Some 10% to 20% of travel agencies will go out of business within nine months, Roger Block, president of Travel Leaders Franchise Group, predicted during a panel discussion I moderated at TheTradeShow in Las Vegas last month.
Is he right?
There are some encouraging economic macro trends, but when it comes to travel's micro climate, we're stuck under the clouds. At the end of Q2 (the most recent data available), airfares were down 12.5% from the previous year's Q3, when the recession started. At the end of August, hotel revenue per available room had dropped more than 28% in Europe and Asia and almost 19% in the Americas, year over year. Travel spending is unlikely to rise in 2010, according to the U.S. Travel Association.
So, what can you do in the next eight months to increase the odds that you'll be among the agencies still standing in mid-2010?
When the recession hit, attention was first paid to the cost side of the ledger. As revenues dropped, reining in expenses was the highest priority for most agencies. But one large agency is now touting the benefits of investments it made in its own business last spring that have paid off handsomely.
"The No. 1 problem is not expense," said Brad Anderson, co-president of America's Vacation Center, a megahost agency. "It's the income side. If it doesn't come in, it doesn't matter how much expense you cut."
Anderson said he and his brother (and co-president) Van invested $1 million in marketing last March and another $1 million in June, calling it a "travel agent stimulus" program.
"The payback was amazing," Brad said. "Unless something unforeseen happens, 2009 will be our best year by any measure: total sales, commissions, transactions, lead generation, commission per affiliated agent and bottom-line profits."
Of course, few agencies have a spare $2 million to invest, but Anderson believes the amount is less important than the decision to market aggressively, right now, and that paralysis brought on by fears that the recession will last longer can be fatal.
"What we really need is an industry psychiatrist" to counter the fear, he said.
Travel Weekly will be publishing its annual Travel Industry Survey at the end of the month, and while I won't reveal too much now about what we discovered, there's a slice of data that seems particularly germane.
We asked agents whether revenue was up, down or flat for 2008. Revenue fell for 80% of respondents, was flat for 10% and rose for 10%.
In our analysis, we discovered that those whose revenue went down had cut marketing, staff, staff hours and operating more than those whose revenue went up. And those who saw more revenue had instituted new sales programs, expanded their product line and increased marketing more than those whose revenue dropped.
Yes, forecasts for 2010 aren't encouraging for the industry as a whole, but there will be winners, and there will be those who end up in Roger Block's 10% to 20%.
Where will you be?
As noted in every financial prospectus, past performance is no guarantee of future results. But it would appear that those who are investing in their own agencies have seen returns that are far better than average.
Contact Arnie Weissmann at [email protected], and follow him on Twitter.