Luxury travel agencies are still growing — but watch out for the millennials

Key Points
  • Up to 40 percent of luxury travel trips are booked through travel agencies compared to just 27 percent of all international outbound trips
  • Millennials prefer digital-first communication, forcing travel agencies to evolve
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Travel agents may seem passe in the age of countless apps and websites, but in the luxury travel sector, traditions aren't being tossed away just yet.

In fact, 40 percent of luxury travel trips are booked through travel agencies compared to just 27 percent of all international outbound trips, according to a report by ITB Berlin, a world travel trade show, and IPK International, a tourism consulting group.

The study also found that more than half of international luxury travelers used agencies as an information source.

To cite an example, Scott Dunn, a U.K.-based luxury travel agency, said it's growing at 20 percent a year, driven by strong demand for specialist travel advice and planning. "I always tell guests who are considering booking themselves, 'Why risk it?'" said, Simon Russell, Scott Dunn's CEO. "This is your holiday and you are spending a lot on it, don't take any chances and make sure you make the most of your time away."

According to Russell, the firm's clients prefer spending on travel experiences to other assets. "This is fueling the travel market with a new generation of luxury travelers."

According to a 2016 report by Amadeus Travel Intelligence, outbound luxury trips are projected to grow at 6.2 percent over the next 10 years compared to overall travel that is projected to grow at 4.8 percent.

Scott Dunn's Russell said Instagram is playing a massive role in creating an appetite for personalized travel experiences and exotic destinations. "People's personal brands are being defined by where they've been and where they're seen, not just by friends but much wider social followings," he said.

Still, the growth of travel agencies is likely to be challenged in the coming years as millennials, the first generation of digital natives, accumulates wealth and eventually constitutes a larger percentage of the luxury travel market.

"Millennials are far less inclined to pick up the phone," Russell said. "They want to organize and engage digitally and they seek much more instant gratification."

He said the firm's online experience will constantly need to evolve. "Intelligent chat and voice activated search are very much on our radar," he said.

Currently, Scott Dunn said about 70 percent of its revenue comes from the U.K. market, but its CEO said he hopes it will evolve to a three-way split between the U.K., the U.S. and Asian markets.

Last year, Scott Dunn launched operations in Singapore to tap into the Southeast Asian market, and earlier this year, Scott Dunn acquired the city state's largest private tour operator, Country Holidays, for an undisclosed amount.

Correction: This article has been updated to reflect that Scott Dunn acquired Country Holidays.