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PowerPoint PresentationGeneral Manager, Industry Products and Services
ARC PROPRIETARY AND CONFIDENTIAL. This document includes confidential information that is proprietary to Airlines Reporting Corporation (ARC). Disclosure of this document or any information contained herein to third parties is prohibited without the prior written consent of an authorized ARC officer. Obsolete versions of this document should be destroyed in a manner to prevent compromise of the information, e.g., shredding. © 2007 Airlines Reporting Corporation (Unpublished Work)
Business Line Mission
Build upon ARC’s core competencies, creating more value for stakeholders through the delivery of:
Solutions to increase productivity, improve processes & reduce costs
Opportunities to earn ancillary revenues
What Are ARC’s Core Competencies?
Transaction Processing – large volumes & wide range of participants.
Financial Settlement – moving monies between parties with highest standards of accuracy.
Reporting – superior analytics & PCI compliant data processing and storage.
Accreditation & Fraud Monitoring – solid processes & years of experience protect all stakeholders.
Honest Broker – experienced with leading intra-industry working groups to develop standards & efficiencies.
Trends & Opportunities – Better Processes
Initiatives, large and small, to reduce distribution costs, eliminate paper or manual processes and improve efficiencies:
ARC Payment Express for collection of GDS-related fees
ARC appointed by airlines to invoice & collect fees
Leverages existing financial processes
Leverages existing settlement system
User groups developing standards
Enhancement to ARC Agent’s Choice – Jan. 2008
GDS-independent service fee processing
Still leverages existing settlement system
ARC Agent’s Choice – Profile Enhancement
First ARC product with client profile; makes processing a service fee more efficient.
ARC Memo Manager
Product Manager, Industry Products and Services
ARC Memo Manager Overview
ARC Memo Manager automates and streamlines the current memo distribution and settlement process in the U.S. (launched Aug. 2007)
Secure, central repository for memo data; retains 39 months of history
Site administrators control user roles; users only access memos related to their organization
Users access memo data in real time to work and settle memos (view, correspond, dispute, pay)
Enables agents to make full and partial payments to be settled in IAR
Query and export capabilities for memo data
Better communication via shared access to info (misplaced/lost documents a thing of the past)
Improved cash flow for all; easy settlement through IAR
ARC Memo Manager Update
89 subscribed carriers and 44 carriers actively loading memos
One major carrier (LH) implemented with another to follow 2Q (DL)
25 additional carriers in the file upload certification process
Current users have already seen benefits from AMM:
Faster settlement - average 19 days to settlement
Cost Savings - implemented carriers and agents have remarked on the cost savings of eliminating paper (printing, sorting, mailing etc…)
High agency adoption rate
99% of ARC mega agencies (over 700k annual air transactions) are registered for Memo Manager
AMM registered agency users represent 76% of ARC’s total annual air transactions
Expect these numbers to increase as other major carriers implement
Product Enhancements to Date
1.2 (12/11/07) – Over 100 items, mostly behind the scenes items to make the system run smoother, navigation, attachments and bug fixes
1.3 (12/14/07) – Security questions not case sensitive, BSP calculation
1.4 (1/18/08) – XML attachments, export function to include all details from memo listing
1.5 (3/5/08)– Maintenance release
1.6 (Scheduled beginning of April) – Redesign of Memo Listings screen
1.7 (Scheduled mid April) – Redesign of Advanced Search screen
Note: 1.3, 1.4, 1.6 and 1.7 include enhancements that incorporated customer feedback.
Upcoming Enhancements
Agent and carrier user groups have been created to receive feedback and help prioritize new enhancements to the system.
The groups are currently working to prioritize a list of over 50 enhancements to the system.
Examples:
Reporting enhancements
Ability to take group actions on memos
Questions about AMM?
What other trends do we see?...and how is ARC responding?
Evolving Travel Agent Business Models
Growth of home-based or non-ticketing agents.
Presents new challenges for all suppliers
How to identify booking agents?
How to market to booking agents?
How to pay commissions to booking agents?
How to monitor for, and reduce fraudulent activities?
ARC introduced Verified Travel Consultant (VTC) mid-2007
Rigorous approval process; leverages core ARC expertise…same process as for full accreditation minus on-site inspection and financial surety (bond or letter of credit)
248 applications as of 4/15/08 (new – 103; reclassification – 145)
VTCs participate in IAR and Memo Manager
Provides expanded customer base for ARC products & services
One Size Definitely Does Not Fit All!
