A Consolidating Industry

A Consolidating Industry

Decades ago, joining a travel agency consortium or franchise was all about the commission overrides. Why go at it alone when you can earn more as a group whose sales volume gives it more clout with suppliers? But while commission earnings are still a primary reason for belonging to a larger group, consortia these days are providing much more to members, such as one-to-one marketing with customers through sophisticated e-mail marketing and data mining initiatives, education and training. Hotel programs provided by the major consortia give their agency members a fierce edge over online travel agencies (OTAs). What’s better for a travel agent than being able to tell a client they’re getting a free breakfast or room upgrade because of the agent’s relationship with the supplier?

Technology as well has made the competitive landscape more intense, with one consortium after another making it easier and easier to book a preferred supplier with a few simple keyboard strokes. Such consortia programs have made agency members heroes to their clients, since they’re filled with very specific and robust details about preferred hotels, cruise lines, tour operators and airlines. In all, as consortia and agency franchise groups have evolved their offerings to remain competitive and relevant over the years, they’ve done well in servicing their agency members, benefiting consumers and suppliers along the way.

The agency community has evolved as well. There’s been a surge in travel advisor popularity, with consumer press recognizing the value an agent brings to a booking. Over the past two years, there’s been a steady flow of positive press for agents, once again bringing them to the forefront in the consumer’s mind. During this evolution, agencies have fought to overcome the challenges of a down economy by working smarter. In many cases, they’re now affiliating with larger agencies that have strong airline programs that pay higher commissions.

At times, agencies have teamed up with former arch competitors to create powerhouses that have daunting strength when it comes to negotiating pricing with suppliers. These moves, while making the larger groups even larger, have left the smaller groups unsure of what tomorrow will bring.

Of note are the acquisitions of Travel Leaders Group, headquartered in Minneapolis. The group has been steadily rolling up major agency groups to the point where it now holds under its umbrella Vacation.com, with 5,000 members; Nexion; Tzell Travel; and Cruise Holidays

Not bad, considering Travel Leaders was spun off from Carlson just five years ago, and has since gone from being a $6 billion-a-year company to an $18 billion-a-year company. Along the way, it’s also launched a robust hotel amenities program, giving members in the entire network access to consumer perks other competing consortia have long offered. A new DMC program was also formed.

One of Travel Leaders Group's largest deals happened late last year, when Tzell Travel Group, a Travel Leaders company, purchased Protravel International. The merged operations of the two New York City-based agencies alone create an annual sales volume of over $2.35 billion, according to Travel Leaders Group.

The move was not just about two mega-agencies coming together; it gave Travel Leaders a foray into the luxury travel advisor scene, fulfilling a goal it had spoken of for well over a year. But 2012 was also about share-shift for Travel Leaders Group; it now encompasses roughly 30 percent of the travel agency marketplace (that's prior to the Protravel deal) and officials promise there’s more to come (see below).


Consortia Chiefs’ Perspective

We spoke with the leaders of a select group of consortia heads to find out how the many changes over the past decade or so are impacting their businesses. Here’s what we learned:

Roger Block, president of Travel Leaders Franchise Group, is a believer in consolidation and not just because his umbrella corporation is making the biggest moves.

“The consolidation that’s happened in the industry on an individual level, depending on who you work with, could have been painful,” he tells Travel Agent. “But overall, I believe consolidation has been great for agency owners and for consumers. And this isn’t about Travel Leaders per se; this is about the overall retail travel distribution channel in the United States.” Observing his own network, he notes those agencies that have expanded their size via consolidation have also become more efficient in their operations, and hence more profitable.

“That profitability has allowed them to invest in their businesses, which could mean technology or training for their staff so they can specialize in certain areas of expertise.”

As a result, if Agency A bought Agency B, there may have been staff reductions in accounting and finance and a location may have been eliminated, “but very seldom do I see them terminating any of the good frontline travel specialists; they keep them,” says Block. Having destination experts creates a positive customer experience that will not be found on the Internet, he says, adding that such experts can easily upsell clients by customizing a unique trip for them.

Roger Block
Roger Block

Speaking broadly about the overall Travel Leaders Group, Block observes that every time a large acquisition is made, such as that of Tzell buying Protravel, “it elevates our standing with suppliers and each of the acquisitions brings in a new area of expertise.”

Watch out for more acquisitions from this industry giant, “since that’s in our DNA to do so,” says Block. “The question is not if; the question is when.

