Among the more intriguing findings of Travel Weekly's 2012 Travel Industry Survey (see the full report starting here) is that bookings by leisure agents are increasingly dominated by trips to foreign destinations, which produced more than 55% of agency revenue in 2011.
The survey revealed that Europe, Mexico, the South Pacific and other international destinations are increasingly outpacing domestic hot spots such as Las Vegas and Orlando as revenue generators.
The gravitation toward international bookings continues a slow but steady rise that began eight years ago, when Travel Weekly's survey found that international sales represented 40% of agents' revenue.
The growth in the international segment no doubt is one indication that agencies continue to hone their focus on higher-priced travel.
At the same time, it suggests that consumers might increasingly be seeking out agents for complicated and exotic trips, while they feel comfortable booking short domestic getaways and trips to familiar U.S. destinations on their own.
Among traditional brick-and-mortar agencies, regardless of their size, the survey shows that the percentage of revenue derived from international travel is now more than 50% (ranging from 52% to 56%).
Among home-based agents, however, size does makes a difference when it comes to the international/domestic ratio. (Click on the image, left, for a larger view of a chart showing the revenue split.)
It is only among the smallest home-based agents -- those selling less than $50,000 a year -- that domestic bookings dominate, providing 59% of revenue.
Among home-based agents with revenue between $50,000 and $250,000, however, international bookings comprise 59% of revenue, and that figure grows to 63% among agents whose annual revenue is greater than $250,000.
Bill Sutton, vice president of Alabama World Travel in Montgomery, attributes the rise in international travel in 2011 at his agency to pent-up demand that built during the deep recession years of 2009 and 2010.
"People held back for several years, and now they are feeling freer to spend more," he said.
Scott Pinheiro, president of Santa Cruz (Calif.) Travel, said the growth in international travel as a portion of agency revenue speaks to an increasing focus on the segment because it's where agents can most effectively offer and promote expertise and service.
"When people start looking at spending $5,000 to $6,000 for a trip, they're looking for the help of a professional," Pinheiro said. "A lot of people aren't familiar with the basics of international travel: going through airports, using a passport and all those kinds of things. That's what we are about and where we offer guidance."
Cruise specialists are also seeing an uptick in international bookings, said Michelle Fee, president and CEO of Cruise Planners, a franchise group of home-based agencies.
"The more complex the sale, the more likely you will use a travel agent," Fee said. "You may feel comfortable with purchasing a Caribbean cruise that departs from a U.S. port online, but when you're talking about going to Europe and hitting five different ports of call and looking at pre- and post-tours and shore excursions, you will look for an agent. Those types of bookings are really hard to do on the Internet."
The explosion in river cruising has also helped fuel agent sales of international travel, according to ASTA President Nina Meyer, director of sales and marketing for Express Travel in Miami.
"Lots of agents are selling more Europe, China and Russia because of river cruises, and they're packaging pre- and post-cruise experiences," Meyer said. "That's the biggest change I've seen. And, even with a tough economy, there are plenty of people who have the wherewithal to travel, and they are going."
Traditional tour operators report that they are seeing a continuing rise in international bookings by agents, and that they have been responding with new vacation products to keep up with consumer demand.
"Overall, there's more money to be made for travel agents and tour operators in international than in domestic travel," said Jack Richards, president and CEO of Pleasant Holidays. The company started as a Hawaii specialist but has expanded far beyond, to the South Pacific, the Caribbean, Mexico and Central America, and it also has built a thriving international air consolidator division. (Click on the image, left, for a larger view of a chart of the split between domestic and international sources of revenue.)
"The more complex the trip, the more they need a travel agent expert for advice," Richards said.
Barry Liben, CEO of Travel Leaders Group, said agents must position themselves as the go-to professionals with the expertise needed when arranging complicated itineraries in international destinations, but they should never discourage clients from thinking of them for domestic trips either.
"It's a simple fact that the more complex the travel itinerary becomes, the greater value a travel agent represents," Liben said. "That's not to cede any territory to the do-it-yourselfers when it comes to planning domestic travel; consumers will still find the most value by working with a travel agent. But with exponentially more choices, as well as much greater earnings potential in terms of commissions, it's a no-brainer that enterprising agents concentrate more on where the money is: international travel. Consider what a superstar agent can earn by selling first-class airline tickets, not to mention an international tour or cruise or FIT, and pretty soon you're talking about major dollars."
