If any proof were needed that the travel industry experienced a recovery from 2009 to 2010, it can be found in Travel Weekly's 2011 Travel Industry Survey.
Compared with last year's survey of agents' 2009 sales, which were down by 20% from 2008, the 2010 results indicate that there was a massive swing in the other direction.
In 2010, some agents not only recovered from the loss of sales they had experienced in 2009, but the sector as a whole managed to come back stronger, with a 24% increase in sales.
The average sales reported by retail agencies was $6.2 million, which just topped the prerecession levels of $6.1 million reported for 2006 and 2007.
For home-based agents, growth from prerecession levels was even more profound. In 2010, average sales for home-based agents was $358,000, an increase of 10% over 2009 and far surpassing the 2007 average of $248,000.
The numbers substantiate what many agencies felt intuitively: The travel industry has been steadily recovering from the economic downturn that began in 2008. However, the recovery was not broad-based and, according to the survey results, was heavily concentrated among the largest firms with greater resources.
In fact, while the overall average gross indicates recovery, 63% of agents in this year's survey reported that their sales had actually decreased in 2010.
With the economy now teetering toward what many analysts say could be the second dip in a double-dip recession, survival lessons of the last few years might serve as a good barometer for understanding how agencies could ride out the next storm and what economic trends our Travel Industry Survey could reveal over the next few years.
• One indication of the economy's relative strength in 2010 is that it became less of a concern to agents. The survey found that for 55% of all agents the soft U.S. economy had the greatest impact on agency revenue in 2010, down from 67% who cited the economy in 2009.
Concerns about the economy were followed closely in 2010 by rising airfares and fees, cited by 54% of respondents. However, when agents were asked what issues would have an impact on agency revenue over the next two years, rising airfares and fees topped the economy as an issue, 50% to 46%.
• The study found that agent concerns have changed in other ways, as well. Anxiety about Internet competition continues to drop, landing in fifth place in 2010, with 37% citing concern about it. In 2009, it was the most-often cited concern, and in 2008, it was the second most-cited concern.
This decrease appears to suggest that travel agents have found their own niches and are able to compete more effectively with the large online players for business. In addition, of course, many traditional travel agencies now see their own Internet businesses thriving.
For that reason, it is not surprising that Internet competition remains a larger concern for smaller retail agencies.
Agency profile
• The data suggest that the largest and most established travel agencies saw improvements on a number of fronts.
For example, there was an increase in the average number of years traditional travel agencies have been in business, to 29 from 25 in last year's survey. This partly reflects the fact that fewer new agencies were started during the recession, and that smaller, less established outfits likely closed or were bought.
As a result, a greater proportion of respondents, 33%, are now working in firms that have been in business for more than 30 years, up from 25% in last year's survey. The percentage of agents working in firms that have been in business for two to 10 years declined from 22% last year to 12% this year, erasing gains made in the 2008 survey, when it was also 12%.
• Home-based still made up the largest overall percentage of agency types, at 39%, down only 1% compared with the 2010 survey, but the slight drop suggests that annual growth of the home-based agent sector hit a plateau.
Business mix
• Leisure sales still dominate business at both traditional and home-based agencies, accounting for 76% of total sales. That number was only 3% higher than last year's results and has remained consistent in recent years.
Continuing a trend identified last year, among home-based agents the leisure/business mix is even more pronounced, with home-based agents reporting that between 82% and 92% of their business is leisure.
As usual, the largest agencies in both segments reported more business sales, and that number is the highest among the largest traditional agencies. The agencies that make $10 million or more in revenue are almost split, selling 52% leisure and 48% business, a number that is consistent with last year's findings.
• Cruises continue to be agencies' largest source of revenue, but sales of packaged and escorted tours jumped significantly.
The percentage of total revenue represented by the sale of tours grew from 12% in 2009 to 17% in 2010. In 2008 it was 11%.
Cruises remain the main source of agency revenue, at 31%, and have gained traction since last year's survey, when cruises represented 29% of revenue. That number is still down from a 35% share of total revenue in the 2008 survey.
Indicating that travel agents clearly place an emphasis on selling products that offer commission, the sale of air travel in 2010 reached an all-time low at 23%, down from 25% in last year's survey and 24% the year before. As recently as 2003, air travel represented 36% of revenue.
• After leveling off between 2006 and 2009, international travel overtook domestic travel as a revenue source in 2010. In 2009, the domestic/international mix was 51%/49%, the same as the year before. In 2010, international travel, accounted for 53% of revenue, compared with 47% for domestic. In 2003, the mix was 60% domestic and 40% international.
While any agency would in theory want to increase international leisure bookings because they are higher-dollar transactions than domestic bookings, in practice only the largest home-based agents were able to do that.
Domestic sales still dominate among the smallest home-based agents, at 58%, while the largest home-based agents have increased their sale of international revenue, to 62%.
Traditional agencies, regardless of size, are selling more international travel than domestic travel.