“All deals are done strategically,” he notes. “We are not just buying things to have sales growth,” even though Travel Leaders is known as a go-to company that is interested in acquisitions. “We are very selective in what we want to do that’s going to strategically fit. Our merger and acquisition teams are constantly looking at things, weighing several questions, such as is it truly a good fit for us, is the value right, are the people right, will their philosophies fit with ours and at the end of the day it’s got to make sense. It’s all about making sure that all the different pieces fit together strategically.”

Alex Sharpe
Alex Sharpe


Smart Consolidation

Alex Sharpe, COO of the Signature Travel Network, is also all for consolidation that fits all the pieces in a puzzle. “I love smart consolidation,” Sharpe tells Travel Agent. “When I see Steve Orens open in New York, that gives him a foothold in another major area,” he notes, speaking of Los Angeles-based Plaza Travel, a Signature member that’s big in the entertainment travel arena. Plaza Travel last year established a Manhattan office by linking up with a duo of New York-based independent contractors who are also strong in entertainment. Sharpe also points to one of Signature’s largest members, Frosch Travel, a $1 billion agency, which late last year acquired Summit Travel, a $60 million-a-year company, bringing the travel fulfillment business into Frosch’s fold. “It’s putting another tool in Frosch’s tool belt,” points out Sharpe. “Now, if Frosch wants to go bid on a piece of business and there is a fulfillment component, they are going to know how to deal with it.”

Because of the trend of large agencies affiliating with independent contractors, Sharpe emphasizes it’s more important than ever for consortia and agency heads to focus on the individual travel advisor. “There has to be that focus on the consultant, because if you see one consultant move, you could see $2 million of your tour business and thousands of hotel nights move.”

For that reason, Sharpe concedes, this is a business “that’s all about the consultants. I think if we focus on them, the consolidation will take care of itself because [if these consultants are involved in a consolidation], they will be the first one to raise their hand and say, ‘I can’t live without Signature.’ ”

Matthew Upchurch, CEO of Virtuoso, affirms the consolidation in the industry makes him feel confident. “Ten or 15 years ago, the retail structure was supposed to be wiped out by now. Fast forward to 15 years later, and all of a sudden, Wall Street is coming up with hundreds of millions of dollars to fund the consolidation of the sector. Why? Because lo and behold, their prediction that we were all going to be obsolete has not only not happened but all of a sudden, you are starting to see everybody realizing that this sector is actually driving innovation and driving yields. So now there is all this money that’s driving this consolidation which basically means that the sector has been validated.”

Even better, over the past five years, even during the financial crisis, travel advisors proved their value, earning high praise in the consumer press, says Upchurch.

John Lovell, president of Vacation.com, also a part of Travel Leaders Group, notes that consolidation is also occurring within the supplier sector, including in the airlines and cruise lines. “I think it’s very, very healthy,” he tells Travel Agent. “It tells me that the people who are making the investment see it as a very healthy distribution channel.”

Consolidation does take out inefficiencies, adds Lovell, and it gives the players buying power.

“The supplier needs to make money, the agent needs to make money and the customer needs to get the best value, and I think that consolidation is only going to help drive that in the future,” he concludes.

Libbie Rice, co-president, Ensemble Travel, says that if the consolidating industry creates large entities that can create a general consumer awareness about the value of agents via their robust marketing efforts, it’s good for everyone.

“If you look at the marketplace, it’s no surprise that the number of agencies has been shrinking over a period of time,” says Rice. “From the Ensemble perspective, we have some members that are very actively on the acquisition path and some members that are sun-setting and trying to sell their businesses and hence more consolidation. So we try to do some matchmaking in that process, because that’s better for Ensemble.

“But if you think about it, consolidation could create agencies that are smarter in their marketing and that are spending more on attracting more clients. Maybe they are able to offer some more services that you couldn’t do as well as a smaller agency. What we’re faced with as a challenge is not getting clients to move from agency to agency; what we’re really trying to do as an agency is get people to use a travel agent. So if a mega-consolidation happens, if through the marketing online or in print or word of mouth you can get more consumers to use an agency, that benefits all of us.”

Tony Gonchar
Tony Gonchar


Tony Gonchar, vice president, consumer travel network at American Express, notes that the current consolidation trend is “a bit less about big guys buying the smaller guys and more about big agencies forming alliances with other large agencies.” Since 2001, the travel agency arena has seen players selling their businesses in order to retire, he says, but those have involved agencies with a sole proprietorship model. “When these deals are done at the tectonic level they are much more impactful on the marketplace,” he says.

