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Your 2010 Survival GuideDecember 23, 2009 By: George Dooley Travel Agent
Tough challenges ahead, but the worst may be over
Any survival guide for travel agents in 2010 has to be approached carefully, keeping in mind the volatile economy and changes in the agency industry— including the closing of 1,400 locations in the past year— and the search for new viable, profitable retail business models.
“As the U.S. economy struggled to shake itself free of an economic recession, the travel agency industry was faced with monumental challenges few of us could have foreseen,” said Chris Russo, ASTA’s president and chairman, in a year-end review.
The H1N1 flu crisis, the bank and auto bailouts, shortfalls in consumer demand, the lack of credit for small businesses and a declining dollar were among the crises faced in 2009. And there is more to come as Congress presses for controversial changes in health care and energy policies.
As far as agents are concerned, competition from online agencies continues. One result has been increased consolidation among agencies and an increase in the number of independent contractors as agencies seek workable business models that function in tough economic times. There is a “new normal” in the travel industry, including the marketing power of social media.
The consensus is that 2010 won’t be easy, but will be better than 2009. In fact, there are reasons for genuine optimism among the travel agents, suppliers, agency consortia, and associations interviewed by Travel Agent.
The hope remains that Las Vegas' CityCenter will draw new crowds to the city
Apart from the dramatic reception of Royal Caribbean’s new Oasis of the Seas and the opening of Las Vegas’ CityCenter, imaginative discounted tour operator programs abound as do the benefits from the promotional flair of hoteliers, car rental firms and destinations worldwide, from Mexico to Dubai.
New market niches are being identified along with innovative technologies that are helping agents sell and prosper. Consumers are being offered bargain rates by cruise lines on some of the greatest ships ever launched, while major resorts such as Sandals are involved in aggressive promotions. Leisure travel marketing has assumed a force of its own.
“There will no doubt be challenges in 2010. If I had to guess, it’s likely that 2010 will be identified as the year of recovery. The industry will likely focus on ways to improve business as consumer confidence returns,” says John Pittman, ASTA’s vice president, industry relations. “Nonetheless, an airline or two may continue to make noise about transferring some, or all, of its distribution costs, including, but not limited to GDS and credit cards, in 2010. Yet, as long as agents continue to focus on providing value to suppliers by creating demand for travel and providing valued services to consumers, the future looks good.”
The reality is that travel professionals, whether full-service agencies or independent contractors, corporate or leisure, will benefit from ongoing multibillion-dollar investments in the travel industry, including cruise lines, tour operators, technology firms, hoteliers and car rental firms. The $100 billion-plus in annual agent sales will remain a key factor in shaping the industry’s future—and consumer choice.
Royal Caribbean’s Oasis of the Seas is paving the way for a slew of newer, bigger ships in 2010
The most dramatic indications of the investment will show among cruise lines. Despite the downturn, and lower yield on agent transactions, the cruise industry continues to invest. In 2009 CLIA lines introduced 14 new ships; in 2010 they will launch another 13. Between 2010 and 2012 the CLIA fleet will grow by 26 vessels, an investment of nearly $15 billion, according to Bob Sharak, executive vice president of CLIA, who urges increased agency involvement in CLIA and cruise sales.
These ships, including the three largest ever built, showcase the truly incomparable variety and choice offered to consumers across all price categories and types of itineraries around the world, Sharak said. This year will also see CLIA expanding its training and certification programs and adding new incentives for agent and agency membership.
“Crucial to the success of agents in 2010 is staying focused on marketing and selling, creating outbound sales programs to call out to past passengers and clients, and having special offers to tell them about. It is important to find creative ways to capitalize on the positive attitudes that exist out there among consumers about the future of the economy,” says Dwain Wall, senior vice president and general manager of CruiseOne and Cruises Inc.
As for 2010, Wall predicts gains. “We know that there is a 6 percent increase in overall cruise inventory based on the introduction of new ships in 2010. Combining that intelligence with knowledge gained from our third- and fourth-quarter booking numbers, we anticipate a 19 percent increase in 2010 bookings.”
Along with cruise sales, tours will remain the mainstay for many leisure agents. And, despite a tough 2009, members of the U.S. Tour Operators Association (USTOA) report that more than 75 percent of surveyed tour operators anticipate sales to rise by an average 18 percent in international packaged travel in 2010.
