Overview of the Travel Agency Industry
A travel agent business is one that retails tourism related products and services on behalf of wholesale travel operators (such as hotels, major airlines, car rental firms, cruise ship operators and railway companies). The key role of a travel agent is to bring together (or 'package') all of the details that a prospective traveller needs that make up their vacation or business trip.
The travel agency industry accounts for over $140 billion worth of revenue a year. Despite the credit crunch and the subsequent global economic downturn, more and more people are travelling around the world for vacations and business travel. Despite these higher numbers of visitor trips per year, the average amount spent per trip has fallen.
A personalised service is a key element of any travel agency business. This involves answering customer questions and providing alternative options that meet the travellers needs. For example, a reliable travel agent could give you useful tips, like how close the hotel is to the beach, and the names of good local restaurants near the hotel. Agents do not own the stock they are reselling and are reliant on commercial agreements they have with tour operators and other travel companies.
A travel agent usually helps customers plan their holiday, enters a booking into a travel system, process a deposit, liaise with customers to ensure final payments are made when the tickets arrive. Many agents also offer help with a currency exchange service, help with applying for visas, vaccinations and even sell travel insurance. All these tasks mean that successful travel agents need great organisational skills, enthusiasm and a strong awareness of all aspects of holiday logistics.
With such fierce competition, many agents send their own sales staff on holiday to the destinations being sold to soak up local knowledge. Many independent travel agents are unusually good at offering specialist advice in certain areas ( such as luxury cruises, city breaks or skiing holidays). As the average price per trip is significantly greater than most bulk package deals, consumers expect a personalised approach and are willing to pay for it.
Most travel agents offering package holidays have purposely located on a shopping high street near high number of passing shoppers. This traditional model relies on colourful shop frontages, glossy magazines, racks of holiday brochures and uniformed staff. It imitated the supermarket mentality when selling holidays. Most travel agents rely on upon smartly dressed sales staff to answer questions, provide on-the-spot quotes from travel brochures and ageing computer screens. However, this business model is struggling and changing fast....
The economic downturn has put people off from splashing on luxury holidays as consumers have tightened their belts and turned to the Internet for low-cost flights, cheap accommodation and car hire. As a result, the traditional independent travel agent has lost out. Similarly, some noteworthy larger high street travel agency chains have had to reduce the number of branches and sales staff.
Like many other industries facing economic threats, the largest and most powerful players within the travel agency industry are consolidating and merging, to focus on global ticketing systems and capitalise on economies of scale. At the same time, these major tour operators are cutting travel agents commission from travel sales to increase their own operating margin. Many agents now rely on a service fee (instead of a commission) for flight bookings, as the airline industry experiences intense competition. Similarly, many other wholesale travel operators have also created the own travel websites to sell directly to the public (thereby cutting out travel agents completely).
Many agents have had to close their high-street operations. Internet savvy consumers are choosing to do their own travel research online to find out about resorts, destinations and accommodation. Many larger travel websites offer real-time booking facilities to confirm hotel rooms have been reserved, and car hire or flight tickets have been secured. The huge growth of price comparison travel websites has forced many traditional travel agents to specialise on niche areas, where consumers still demand a personalised advice.
High Street travel agents have higher overheads than their online contenders. Travel agents have to incur the costs of property rents, business rates, commercial property insurance, salaries for sales staff, marketing and advertising costs and other overheads related to traditional bricks and mortar shops. Whereas travel agent affiliates based from home running an Internet only model, enjoy very low overheads and are reliant upon Internet marketing tactics and a steady stream of website visitors.
Yet many travellers still prefer the reassurance of dealing with a properly bonded travel agent whom they can ring or meet face-to-face to discuss problems or answer complicated questions. This human interaction and professionalism is rarely replicated through faceless travel websites with limited telephone support and murky credentials.