Suppliers of travel products are clearly on the hunt for business from home-based travel agents, just as they are eager to find help from any credible channel to distribute their products.
But the relationship between suppliers and home-based agents is not being pursued as vigorously as some have assumed, nor is it generally as productive as some suppliers have indicated elsewhere, and it typically represents a small percentage of the revenue that suppliers receive through all travel agents.
While most home-based agents tend to be professionals with many years of experience selling travel, even suppliers who have invested the most in home-based agents, the cruise lines and tour operators, are critical of what they perceive as mediocre knowledge of products and of their lack of demonstrable creativity in developing programs and travel ideas. Those are among the findings of Stanley Plog, a researcher and analyst who produced a survey of home-based agents, suppliers and others with an interest in the home-based market, and then assessed those results for Travel Weekly and its sister publication, Travel Age West.
Plog's survey of suppliers and their transactions with home-based agents, one of three areas on which his home-based agent study was focused, was conducted among senior executives in four supplier groups: airlines, cruise lines, tour operators/packagers and hotels.
Plog received responses from 40 of the 77 executives who were asked to participate, a 57% rate of return. In his questionnaire, Plog asked the executives to explore the importance of home-based agents to their operations, the level of acceptance of such agents within their industry and the potential future growth of home-based agents and their impact on travel distribution.
Respondents included 18 executives from tour operator/packagers, eight from hotels, eight from cruise lines and six from airlines.
Their answers, from which Plog quantified the data, show that among the sample, only two executives -- one from the airline industry, the other from hotels -- said they did not accept bookings from home-based agents.
Most said they had been doing business with home agents for five years or more.
The responses from the remainder of the sample led Plog to six general conclusions.
• The vast majority of supplier executives reported having established criteria that home-based agents must meet in order to qualify to sell the supplier's products. The most stringent rules for home-based agents came from cruise lines, which were the largest reported source of income for most home-based agents.
• While tour company executives estimated that 75% of their revenue came from travel agents, they estimated that just 16% of that total came from home-based agents.
• Cruise line executives estimated that 62% of their revenue came through travel agents, but only 5% of that came from home-based agents. That number, Plog said, seemed low in light of data indicating that home-based agents generally booked more cruises than any other travel product.
• Hotel executives estimated that 36% of their revenue came from travel agents, but just 5% came from home-based agents. Airline executives estimated that figure at just 3%.
• Estimates of commissions paid by each segment closely paralleled estimates reported by home-based agents in the study, but estimates by cruise line executives of the average annual revenue delivered by each home-based agent, $127,000, seemed high in terms of other data in the study, Plog concluded.
• Hotels credited approximately $66,000 in annual revenue to each home-based agent; tour company executives estimated home-based agents each generated an average of $54,000 in revenue for their companies annually.
Airline executives put that figure at $35,000.
Suppliers and home-based agents
In this, the second of Travel Weekly's two-part series exploring survey findings, we look in detail at suppliers and how they see their relationships, now and in the future, with home-based agents.
Suppliers almost universally accept home-based agents. With the minor exceptions already noted, the vast majority, 87%, said they had well-established rules and requirements for when they did or did not accept bookings from home-based agents.
While the criteria vary widely, some things are predictable. A majority of airline executives, 60%, said they required membership in ARC or IATA.
Half of the cruise industry executives placed emphasis on affiliation with a host agency, affiliation with the Cruise Lines International Association and the holding of a business license or business checking account.
Only 25% of cruise executives said they required ARC or IATA membership, about the same percentage as those who ask for proof of sales history.
Eighty-two percent of supplier executives indicated that they had established procedures to cross-check and verify that a home-based agent is legitimate. Three-fourths of tour operator executives said they used verification procedures.
For tour operators and cruise lines, about 50% of executives reported that they required either an affiliation with a host agency, a business license or established business documents such as a checking account.
Proof of sales history was ranked the lowest of all the criteria, with 25% of cruise executives listing it as a requirement and 22% of tour executives citing it. Neither airlines nor hotels used past sales as criteria.
Plog's research revealed that cruise and tour executives were unanimous in their expectations for growth of the home agent market. About two-thirds of airline executives and three-fourths of hotel executives said they expected significant growth for home-based agents in their industries.
Those who predicted growth said they expected rapid development of this distribution channel over the next two to three years. Cruise executives said they anticipated a growth rate of 23% during that time. Airlines and hotel executives each predicted 19% growth, and tour executives predicted 37% growth.
Revenue from home agents
The executives were asked to estimate what percentage of their revenue came from travel agents at large, and also specifically from home-based agents. Plog, while acknowledging that executives had some difficulty separating those numbers, said trends from the data indicated some distinct results.
Plog said it was well established that the majority of revenue earned by tour and cruise operations came through travel agents, but he found it surprising that cruise line executives estimated that travel agents were responsible for only 62% of revenue. He noted that in public statements, cruise lines indicated that 90% of revenue was derived through travel agents. Tour company executives traced 75% of their revenue to travel agent sales.
Plog said he also found it surprising that cruise executives estimated that only 5% of their revenue came from home-based agents. He noted that, based on an interview in a separate section of the survey, a top official at CLIA indicated that home agents were widely expected to become a larger part of that mix.
The travel executives, in aggregate, estimated that travel agents brought in 58% of their sales and that 12% of that business came from home-based agents.
Airline executives estimated that 22% of their business came from travel agents, with 3% of that total coming from home-based agents. In the hotel category, 36% of revenue came through agents, and 13% of total travel agent revenue could be tracked to home-based agents, executives estimated.
Cruise line executives claimed 62% of their business came from agents, 5% of whom were home based. Tour operators reported that 75% of bookings came from agents, and 16% of total travel agent bookings were from home agents.
Wide disparity was seen in results when executives were asked to estimate how much each home-based agent, on average, contributed to their revenue.
Cruise line executives said the contribution was $127,000 per agent, and every other supplier group estimated about half that amount or less.
Airlines were the lowest, at $35,000 per agent. Hotels said each home-based agent contributed $66,000 on average; tour companies said each agent contributed about $54,000.
Estimates by home agents surveyed separately showed similar conclusions.
Full-time home agents estimated the revenue they generated for cruise lines at about $127,000. They estimated that figure at $34,000 for air; $24,000 for hotels, lower in that category than what hotel executives estimated; and $93,000 for tour operators, higher in that category than tour executives estimated.
Disparity in amounts by individual agents became more pronounced when executives were asked to rank the averages of their highest-producing home-based agents. The average estimate across the board for suppliers was $283,000 in annual sales, with cruise executives estimating $375,000, tour companies $310,000, hotels $266,000 and airlines $139,000.
Top home agents, the supplier data showed, made four times what the average agent was making from airline and hotel bookings, three times the average in cruise bookings and 5.7 times the average for tour companies.
Plog noted that those executives who said their highest-producing agents brought in more than $500,000 a year in sales estimated that their top home-based agent produced at or near $1 million in sales for the supplier per year.
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