Some of it has to do with big players, such as Protravel’s president, Priscilla Alexander, determining a long-term strategy for her company by selling to Tzell Travel, but overall, Gonchar, who previously headed ASTA and was in a senior leadership position at Virtuoso, doesn’t see the pace of mergers declining in 2013.

His caveat? Some players who haven’t joined the consolidation bandwagon may feel they have to act now or risk losing the opportunity do so later. But, as Gonchar aptly puts it: “The due diligence here would require some patience in terms of ensuring that these deals are done correctly for the parties trying to achieve them.”

What to watch for: Gonchar notes that the mergers, buyouts and affiliations now taking place certainly do bring about an efficiency in terms of the operations aspect two businesses can achieve. However, the more interesting aspect is what kind of share-shift the joining of mega-agencies can create in the marketplace.

“It’s more about what can be demonstrated to suppliers in terms of what buying power these groups can now achieve.”

There are markets that do well with fewer bigger players and there are markets that do well in a much more distributed opportunity environment,” says Gonchar, adding that the impact has yet to be determined. “It’s ultimately about whether this is good for the consumer and whether they are going to have the travel experience they are looking for.” 


Consortia A to V

We asked consortia leaders what their highlights for 2012 were and what we can expect them to accomplish in 2013. They follow, in alphabetical order:

* American Express

Tony Gonchar, vice president, consumer travel network at American Express, says that in 2013, specialization and continued education will be key for its network. He also alludes to programs that would leverage American Express’ other businesses to help its travel agents. “We also have new, exciting partnerships with American Express assets that will help agents further this competitive advantage,” he notes. Looking back, Gonchar, who joined the network last summer after serving as CEO of ASTA for 19 months, says that in 2012, American Express enjoyed an 8 percent increase in sales over 2011. “At the same time, we’ve created greater efficiencies through a deliberate reduction in the number of agencies driven by a rigorous scorecard process,” emphasizes Gonchar. “This creates a unique network of high-quality, high-performance agencies that offer a consistently superior travel experience for our American Express card members.”

A new “Travel Insiders” program comprises 300 agents with expertise in 80 destinations throughout the world and 20 travel specialties. A recently refreshed website more easily drives “new, high-value customers directly to our agents,” states Gonchar. “This is particularly important for our representative network, who are able to see the continued effort and resources we put against growing business for their agencies.” Another proud moment in 2012? American Express had a 98 percent attendance level at its Network Learning Forum and National Summit in October 2012, says Gonchar.

Libbie Rice
Libbie Rice

* Ensemble Travel

Libbie Rice, co-president, Ensemble Travel, says that the fact that Ensemble grew year over year in 2012, which correlates to returning profits back to members, was a highlight for the group.

Watch for Ensemble to launch initiatives that straddle both its U.S. and Canadian regions. “It has been very separate until now,” says Rice, who oversees Ensemble from New York with her Canadian counterpart, Lindsay Pearlman.

Case in point: Two new big hires have “North America” titles: Marc Jacobsen is the senior director of information technology for all 850 member agencies in the U.S. and Canada and will be responsible for creating a long-term technology vision and strategy that support internal needs as well as those of members and Ensemble’s network of travel partners.

Georganne Shirk, the new vice president of marketing, will also work with both sides of the border, creating an overall North American marketing strategy. Watch for news from Ensemble on the IT and the marketing front in October, notes Rice.

Recent announcements also include a suite of “Express” booking tools, which let members book preferred air, hotel, cruise and on-location suppliers more easily. That the program can be used online and doesn’t require the use of the GDS may attract more new talent to Ensemble, says Rice.

Ensemble has partnered with a company called ChangeLabs to do detailed research around customer service. The findings will be rolled out at its executive retreats for owner/managers. “It’s really much more about how to run your business,” says Rice.

* Signature Travel Network

COO Alex Sharpe says that while Signature is always focused on staying ahead of the curve with new IT and marketing efforts, in 2012 it worked keenly to leverage what it already had in place to ensure its members were getting the most out of its offerings.

“We had strong same-store growth for a tough year; we were in the high single digits and then even higher with new stores coming into the fold.” In fact, recruiting efforts were modified to hone in on those agencies that would bring the most value to Signature.