USTOA chairman Charlie Ball reports that a little more than 56 percent said they foresee average growth of 10 percent in domestic packaged travel. While more than 35 percent said they believe domestic travel sales will remain on a par with 2009, only 7 percent said they expect a decline. Agents can, in fact, anticipate lower prices, Ball said. Tour operators have also made huge discounts on tour program costs while adding value for consumers.
“We call 2009 the year of the deal. I don’t know about you but I’ve never seen travel so affordable as it was in 2009. Worse yet, many people still didn’t travel—2009 (except for the first quarter) is going to be a year to remember and hopefully forget,” says John Peters, president of Tripology, a technology and marketing firm that has enjoyed explosive growth and agent support in 2009.
Jack Mannix, president of Ensemble Travel, a major agency-owned network, remained bullish on the future of travel professionals, but warned that there are no silver bullets to agency profitability and growth in the year ahead. “Effective agency managers must pay attention to the basics—efficient management, sales performance and finances. They have to control and direct their businesses as businesses, not only be experts in travel. For example, agents must [become] comfortable with charging consultation fees. They have to understand the value of their time and expertise,” he says.
Many destinations dropped in tourism in 2009—in the case of New York City, from 4th to 17th most requested destination
John Werner, president of MAST, another agency-owned group, notes the importance of new destinations to agents—growth that will speed up the recovery of leisure travel sales: “There are so many places to go. I think agents should be excited about that because it means business for them if they go after it. New resorts, new ships, new styles in tours—it all means more customers need the service and expertise of a travel agent to guide them. There have been so many good deals in 2009 and smart travelers have been taking advantage of it because they know what the price points are typically.”
Pricing problems will remain with us, Werner warns: “But I hear and read that many consumers still feel travel is expensive. That’s a little scary to me. I think it indicates that cruise and tour operators will not be able to raise prices in 2010, or at least by not very much, to ensure demand does not fall back. Airfares worry me. I think there is some room for fare increases, but not very much. Most people have a particular price point in mind [of] what an airfare should be and anything above that causes them to not go or change destinations. I think back to 2008 airfares to Europe and what that did to demand.”
In 2009, a few destinations also took a hit. “Because we track trends, it is very evident that [a few] destinations took a terrible hit in 2009,” Tripology’s Peters notes. “The worst? New York, dropping to number 17th most-requested destination from [number four] earlier in the year. Of course, Mexico dropped in ranking as well. Holding strong though are Las Vegas, Orlando, Italy and Greece.”
Will new technology help agents in 2010? The consensus is an emphatic yes—especially when technology solves agents’ problems and delivers efficiency and productivity gains. Stephen McGillivray, Vacation.com’s vice president, marketing, says, “For technology to help agents, they must get a high return on their investment. Agents invest a lot of time and money into websites, social media and various sales tools.” That was the thinking behind Vacation.com’s creation of EZguider, a sales tool that is free to members and reportedly takes very little time to master.
MAST’s Werner adds, “Technology is a big help to agents from an efficiency standpoint. And in areas such as improving the agency’s professional image—the ability to work remotely and not [remain] tied to a desk in the office, and more control over servicing bookings. But a huge challenge remains in learning how to use all of the technology at an agent’s disposal. Most agents have a long way to go and frankly will never learn it all or use all of it.”
Amadeus’ “I need” program is a good example of GDS’s major focus on agents’ needs and the vital role GDS continues to play in agents’ lives. Sabre, Worldspan, Galileo and Amadeus clearly will want agent business in 2010—as they did in 2009. They will continue to innovate and expand their global reach. Technology, if it increases agency productivity and profitability, will continue to share center stage in 2010.
Brad Anderson, co-president of America’s Vacation Center (AVC), reported AVC’s proprietary technology has proven instrumental in his agencies’ sales performance. AVC uses technology not only to generate and track sales leads but monitor agents’ performance including cruise and tour sales. Reporting strong growth in sales despite the recession, Anderson expects to add several hundred agent/affiliates in 2010 just to meet demand. “There is tremendous opportunity out there for agents to earn good money and build careers in travel,” he says.
A consistent theme among the agents and executives interviewed by Travel Agent was the importance of specialization. Ensemble’s Mannix, who also teaches at The Travel Institute, put it bluntly: “Get better or die!” He urges agents to add value to every client and every transaction and to develop a full range of skills as business owners and managers, as well as travel professionals. Mannix urges agents to specialize, accelerate luxury travel expertise and sales and strive to excel as business managers.