122.pdf
Updated January 25, 2008 - Final
Douglas Quinby, Senior Travel Analyst & Project Manager
Julien Beresford, Senior Research Analyst Elizabeth Cepeda, Research Associate
Diane Shuart, Project Coordinator Lorraine Sileo, Vice President, Research
JANUARY 25, 2008
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Common Project Goals 1. Profile the U.S. agency community: size, structures, types and affiliations
a) How big is it? (number of agencies) b) Business mix (leisure vs. corporate) c) Affiliations d) Home-based agents focus
2. Size the U.S. travel agency marketplace (gross bookings – US$) a) Total agency volume, and in context with other channels b) Size across key travel product categories c) Trending
3. Product mix: What are agents booking and why?
4. Booking channels and tools: What prompts channel choice?
5. Technology trends
Project Design: Two-Phased Approach Two Concurrent Phases 1) Agent Survey (quantitative)
Demographic/business profiles, research and booking behavior, attitudes, outlook, etc.
2) Executive Interviews (qualitative and quantitative)
Travel Suppliers Current activities, future plans, successes and challenges
Consumers
Agency Organizations What agents are doing, what
they want, what they don’t like, what they plan to do
Travel Agency Market: Size & Trends
Technology Providers
Travel Agent Survey Agency Organization Interviews (7) Frontline Agent / Owner-Manager
Interviews (20) Reputable Third-party Data Comprehensive review of relevant third-party data on travel agency marketplace
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Partners • American Society of Travel Agents (ASTA) • Airlines Reporting Corporation (ARC) • Cruise Lines International Association (CLIA) • Performance Media Group (PMG)
Sponsors • AAA • Access America • Amadeus • Best Western • Canadian Tourism Commission • Carlson Hotels Worldwide • Choice Hotels International • Globus & Cosmos
(Juice Communications)
• Hilton Hotels Corporation • Hyatt Hotels Corporation • The Mark Travel Corporation • Regent Seven Seas • Royal Caribbean • Starwood • TravelPort Inc.
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Table of Contents 1. Project Recap
a) Common Project Goals and Approach b) Client Key Outcomes c) Methodology
2. Overview and Key Findings 3. Size of the U.S. Travel Market (Total and Agency)
a) Gross Bookings by Channel and Product b) Travel Agencies and Agents
4. The Travel Agent Population 5. Travel Products: What Agents Book and Why 6. Channels & Technology: How Agents Book and Why 7. The End Customer: Travel Agents’ Clients 8. The Agency Business: Performance, Prospects &
Challenges
• Total Market / Agencies / Home-based
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• Web-based survey to capture profile information, research and booking behavior
• Multiple source lists used in partnership with major industry partners to ensure large and comprehensive response base:
• Project Partners: • ASTA Family Research Panel • Airlines Reporting Corporation (ARC) • Performance Media Group (publishers of Agent@Home, Travel Pulse Daily, others) • Cruise Lines International Association (CLIA)
• Additional Agency List • IATAN
• 20 interviews with select survey respondents: • Selected for balance of type (storefront vs. home-based), business mix, affiliation and size
Methodology: Two-Phased Approach 1) Travel Agent Survey
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• Travel agents belonging to ARC, ASTA, CLIA, IATAN and/or subscribing to PMG publications received a personalized email invitation from each association/publisher to participate in a PhoCusWright industry study. Every invitation was essentially the same text but from a sponsor executive.
• Invitations were distributed during the period Aug 27 – Sep 12, 2007. 1,887 valid responses received though September 26, 2007, on a Web survey hosted by MarketTools Inc.’s (San Francisco, CA) zTelligence:
• IATA (9.4%) ARC (19.8%) ASTA (15.7%) CLIA (26.5%) PMG (28.4%)
• Survey respondents were offered an executive summary of results. • The 1,887 responses represent 1.4% of the estimated total retail storefront agent population and 2.5%
of the estimated home-based agent population. The confidence interval of the retail storefront results is +3.9 points with a 99% confidence level; the confidence interval of the home-based agent results is +4.6 points with a 99% confidence level. The confidence interval for comparisons of retail storefront and home-based results is +3.0 points with a 99% confidence level.
• Total responses were weighted so that home based agents accounted for 28.0% of sample rather than non-weighted 41.0%.
Methodology: Two-Phased Approach Survey Methodology Detail:
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• Interview candidates selected to ensure representation
2) Supplier, Technology and Agency Organization Interviews
Executive Interview Breakout Type # Explanation Airline 2 One network, one LCC
Hotel 3 Upscale, mid-market and economy
Car 1 Large
Packaging 5 Represent the spectrum of TO world: package operator, escorted, FIT, online, etc.