• Within the tour and package segment, traditional tour companies maintained their position as the most popular type of supplier for travel agents, increasing 8% over the previous year, to 87% of all agents.
Among the largest traditional agencies, that number decreases to 82%; it is highest among the largest home-based agencies, at 92%.
Consistent with the overall increase in international sales, the proportion of revenue from selling international tours and packages has grown consistently over the past four years.
Except for a small decline in last year's survey, international tours and packages have grown from 52% of revenue in the 2007 survey to 59% in this year's.
• Looking ahead, most agents expected their 2011 sales to increase, with the largest agencies predicting the greatest increases.
• While all segments of both traditional and home-based agents expected cruise sales to increase, river cruises was the category with the highest expectation for increased sales.
Last year, 39% of agents believed river cruise sales would increase; this year that number jumped to 46%.
• The larger the agency, the better the expectations in all categories. A full 70% of traditional agents in the $10 million-plus bracket believed hotel sales would increase in 2011, a number that drops to 38% among the lowest-earning traditional agencies.
Home-based agents are mostly bullish about cruises, which was the only category for which 60% or more of agencies in every revenue bracket believed sales would increase this year.
• Home-based agents also became much more confident about selling air, with 44% of the highest-earning home-based agents predicting that in 2011, air sales on legacy carriers would be better, up from 28% last year; 39% predicted low-fare carrier sales would improve, up from 25% in the 2010 survey.
Marketing practices
• Email is still the primary way travel agents market to new clients and keep current ones, but its importance declined precipitously from 2009 to 2010.
In 2010, 73% of traditional agents cited email as their primary marketing approach, down from 85% in 2009.
Adding to email's decline was that the Travel Industry Survey this year began tracking the use of social media, which 39% of agencies cited as their main marketing tool, making it the third most important, after email and agency websites.
The addition of this category diluted the number of selections that could be made for the other marketing approaches, and the "agency website" choice fell from 59% last year to 51% this year.
There are major discrepancies between traditional agencies and home-based agencies in this area.
Lower-volume home-based agents are much more likely to embrace social media, with 53% citing it as their most important marketing tool, while only 31% of the lowest-volume retail agents did.
This is understandable since Facebook, Twitter and YouTube, for example, are free and efficient ways for small players to reach a large audience.
Retail agencies depend much more on their website, with the largest agencies depending on them most. Among travel agencies that gross more than $10 million in sales annually, 69% say their website is their most important marketing tool, topping email and social media. This is significantly higher than among all other sizes of retail or home-based agencies.
• Mobile was also added to this year's options, but only 5% selected it, an indication of how new and untested this technology is.
The largest retail firms have also embraced social media far more than mid-size retail agencies, which still cite email as their most important marketing tool.
Supplier relationships
• Overrides and incentives regained first place this year as the top support service offered by travel suppliers, up 13% from last year, to 57% of all agents.
The biggest travel agents in both the traditional and home-based segments clearly benefit the most from overrides and incentives, with 69% of the largest traditional agencies and 61% of the largest home-based agencies citing it as the most important support service suppliers offer.
Among the smallest group in terms of sales volume, home-based agents who saw less than $50,000 in revenue per year, only 29% cited it as an important factor.
• Familiarization trips came in second this year, up a notch from third place last year. Among all agents, 55% cited it as an important service, with home-based agents ranking it more important than traditional agencies did.
• Email updates on special offers, which held first place last year, dropped to third place this year, with the traditional travel agencies finding them far less important.
Home-based agents still seem to appreciate the email updates, especially the smallest agencies, with 68% citing them as important.
This makes sense since the largest agencies have their own marketing teams and can afford more investment in technology than smaller agents, who often depend on the suppliers' technology tools.
• The percentage of agents who received overrides or incentives from airlines increased this year to 32% from 27%, a return to prerecession levels.
The largest traditional agencies and midsize home-based agencies drove the increase, with 67% and 18%, respectively, saying they earned overrides or incentives from airlines, up from 60% and 8%.
• There is no good basis on which to compare the percentage of travel sold through preferred suppliers between this year and years past, because the structure of the question was changed in this year's survey.
This year, the data represent the use of preferred suppliers vs. all other suppliers for each product category, indicating that preferred-supplier use is high, with more than two-thirds of agents selling them above other suppliers.
Seventy-nine percent of agents said they use preferred cruise suppliers more than any other travel product. Following close behind are tours, at 77%, and car rentals, at 70%. Air, 66%, and hotels, 69%, also enjoy preferred status.
While air travel has the least amount of agent loyalty, it likely reflects the fact that airlines have contracted less with travel agents than other suppliers have over the last decade. However, that number increases among larger agencies, a reflection of the fact that their volume enables them to negotiate commission deals with all suppliers, including airlines.
The smallest home-based agents also indicated a high use of preferred suppliers, even for airlines. This may indicate that many of these agents are affiliated with hosts that have deals with airlines and other preferred travel suppliers.
To view the survey in its entirety, click here.
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