Travel Agents Took 10 Years To Collapse. Developers Are 3 Years In

Travel agents are the go-to example of an industry killed by the internet. And the numbers are brutal: US agents peaked at around 124,000 in 2000 and collapsed to under 40,000 by 2020 - a 70% drop. Retail locations fell from 34,000 to 13,000[1]. But that collapse took a decade. The ones who survived did it by going upmarket. I keep thinking about this when I look at what's coming for software engineering - except this time, I don't think we get ten years.

Interestingly, while researching this article there are some significant other factors at play. US airlines dramatically cut commissions in 1995 - which accounted for 60% of the average US travel agent's revenue prior to this.[2]

While it's hard to say how much of this commission cut was due to increasing digitisation of the booking services vs other factors, I feel this really does have parallels to the software engineering market, which had a huge boon with covid-era ZIRP causing arguably far too much capital to be allocated to software engineering and then a gradual but seemingly relentless pullback in job positions post that.

In many ways the commission cut led the travel agent industry to be in the worst possible position for the advent of the internet with serious almost overnight cashflow worries. I have no doubt this led the industry to be poorly prepared for the arguably much larger threat of OTAs - margins really started eroding but overall travel volumes continued to increase, masking the structural shift going on.

I do feel this is happening with software engineering positions and contracts right now. Many chats I have with people seem to blame the economy or other external factors for the big slowdown in openings. While there is some truth in this - there has been a ~$150bn decline in US VC funding[3] - I also hear a lot of managers and CTOs saying they are not needing to hire for additional software engineering positions and often aren't rehiring when employees leave.

Interestingly, employment in the US travel agent sector started to increase in the late 90s - due to record travel volumes. It was a classic 'make it up in volume' play, where margins started eroding because of the commission cut. Anecdotally I've heard of a lot of this happening in the custom software engineering market - with significant discounting going on to try and maintain/increase headline revenue numbers albeit at a (much) reduced margin.

It's important to keep in mind in 1999 less than 5% of travel was booked on

Source: HackerNews