Agencies that were admitted to the group had an average annual sales volume of $10 million. “We didn’t sign any mega agencies. But they were really solid business people who saw value in our programs,” says Sharpe.

Frontline advisors will continue to be a focus in 2013 for Signature, particularly with a newly launched private sale program that was developed internally by the group’s EVP, Ignacio Maza and its IT guru, Karen Yeates.

“We just want to be in the space, number one,” says Sharpe. “We want people to think of us for that last-second deal, for that extra booking, for that cool hotel at a great value.” At the same time, it’s a great way to reactivate dormant customers, as well as to get more business from corporate customers. The program, which has 800 hotels participating, promotes six offers twice a month. More and more agencies are opting into the program, and more and more consumers are opting to receive the e-mails, says Sharpe, who reports that “the open rates are higher than anything else we’re dealing with.”

Another new program called CruiseTrack notifies frontline agents when there are price changes on a cruise that’s been booked. This in turn lets them notify the client before they discover the new pricing online. The advisor can then offer to use the savings on an upgrade for the client or simply offer them the lower price.

The game-changer for Signature, however, will be a new ClientReach program that rewards advisors who continuously update their res cards during the booking process, says Sharpe. Those who fill in at least five fields of their client profiles can be put into a new program that has a menu of offerings that can be automatically assigned to clients electronically for ancillary purchases, such as travel insurance or shore excursions that the consultant can earn a commission on. Excitement for the program from both the agency members and suppliers is already building, he notes.

On the marketing side, Signature has just done a mailing of a new magazine called Ultimate Experiences to agency customers on behalf of its advisors that’s more of an aspirational coffee table style book. The response to the annual publication has been so strong that it may be reprinted, Sharpe says.

* Travel Leaders Franchise Group

Roger Block, president of Travel Leaders Franchise Group, says that he no longer looks at simply the number of locations a consortium has to measure its health; in fact, that figure can be deceiving as more agencies consolidate and reduce locations while still maintaining their sales volume. But an agency’s sales volume measurement isn’t the only matrix Travel Leaders Franchise Group uses to consider how a new member will benefit the organization.

“We do still talk about volume in that we just landed a $5 million account or a $20 million account,” says Block. “But behind the scenes, we’ll [describe an agency as having] 17,000 transactions that are going to be 80 percent with our preferred suppliers, and it’s ‘X’ many segments for the GDS, so this is the overall profitability of the account. That type of equation and conversation never happened 10 years ago.”

That said, 2012 was an extremely good year in terms of growth of the system and sales for Travel Leaders, reports Block. But he’s most proud of the new Center of Excellence for Luxury Travel launched in 2011. Agencies are using the program’s educational offerings and they’re also using the new DMC (destination management company) program, which gives them access to on-the-ground experts who can customize clients’ itineraries. New hosted cruises on luxury cruise lines and a luxury hotel program have also been added.

How much further will Travel Leaders take its luxury initiative? “We are light years ahead of where we used to be and we are far from where we want to be,” says Block, estimating that about 75 percent of his group is engaged in the luxury program.

The group’s Corporate Center of Excellence has new tools to help its agencies determine their cost per transaction so they simply don’t charge all clients a flat $25 fee regardless. Block also sees tremendous potential to extend Travel Leaders’ new luxury offerings to C-level executives in its corporate accounts.

“It’s the way for our agencies to grow their existing business,” says Block, who adds that Travel Leaders has long had a competitive air program in place that pays overrides on the two largest domestic airlines. “Our commission levels are higher and we have probably 55 deals with international carriers. So we are up there with them—because of our size, because of our scope, we are competitive with anybody and everybody.”

This year, watch for a new Center of Excellence for Independent Contractor, designed for host agencies and independent agents. “The number of independent contractors is a force within the travel distribution system,” says Block. The program will teach members how to get into the business and will focus on legal issues, insurance policies to protect you from independent contractor fraud as well as how to pay and manage ICs. For those with hundreds of ICs, there’s a new Independent Contractor Graduate Course.

Travel Leaders has already developed a platform called Agent Profiler which allows independent contractors and agents to build website pages to market their own specialties on www.travelleaders.com, which allows consumers seeking an expert in a certain region to be connected to the specialist. A “live chat” feature is about to be added to those pages.

“We are saying that if you want to buy by the phone, we can help you; if you want to send just e-mails, we can do that; if you want to do a live chat, we can do that; if you want to visit a brick and mortar agency and sit down with a specialist, we can do that,” says Block.