Mike Cameron, president of Andavo Travel, a Colorado-based corporate and leisure agency with offices in affluent areas of the U.S., said the survey's findings closely match his agency's experience. Its leisure agents are booking a higher percentage of international travel than ever.
"That speaks to a couple of things," Cameron said: First to "the nature of high-end leisure clients who do a lot of international travel, and it speaks to the fact that people who take simple point-to-point domestic trips don't use a travel agent as much. On the corporate side, we get all of it -- domestic and international -- because a company mandates that employees use us for everything. But there's a higher percentage of leisure travelers who, when doing a weekend getaway or family trip, will do it themselves. They'll then call us when they want to take real vacations."
However, looming over all the good news about the growth in international bookings is the concern that international airfares, particularly to Europe, will continue their relentless upward climb and put a damper on growth.
In the Travel Industry Survey, 57% of agents cited rising airfares and the economy as the two top issues that affected agency revenue the most in 2011.
The results closely resemble the response to the question in 2010, when the soft U.S. economy was cited by 55% of agents, followed closely by rising airfares and fees at 54%.
Santa Cruz Travel's Pinheiro said there has recently been some pushback from clients over higher airfares to Europe.
"We had a group to Croatia this summer that didn't happen, and a lot was due to airfares," Pinheiro said. "But we can also find a different way to package travel with less expensive airfares. Cruise lines and tour operators offered packages with air with good prices. And the beauty of being entrepreneurial is that we can go where prices are good and shift to other destinations. This year from the West Coast we had more lift and good pricing to Hawaii."
Libbie Rice, co-president of the Ensemble Travel consortium, said the abundance of cruise capacity in Europe this summer created an issue because of the higher airfares.
"People had trouble stomaching airfares that were the same price as their seven-day cruise," Rice said. "Some cruise lines came up with promotions that included air, and there was a lot of discounting on the cruise side."
Other increased costs of travel that affected agency revenue included Internet competition, rising fuel costs, airport hassles, delays and security and terrorism fears.
However, agents who cater to affluent travelers said that the higher airfares did not have as much impact. (Click on the image, left, for a larger view of the events with the greatest impact on agency revenue in 2011.)
Alabama World Travel's Sutton said international business- and first-class airfares have not risen as much as economy fares. And the affluent continue to travel regardless of price, even if they trim their travel budgets a bit as they have in the recession years.
"People really want to go to Europe, and they will go, and they will continue to travel business and first class," Sutton said. "They will pay what they have to pay in the luxury market."
Andavo Travel's Cameron said that if the airlines' current strategy continues as it has in the last year, travelers will have to expect higher airfares to continue.
"We're growing because we're gaining market share, not because the market is growing," Cameron said. "In the first eight months of this year, our domestic air is up 3%, and international is up 6%, and that's year over year. The airlines have been very disciplined about holding back capacity and maintaining their pricing power. We're not used to that. We're used to seeing prices going down after a while."
Travel Leaders Group's Liben said rising airfares and limited seat capacity had led to a "very good thing" -- airline profitability -- but he, too, admitted it had cut into sales.
"With the consolidation of the airlines over the last five years and the potential for even more in the future, along with continued concern about the economy, the airlines have succeeded in significantly reducing the seating capacity to the lowest level in years," Liben said.
He added: "It's also no wonder that agents have expressed concern about airfares and the economy, because these two issues really do go hand in hand. If airfares are prohibitively expensive, then consumers who had become programmed to seek out last-minute deals will instead express sticker shock. The ripple effect on the rest of the industry simply can't be underestimated."
ASTA's Meyer likewise said she wasn't surprised that rising airfares and the economy were cited in the survey as the biggest concerns for travel agents.
"It matches our ASTA research pretty much," Meyer said. "Unfortunately, both those things are out of agents' control. Interestingly enough, though, even with the economy and the higher airfares, more and more agents are showing profitability, and revenue has jumped for agencies. It's looking good into the near future."