Alive and well: Phocuswright report portrays agencies as thriving

Photo Credit: George Rudy/Phocuswright

A new Phocuswright study portrays the U.S. travel agency community as thriving and forecasts that it will continue growing, thanks in large part to the influx of independent contractors (ICs) joining the industry's most productive channel.

"Ten years ago, that segment was sort of like the stepchild of the business," said Mary Pat Sullivan, Phocuswright's leisure travel analyst and one of the report's authors. "Everybody kind of looked at the independent contractors as not necessarily supporting the growth of the business, and I think what this research shows is that they're fueling the resurgence."

The report, "U.S. Travel Agency Distribution Landscape 2016-2021: From 'Survivor' to 'The Bachelorette,'" was published late last month. Those popular television shows were chosen because Phocuswright's first analysis of the agency landscape in 2006 "assumed travel agency extinction -- and we were proved wrong."

Source: Phocuswright

"Our research shows that travel agents aren't only surviving; they're being courted: Suppliers, consortia and host agencies are trying to attract travel agents to their products," the report states. "Leisure agents are specialists; they are entrenched in certain consumer groups and are communicating constantly with their customer network via mobile devices, social media, whatever works. Personal networks and relationships are playing into agents' hands, since this shows they're truly the keepers of the keys to lucrative leisure travelers."

The study was compiled using results from a survey, answered by 1,551 agents, coupled with more than 20 interviews across the industry. 

In 2017, the U.S. agency market saw $112.8 billion in total sales, according to the report. That number is forecasted to reach $127 billion in 2021, a nearly 13% increase. To size the market, Phocuswright collected supplier revenue for the air, car, hotel, cruise and tour segments, according to Lorraine Sileo, senior vice president of research and business operations.

Three main factors contributed to agencies' success, according to Travel Leaders Group CEO Ninan Chacko: "complexity, trust and the demand for experiential travel." 

Consumers are inundated with information from the internet and social media and are turning to advisers for help. Positive experiences with those advisers turn consumers into repeat customers, Chacko said. Advisers also often have access to attractive things like upgrades and price advantages, and they send clients on the custom, Instagrammable trips they are seeking.

The growth in the market and the overall positivity of the study will be helpful to ASTA with consumer outreach, according to Eben Peck, the Society's executive vice president for advocacy.

Source: Phocuswright

"This gives us pretty substantial ammunition in our everlasting war in the consumer media to drive up the perception of our industry and fight back against the perception that travel agents and advisers are going away," Peck said. "We're going to be shouting this from the rooftops, using this study and some of our own research, as well."

'IC-ification' of the industry

Phocuswright's report found that ICs are "fueling the growth" of the agency landscape.

Just over half (51%) of survey respondents reported they are home-based agents (44% are storefront agents, while the rest are travel management company agents or answered "other"). Sullivan said the average agency reported having 40 ICs and 14 employees.

"That tells me that the industry's figured out that using ICs is a good way to grow -- and grow in a scalable way," she said.

It's a phenomenon that David Kolner, Virtuoso's senior vice president of global member partnerships, calls "the IC-ification of the industry." Kolner has been tracking the trend in recent years, and he said the study helps further define it.

New storefront investments

The study also found that agents are increasingly interested in investing in brick-and-mortar agencies, though they are likely to be different than their more traditional counterparts. Sullivan said that around 10% of respondents reported that they've already opened a new storefront, and another 10% said they plan to in the next year.

"What we don't know is what that's going to look like yet," she said. "I think we're seeing a difference in the kinds of business models."

It could be an agency that's also a coffee shop, Sullivan said, or perhaps a library-like setting where potential clients can come to research travel and then talk to an agent. 

"The diversification of business models continues to grow," Peck said. "We're definitely seeing a lot of growth on the independent adviser side, but that shouldn't imply, then, that storefronts are going away. All of our members report doing great business, including storefronts. You've heard about things like Departure Lounge in Austin -- new, innovative business models using the storefront concept that have been killing it." 

Source: Phocuswright

Sullivan said she believes that agents are investing in their businesses by opening storefronts because they have confidence in their place in the industry, which speaks to another finding of the study: that agencies, OTAs and suppliers' direct-to-consumer efforts are "coexisting peacefully."

According to the study, agents currently hold a 30% share of the travel-booking channel, outpacing supplier websites (28%), offline direct bookings (24%) and OTAs (18%), making agencies the top channel. By 2021, the study predicts, agents will cede only one percentage point, and supplier websites will gain two, to hold 30% of the market share.

"I just don't think it's as competitive as it used to feel," Sullivan said.

Chacko predicted that coexistence will continue, but the winners will be the suppliers "who highly value their relationships with travel advisers as a prime distribution channel." 

"Ask any supplier who sells the suites and the front of the plane," Chacko said. "It's not the OTAs. As the products become more complex, it will place an emphasis on the human touch in helping travelers sort through and pick the right product and options for them."

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