Cruise 4 Two major cruise lines, two smaller/ independent cruise lines
"Alternative" 2 Travel insurance and major destination / supplier
Supplier Total 17 Agency 7 Represent the spectrum of agency world: (large vs. small, corp. vs. leisure, home
based, etc.).
TOTAL 33
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PhoCusWright undertook two independent approaches to size the travel agency market and corroborate the estimates generated from both approaches. These two approaches are explained in detail in the following slides.
In brief:
1. Gross Booking Volume: This was based upon the supply-side methodology developed through PhoCusWright’s Online Travel Overview. This sizes the market from supplier revenues. Data is acquired through supplier interviews, publicly available financial information, and other reliable third-party sources.
2. Travel Agency Locations and Population: This was developed through the travel agency survey and all available reputable third-party sources.
Sizing Methodology Agency Market Sizing – Two-Pronged Approach
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1. Travel agency market sizing figures represent all travel (leisure / corporate / unmanaged business travel) purchased via travel agencies in the United States • Online travel agencies (Expedia Inc., Orbitz, Priceline, Travelocity and all related sites) are
excluded from this segment • Sizing represents gross bookings (not travel agency revenues) • All figures presented in US$ millions except where stated otherwise
2. “Supply-Side” Market Sizing: Driven by Interviews and Data Provision from 40+ Companies across the U.S. Travel Industry • 33 Direct interviews with suppliers (airlines, hotels, car rental, cruise lines, tour operators, rail) • 15 interviews with major distribution companies: online travel agencies, travel agency
organizations, global distribution system companies, alternative distribution systems
3. Figures Corroborated with Additional Research • PCWI research • Third-party data sources: Bureau of Labor Statistics, Business Travel News, Car Rental News,
National Tour Association, PricewaterhouseCoopers, Travel Weekly • Financial filings of public companies, including airlines, hotels, car rental companies, cruise
lines, global distribution system companies, online and traditional agency organizations • Industry association data: ARC, ASTA/NACTA, CLIA, Outside Sales Support Network (OSSN) • PCWI travel agent survey • Published media reports
Sizing Methodology Agency Market Sizing – Gross Bookings (US$)
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PCWI Agency
Population Estimates
Ranges
Step 1
Step 2
Corroboration & AdjustmentStep 5
PCWI Agent Survey
Segment (top 65)
Step 4 Self-reported
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PCWI generated a weighting of 28% for the home-based agent as a percentage of the total agent (not agency!) population based on the following method:
1. Reviewed all available third-party data on the travel agency and agent population to generate a range of comparables for: a) Number of agency locations (referred to as retail storefront/office-based, or RS/OB) b) Number of agents (office-based and home-based) c) ARC vs. Non-ARC locations
Sources: a) Industry associations: ARC, ASTA/NACTA, OSSN b) Government: Bureau of Labor Statistics (BLS) c) Trade Media and other research: Business Travel News, CSFB, Travel Weekly
2. Generated average booking volume ranges for RS/OB locations and home- based agents (individuals) based on survey results
Sizing Methodology: Agency Population Office-based vs. Home-based Weighting
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Cont’d…
3. Mapped average booking volume ranges with population ranges to generate a range of projections for the total travel agency market
4. Conducted separate sizing analysis of the largest 65 travel agencies • Because the highest tier for booking volume in the survey was “greater than $25M,”
PCWI conducted additional analysis leveraging data from ARC, BTN, Travel Weekly and data supplied directly by some TMCs to ensure reasonably accurate sizing estimates for the Mega Agency segment
5. Compared against “supply-side” market sizing to estimate: a) Total RS/OB population (ARC and non-ARC) b) Total Home-based population c) Average booking volume per RS/OB location and home-based agent
Sizing Methodology: Agency Population Office-based vs. Home-based Weighting
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Survey Base Population Home-based Number Reflects Weighting
Q2. Which of the following best describes your travel business? Source: PhoCusWright Inc.
S torefront or office based travel agency, 64%
Home based, 28%
Online/Webbased travel retailer, 2%
C all center, 1%
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PCWI employed the following approach to identify significant differences and trends across leisure and corporate agencies:
Sizing Methodology: Agency Population Leisure and Corporate Segmentation
Source: PhoCusWright Inc.
