                       • Rapidity
      • Partners’choice on place, regular contacts          • Facility
+     • Customer’follow-up during customer’stay             • No moving
      • Customized offer                                    • Broad offer
      • Reliable information                                • Price
      • Designing complex travel arrangements
      • Expert insigh

      • Costly                                              • Making unintentional mistakes
      • Unfair price (fees)                                 • Limited recourse for correcting errors
      • Selling the highest-margin products                 • No easily available information about visa,
      • Not being well understood by the travel agent       vaccine
-     • Not taking enough time                              • Unfair information
      • Incompetence                                        • Misleading advertising

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    Seminar in Service Management                                               
3. Perceived Risk: a literature review
•    The IHIP Paradigm (Intangibility, Heterogeneity, Instantaneity,
     Perishability) (Zeithaml et al., 1985)
•    Risk perception = occurrence of risk + seriousness of loss (Bauer, 1967)
•    Consumers perceive services as riskier than products (Guseman, 1981;
     Mitchell and Greatorex, 1993; Murray and Schlacter, 1990)
•    Intangibility is positively correlated with perceived risk (Finn, 1985; Zeithaml
     and Bitner, 2000)
•    The properties of services may lower consumer confidence and
     increase perceived risk, mainly by augmenting the degree of
     uncertainty in the decision (Mitchell, 1999)
•    Impact of intangibility on perceived risk and the roles of involvement
     and knowledge (Laroche et al., 2003, 2004)
•    To reduce the perceived risk, consumers are likely to shop around to
     compare alternatives and ask friends and relatives for advice (Boze,

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Seminar in Service Management                               
          4. Our Research Questions
• May the customer be able to deal with «
  annoyances »?
• What if the travel agent could be helpful?
• How much valuable would it be?
• Would the customer be willing to pay for it?

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Seminar in Service Management  
              5. Traveler Service Chain

                                                                                  Car rental

        Public                                                              Local Restau-
                                 Airline   Arrival       Shuttle   Hotel   (corres- rants
                      airport              airport                         pondent)
                                                                            guide Theater

           Parties involved in the delivery of a travel arrangement

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Seminar in Service Management                                       
  Activities involving customers when taking a flight
                                             Parking places?              Intrusive questions?                     By bus?
                   Cannot travel
                                               Far away?                   Taking off shoes?                         Hear
                                             Carry luggage?                  Messing bags?                      announcement?
                  Schedule change
                                           Find the right desk?                  Strike?                           On time?
                                                 On time?                       Queuing?                       Room for luggage?

                                     Going to     Going to the     Check-in        through    Waiting for
                                    the airport    check-in          (incl.      security and the flight             Boarding          Flight
                                                     desk          luggage)        customs

                                Far away?                   Automated machine?                   Seating places?                 Good seat?
                             Parking fares?                  Excess luggage?                      Restaurants?                  Turbulences?
                                Any public                       Passport?                           Delays?                    Temperature?
                             transportation?                      Ticket?                          Cancelled?                      Noise?
                               Taxi fares?                     Overbooking?                          Shops?                   Steward /hostess?
                               Traffic jam?                                                       Information?                     Meal?

                                            Uncertainty that lies in the travel activities
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Seminar in Service Management                                                                                            
                  6. Cost-based Methods from
                     environmental sciences
• Methods to value the damages done to
• 3 main families:
       – Implied market decisions
       – Experimental market techniques
       – Surrogate market methods

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Seminar in Service Management   
7. Replacement cost, Substitution cost and
     Damage cost avoided Methods
 • Inventorying risks that might arise along the
   travel service chain
 • Identifying alternatives for replacement or
 • Calculating the cost of the alternatives
 • Verifying that the client would pay for the
   replacements or substitutes

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 Seminar in Service Management   
                                                           Business as usual
  Initial time schedule

                                       Luton                                   Edinburgh
   Geneva                 6.15 pm     7.05 pm             8.45 pm               10.00 pm

                                                           Surrogate solutions

       Geneva               9.55 pm   10.35 pm

                                                      Gatwick                  Edinburgh
                 Replacement option
                                                                     6.45 am     8.15 am

                 Substitute option
126£                                                                           Edinburgh
                                                                      Early in the morning

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                                 CVM Findings
   • Findings from studies (68 students at HEG
     + 270 low cost passengers)
   • Themes: travel agents, tour operators, car
     rental, hotel chain, airlines company,
     luggage at the airport, trip via Internet, ski
   • Designing the travel value chain
   • Using the Contingent Valuation Method to
     price some services offered to customers
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Seminar in Service Management         
                                 CVM Findings

• Gap collected WTP – actual WTP ?
• Few dispersion when pricing services
• Cluster ?

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                                 8. Conclusion
• Observation: loss commission, Internet, customer not
  willing to pay, annoyances, perceived risk
• Application of dollar-based valuation methods to manage
  the risks encountered along the traveler service chain
• Experience gathered from environmental sciences
• This risk framework service enables the travel agent to
  provide sound risk management for his clients
• Customers more willing to pay for added value delivered
  via risk management
• Definition of new metrics to calculate shadow prices

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Seminar in Service Management          

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