* Vacation.com

Big news about to be announced by Vacation.com is that it is looking at segmenting its membership. “We recognize that not all members are created the same; they don’t look the same, they have vastly different needs,” says Vacation.com President John Lovell. “So we are looking at segmenting the membership so we can group together people with like-minded business models. We’ll be doing benchmarking so we can recognize and reward people within a certain peer set.” Visit www.travelagentcentral.com for more news on this soon. 

A major initiative last year for Vacation.com was the launch of Agent Universe, which sits on the agent’s desktop, giving them access to time-critical promotions, webinars and training. The portal also allows suppliers to get last-minute offers to members instantly. 

Vacation.com also brought airline commissions back to members, whether they are ARC-accredited or not. “We’re really, really happy about that,” says Lovell, who is also quite proud of the group’s annual conference, which was held onboard Royal Caribbean’s Oasis of the Seas, and which required a bit of a change in format from its more traditional land-based events. Watch for more ocean-faring conferences to be put into the group’s rotation, advises Lovell. Vacation.com has just launched its proprietary web-based CruisePRO booking tool, which is for the B2B and B2C markets.


John Lovell
John Lovell

“Agents can clearly see exactly what the supplier is offering to a Vacation.com agency in a much more efficient method,” says Lovell. CruisePRO can be accessed via the Agent Universe portal.

The consortium also added suppliers to its Cruise Space program; it’s also offering unique shore excursions and culinary programs.

Vacation.com is participating in the just-launched Travel Leaders Group Worldwide Hotel Program, which lets its members offer value-added amenities to their clients across 25,000-plus hotels around the world. It’s also participating in its parent company’s In-Country Partners DMC program, says Lovell.

* Virtuoso

This is the year that the “Collaborative Commerce” vision that Virtuoso CEO Matthew Upchurch has heralded over the past few years comes to fruition, when the luxury consortium’s website, www.virtuoso.com, evolves into a consumer site. Consumers later this year will be able to create a profile and participate in social media, such as commenting on travel suppliers in a TripAdvisor fashion, or create a portfolio of travel experiences they’d like to take. Advisors, in return, will be able to create portfolios for their clients. Each group will be able to see what the other has created so advisors can collaborate on the clients’ potential vacations.

It doesn’t end there. “You are going to see us have a very small goal of becoming the No. 1 luxury and experiential travel destination on the web,” Upchurch tells us.

Virtuoso this year will continue with its initiatives to bring new travel advisors into the business. “I was asked last year, ‘How are you going to find the next generation of luxury clients?’ and I said, ‘by developing the next generation of luxury advisors,’” says Upchurch.


Matthew Upchurch
Matthew Upchurch

“The other huge accomplishment in 2012 is that we were able to provide irrefutable evidence to both our own data analytics as well as independent sources about the value of Virtuoso production and the yield of that production. So, to me, one of the greatest things to happen in 2012 was that Susan Helstab [EVP, marketing] from Four Seasons came to our International Symposium to basically say that Virtuoso provided the highest-yielding business of any distribution channel or any form of getting business to them, which is something that we had been studying for long time.”

Garnering plenty of excellent consumer press for travel advisors was another huge accomplishment last year; Upchurch reports that Virtuoso enjoyed 2.6 billion consumer impressions in 2012, up from 1.8 billion the previous year. A highlight of that initiative was Upchurch’s appearance on The Today Show with Ann Curry last January, discussing why it’s vital to use a good luxury travel advisor. —Ruthanne Terrero


By the Numbers

* American Express

123 agency franchisees

Annual sales volume: $5 billion in 2011; saw a “nice healthy growth for 2012” despite deliberately trimming back membership

Structure: Franchise group

* Ensemble Travel

850 member agencies in the U.S. and Canada

Annual sales volume: It does not reveal sales volume

Structure: Cooperative

* Signature Travel Network 214 member agencies

Annual sales volume: $5 billion

Structure: Cooperative

* Travel Leaders Franchise Group 340 member agencies

Annual sales volume: $2.44 billion in sales in 2011

Structure: Franchise Group

Ownership: Travel Leaders Group

* Vacation.com

5,100 member agencies

Annual sales volume: It does not release sales volume

Ownership: Travel Leaders Group

* Virtuoso

350 member agencies

Annual sales volume: $9.6 billion in 2010; latest reported figure

Structure: Consortium