• Respondents were asked to indicate the percent of their gross sales volume that is leisure, unmanaged business travel and managed corporate travel
• PCWI created a banner for “Leisure,” “Corporate” and “Blended” agency types based on the following criteria:
• Leisure – at least 70% of gross sales volume is leisure • Corporate – at least 60% of gross sales volume falls in a managed corporate travel
program • Blended – all remaining (leisure volume < 70%, corporate volume <60%, unmanaged
business travel 0-100%)
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PCWI used the following definitions in the agent survey instrument to define key types of travel agency organizations:
Methodology: Agency Organization Definitions
• Examples: ABC Corporate Services, Ensemble, Hickory, Radius, TravelSavers, Vacation.com, Virtuoso, etc.
• Franchise – a travel agency business service that provides branding affiliation, marketing support, preferred supplier relationships, business services and infrastructure
• Examples: American Express, Carlson Wagonlit Travel Associates, Cruise One, Cruise Planners, Results!, Uniglobe, etc.
• Host Agency – provides travel agency infrastructure services that usually include technology, ticketing, and may provide preferred supplier commission rates, and marketing support
• Examples: America’s Vacation Center, Corporate Travel Planners, CruiseBrothers, CruiseShip Centers, Global Travel International, Nexion, TravelStar/formerly Joystar, etc.
Travel Agency Distribution: Key Findings
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• 50% of all air • 30% of all hotel bookings • 25% of all car rentals • 70% of all packaged tours • 85% of all cruises…
…are booked via retail travel agencies. In total, traditional travel agencies (excluding online travel agencies) accounted for almost US$110 billion in gross travel sales in the U.S., or 40% of the $273 billion travel market in 2006.
* Percentages refer to share of total gross bookings in dollars for 2006. ** PCWI’s estimate for travel agent hotel bookings may be understated because it does not include groups and
meetings business. This business, which is significant, is typically made directly with individual hotel properties. Groups and business segment is represented in the Property Direct channel (see slides 34-35 for more discussion on channels and the property direct channel in particular).
The Other Half…* How Close Were We? • 55% of all air • 16% of all hotel bookings** • 20% of all car rentals • 73% of all packaged tours • 77% of all cruises…
When we started this project…
Key Findings:
1. Travel agents represented 40%, or $110B, of the $273B travel market in 2006
2. But the decline continues: projected to slide to $104B, or 33%, by 2009 • Travel agent share of the total marketplace has eroded since at least 2003 • Shift in channel use by leisure travelers is the driver:
• Strong growth in consumer-direct online • Growth (albeit slowed) in online travel agencies • Modest growth in consumer-direct offline (principally in hotel, car and cruise)
3. However, the average travel agent customer and transaction represent a higher value, higher yield market
• The typical travel agent client is older, more affluent than a typical online traveler • The average value per transaction via a travel agent is probably higher
• The average air ticket booked by a travel agent is over $200 more than a typical online air transaction
• A comparable difference likely exists across cruise, package and lodging segments
Travel Agents*, While Declining, Still Play a Major Role in Travel Distribution
* Throughout this report, “Travel Agents” refers to traditional travel agencies to the exclusion of online travel agencies, tour operators, consolidators, and group and event planners
Key Findings:
4. Air continues to represent the lion’s share – almost two thirds – of all travel agency bookings, but steep decline projected as agents pursue higher-margin complex leisure
• Agent share of air market will decline from 55% in 2006 to 45% in 2009 (sizing) • Slight declines projected for hotel, car, package (sizing) • Agents say they are seeing significant increases in cruise, insurance, tours and
packages, steady state for hotel, car, and decrease in air bookings (survey) • Only corporate agents report increase in air
5. Cruise: significant increase in agents’ gross bookings projected, but agent market share will decline from 77% in 2006 to 73% in 2009 as cruise lines push direct distribution
6. There are approximately 24,000 agency locations, but the largest 65 agencies (“mega segment”) represent almost half of all travel agency bookings
• Growth in the mega segment suggests that erosion in agency market lies in small/medium agencies, which are principally leisure
Travel Agents, While Declining, Still Play a Significant Role in Travel Distribution (cont’d)
Key Findings:
7. Home-based professionals, at approximately 31,000, represent a significant portion (28%) of the travel agent population, but a much smaller piece of total agency sales volume (9%)
8. They are overwhelmingly focused on leisure • Leisure as share of gross volume (mean): 90%
9. There are two significant home-based segments: • Agency-affiliated: identify themselves with an agency or host (44%) • Independents: run an independent agency (56%)