“My motto for the travel industry now is ‘specialize or vanish—this is not a drill!’ Online travelers are, more and more, looking for a travel specialist,” Tripology’s Peters adds. Quoting Forrester Research, Peters said this is now up to 26 percent of online travelers. “People are time-starved; they need help but they want a professional—specialists—on the task. They do not want some random travel agent who regurgitates information that can be found on the web in a few clicks. They want someone with firsthand knowledge and personal contacts. They want someone who is passionate about the very trip they’re looking to take. They want value. They want service.”
Investment in education and training programs that contribute to professional development will be the mainstay of associations, consortia and suppliers in 2010 as they were in the past year. Major associations including ASTA and CLIA, as well as The Travel Institute, agency consortia and franchisers, will offer a diversity of opportunities—often strongly supported by industry suppliers—to build agent expertise. Web training has become commonplace.
Agency marketing groups, including consortia, agency-owned networks and franchisers remain at the heart of the agency industry. As in 2009, agents can anticipate their strong support— ranging from performance-based sales incentives and well-managed preferred supplier relationships to support on the technology and marketing fronts.
Vacation.com has a solid example of investment in new marketing technologies in their AgentNet and EZguider desktop booking system and continued expansion of its Engagement marketing and e-marketing programs. As in Vacation.com’s case, agency groups are investing in their agents. Vacation.com’s McGillivray noted the network is home to more than 30 percent of listed host agencies—more than double any other agency organization.
Dramatic highlights of consortia programs include Signature Travel’s launch of a full-scale marketing campaign to promote culinary travel, including relationships with national consumer media such as Bon Appetit and The Food Network. In addition to its marketing and training programs, Virtuoso is breaking new ground with its exclusive deal with Virgin Galactic as its North America agent. Virtuoso travel advisors are the first in the world to be endorsed to reserve seats on Virgin Galactic’s spaceflights, due to launch in 2010.
This year will see continued competition among major host agencies—many of which are members of PATH, the host agency association—for recruiting both new and experienced agents. AVC’s Anderson for example, expects to add several hundred agents to the company’s ranks in 2010 to keep up with demand. Backed by both proprietary technology and lead generation programs, Anderson sees tremendous opportunity for AVC’s independent contractors who also benefit from the company’s strong relationship with the American Express Travel Representative Network. Host agency programs may differ on commission levels but most offer comprehensive, quality support for agents.
In 2010, agents could see business travel recovering at a slower pace than leisure travel. Mergers and consolidations may accelerate. The National Business Travel Association’s (NBTA) president and CEO, Craig Banikowski, says, “The uptick in business travel in 2010 will take place within the framework of a new corporate culture in terms of travel. In the ‘new normal,’ we see stronger travel mandates, greater use of pre-trip approval and audits, tighter restrictions on premium-class travel, more focus on travel ROI and enterprise-wide strategic meetings management.”
NBTA research suggests that 2010 air travel and car rental costs will remain nearly flat while hotel rates decline even as more people travel. Nearly 7 in 10 (69 percent) of travel managers responding to an NBTA survey expected business travel volume to grow in 2010 while 56 percent of travel managers project their total travel spending to increase in 2010; another 31 percent expect their total travel spending to remain flat year over year.
“While most agencies in the U.S. market have experienced volume declines in the past year, it is clear that not all agencies will participate in a recovery to the same extent,” says Uniglobe TravelUSA ’s Andrew Henry, adding, “Those that used 2009 to improve their operations by implementing new technology, extending their global contacts and continuing to knock on corporate account doors are clearly the best positioned to take advantage of what lies ahead for 2010. No one is suggesting that it will be an easy year, but we believe the actions we and our franchisees have taken [have] put us on a solid footing.”
Vacation.com’s McGillivray sees inherent strength in agents: “Travel agents are resilient. While the economy may force a few agencies to shut their doors, for the most part, agents will continue doing what they love—selling travel. However, in a year from now, their approach to selling travel will be different. They’ll become more resourceful and more marketing-savvy. Our members know how important it is to consistently and strategically market their value to past, present and future clients.”
Given the diversity, size and complexity of the travel agency distribution system, a one-size-fits-all survival guide may be at best a work in progress. But time and again—as following the 1995 airline commission caps and post 9/11—travel professionals have proven their resilience and well-honed survival instincts. Different agencies have been impacted differently in the current downturn and they will recover at different rates. But the essence of survival is that travel agents will have to be superb business managers, remain aggressive in pursuing new business and excel in servicing existing clients.