CHICAGO -- Making group travel profitable is as easy as reviewing
some fundamental business practices before retailers get into the
game, according to Scott Ahlsmith, vice president and general
manager of Travel Agency Management Systems, or Trams.
Ahlsmith led a Group Travel Techniques and Technologies seminar
during Travel Weekly's Technology Conference here.
Group packages put together by travel agents can be twice as
profitable as selling a supplier's ready made package -- compare a
12% margin for ready-made packages to margins as high as 24% for
packages you put together yourself, Ahlsmith said.
The only drawback to designing group packages is having to do
all the legwork.
How do you find suppliers to include in your own packages?
"Go to tour operator shows and meet the operators and get a
contract," he said. "If you're new, you may not get anything long
term, but you may be able to put something together."
One fundamental business tenant that many good agents forget to
do when selling group packages is to remember to break costs into
fixed and variable parts. A fixed cost can be the price of renting
a motorcoach or the price of a string quartet that plays at dinner.
A variable cost would be a hotel room or anything that is based on
attendance.
"You need to make a clear distinction between these two in order
to proceed, then you need to establish a break-even point," said
Ahlsmith.
"Many agencies lose money when they forget to make a break-even
point," he said.
In a group package the break-even point usually encompasses how
many passengers you need to go on the trip.
"There is a lot of emotion in this equation because many agents
are reluctant to cancel the trip if they don't have enough
passengers," said Ahlsmith. "If you price your break even point at
20 passengers and you get 18, you are going to have to pay for
itself and that is not a good business plan."
Another key to success, said Ahlsmith, is in integrating your
data from customer profiles, reservations, accounting and
marketing. Having all that data in one accessible place will save
time and money.