Travel Business CPR

Two Proven Profitability Drivers For Travel Agencies

The travel trade media are full of ideas for lowering expenses but not enough ideas about sure ways to increase your travel agency's profitability. Yet there are proven business models which
work for mid-size and larger travel agencies.

1) Consider a straightforward dealership model in which the travel agency decides to
marry a single cruise line and moves 80%+ of its revenue to this vendor. In return the cruise line offers the agency the highest commission and override plus training, soft dollars and co-op marketing funds, cleared wait-lists and satisfactory resolution of customer issues 100 percent of the time.

This approach requires the travel agency to prove to a vendor that it is able to move most of its revenue within an agreed upon time frame. But think about it: today you advertise that your agents are specialists, yet they sell 15 to 20 preferred vendors - can they really be specialists? In a dealership, your agents learn everything about a single vendor and become true specialists.

Tips:

  • Plan on 9 to 12months to convert your business to one vendor from the time you reach an agreement.
  • Put in place a non-preferred vendor tracking/compliance and offer an incentive only for the selected vendor.

2) Try a tour operator/retail travel agency model. Several national travel organizations are using this model well, including AAA Southern California which owns part of Pleasant Holidays; American Express which owns Travel Impressions and Flight Center owns GoGo and Liberty.

This model works when there is a large retail network of owned agencies to sell tours and programs as well as other retail travel agencies which can sell your products as well.

Tips:

  • Start by deciding on the appropriate tour operator that matches your strategy and niche (high-end/luxury or mass-market).
  • Approach the owner or CEO with a partnership proposal which would benefit both of you.
  • Suggest an infusion of investment and potentially expanded distribution outlets in return for % ownership in the tour company.

Travel vendors welcome discussions about dealership or part-ownership proposals. Travel business consultants such as Travel Business CPR will also investigate and negotiate on your behalf.

By Tharwat Abouraya, CTIE


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