Become a Travel Agent

Are You Going to Participate in the Recession?
By: Tom Ogg

Recessions have always been good for Joanie and I. On April 1^st, 1981, we started a Hawaii wholesale tour company. At the time the real estate market had completely collapsed, interest rates were hovering around 20%, inflation was rampant, unemployment was through the roof and no one was borrowing money. The Airline Deregulation Act had just taken full effect and tour companies were going broke right and left. People thought that we were crazy to start-up the venture at the heart of a recession.

The venture proved quite successful however, because we had launched our business with a financial formula that was good for both our suppliers and us. At a time when tour operator defaults were a weekly event, we offered our suppliers prepayment from a trust account that eliminated the need to maintain an open account, which they did for virtually all of their tour operators. This increase in cash flow at a time when they dearly needed it and it allowed us to gain the best FIT operator rates, which enabled us to be very competitive in the agent marketplace.  Every recession brings its own unique opportunities and the current recession does as well.

On a recent cruise seminar in the Western Mediterranean on the Azamara Quest, our group focused our second seminar on the issue of the current financial dilemma of the United States and the likely effect that it would have on the travel industry and on their businesses specifically.  We then turned to the topic of what we could do to effect change to maximize opportunities to continue as profitable entities. Here is a synopsis of the group’s perception and action plan.

The Economy

The meeting took place on October 2^nd, 2008 and the “Bailout Plan” had just passed the Senate vote. Everyone felt that the economy was going to continue to decline, in spite of the injection of $700 billion dollars. The group also felt that the dollar was going to continue to lose ground against other currencies and that the loss of value would translate into weaker demand for outbound international travel. Overall, the consensus of the group was that the economy was going to get worse before it gets better and that a turn-around might be years in the making.

Focus on the Opportunities

Here are the areas that the group saw as opportunities for travel professionals to retain profitability.

Secure Your Relationships:  More than ever, travel agents offer their clients a unique value proposition that will allow them to maximize their vacation dollars.  Now is the time to market the benefits of making the most of their vacation dollars by letting a travel professional sift through the plethora of discount travel offerings that are likely to be available in a weak economy. Financially stressed companies will resort to deep discounts to motivate consumers to buy their products and services and it will take a travel professional to sort through the offerings to find the meaningful value propositions. It is quite likely that prices for commodity type vacations will tumble and be very volatile as demand expands and contracts. Market your expertise as a client advocate to obtain the very best value proposition on their behalf.

Empower Your Clients: Move from short term sales into a longer selling cycle. Offer clients the opportunity to make payments towards a future vacation. While there are likely to be deeply discounted last-minute travel opportunities, focus on packaging further into the future to allow your clients the time to plan and fund their vacation.

Focus on Viable Markets: Domestic travel, home port cruises, condominium vacations and adjoining country visits (Canada and Mexico) will see expanding  demand, as will those countries with currencies in parity with the U.S. such as Mexico, Central and South American countries, South East Asian countries, China, Indonesia and  parts of Africa. Also, focus on niche markets within these destinations. While people are not going to stop traveling, they will want value for the money they allocate for their vacations.   Family travel will likely refocus on longer condominium stays to defray overall vacation costs. Sell U.S. based cruises to Europe and other destinations where the dollar has been pummeled to give your clients the best value for the money spent.

Focus on Inbound Markets: As the dollar continues to decline in value, inbound visitors from countries with stronger currencies will increase to the U.S. thereby amplify opportunities for agents offering these visitors unique opportunities.  Inbound tourism is likely to increase dramatically making this segment a huge opportunity for agents.

Focus on Unaffected Markets: While the downturn in the economy will affect everyone, some will be more affected than others.  Luxury travel, niche cruises and resorts, faith based travel and other similar markets are probably not going to be as dramatically affected as the mass-market travel products. Selling in these markets promises to be more rewarding than ever in a bad economy.

Focus on Profitability: If you are selling products with low internal yields, focus on changing to suppliers that offer higher commissions on more of the complete package price. Get out of the low-yield mass market staple itinerary products and move into a more complex leisure travel transaction that ensures higher yields. Focus on niche cruise and resort product where knowledge is more important and price may not undercut your ability to compete. Most of all, stay committed to not participating in the recession.