10. Home-based independents: agent resurgence or retrenchment?agent resurgence or retrenchment? Independents
• Work more, produce more • Are older and more experienced • Are less affiliated (with industry associations or agency organizations) Trends suggest move into home is a cost-reduction/survival step for leisure agents, many in the
twilight of their careers. PCWI forecasts start of population decline between 2010-2015
Growing Home-based Segment Significant in Population, Less Significant in Market Share
Key Findings:
11.Agents booking more via the Web at the expense of the GDS • GDS accounts for almost three fourths of all agent bookings, but Web projected to
grow from 16% in 2006 to 21% by 2009 • Air, car, hotel predominantly GDS, while phone and Web preferred for cruise, tour • But: more than one third of agents “usually” book air via supplier Web sites as well
as the GDSs • Corporate agencies are much heavier users of GDSs, while leisure agencies and
home-based agents prefer supplier sites and the phone
12.Agents score supplier Web sites higher than GDS in functionality and usability, but • still turn to the phone for personal interaction (especially for complex products,
specific requests) • And call because of technical problems
GDS Remains Dominant Booking Channel, but Agents Increasingly Turning to the Web
13.13. Leisure vs. CorporateLeisure vs. Corporate: Significant differences in product and channel selection across leisure and corporate agencies
• Corporate agencies – far fewer, but they’re much larger, on average (almost half produce over $5M) – overwhelmingly focus on air, car, hotel – primarily use the GDS – defer to client (company) preferred (contract) vendors first, their agency preferreds second
• Leisure agencies – A lot more of them, but they’re a lot smaller (four out of five produce under $5M) – focus on cruise, package/tour, although air is not insignificant – prefer the Web and phone to the GDS – are motivated first by supplier experience (their personal experience with the supplier, and
not necessarily the “brand”) and personal product knowledge, followed by preferreds (although in many cases this is how preferreds are selected)
14. Consistent trend across agency organization*, business mix and agency size • Two out of three agencies belong to consortia* (trend is leisure and small) • Only 15% are franchise* affiliated (and trend is a little more corporate, a little larger)
Leisure and Corporate: Very Different Animals
* See slide 17 in methodology for definitions of agency organization types Source: PhoCusWright Inc.
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Key Findings:
15. Almost half of all agents are over 55, and nearly two thirds have more than 20 years of experience
16. Fewer than one in five agents say income is up • One third of RS/OB, one half of home-based, say income is down
17. All report seeing agencies in their areas close and colleagues leave the business
18. All love what they do, but have mixed feelings/trepidation about the future, and expect a continued trend in anti-agent actions from suppliers
19. All emphasize that personal interaction and customer service are the heart of their business and key differentiator (from the Internet and booking direct) • While commissions and preferred suppliers are “somewhat” important, supplier reputation
(i.e. personal experience) and service are top influencers • Agents see themselves as “customer service professionals” first, “travel and business people”
second, and on the “front-line” between clients and suppliers: they bear deep resentment for suppliers that exhibit poor service for their clients, especially when there are problems
Agents Today Are Senior, Service-Oriented Survivors: Frustrated Optimists, Enthusiastic Pessimists
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Agencies Represent 40% of Total Travel Market in 2006, Declining to One Third by 2009 Total Travel Market and Agency Share, 2006-2009 (US$M)
* Total Market represents gross bookings for air, car rental, hotel, tour operators (less tour operator cost of air and hotel inventory), cruise lines and rail. Figure has been adjusted upward from PhoCusWright’s Online Travel Overview 7th Ed. due to a new methodology for sizing U.S. point of sale bookings for international airlines (Online Travel Overview methodology has historically sized the air market by U.S.-based supplier revenue). This study takes into account travel agency bookings with international airlines.
** Traditional Travel Agencies refers to travel agencies to the exclusion of online travel agencies, tour operators, consolidators, and group and event planners.
Percent Change 5% 6% 5%
Traditional Travel Agencies** 109,711 107,240 105,656 104,035
Percent Change -2% -1% -2%
Travel Agency Percent of Total 40% 37% 35% 33%
Agencies Represent 40% of Total Travel Market in 2006, Declining to One Third by 2009 Total Travel Market and Agency Share, 2006-2009 (US$M)
* Total Market represents gross bookings for air, car rental, hotel, tour operators (less tour operator cost of air and hotel inventory), cruise lines and rail
Traditional Travel Agencies
Consumer Direct, Growing Faster, Will Overtake Intermediary Sales in 2008-2009 Size of the Market for Consumer Direct vs. All Intermediaries, 2006-2009 ($M)
2006 2007 2008 2009
Direct 123,935 136,825 151,223 164,598
Intermediary 149,110 150,421 151,932 153,510
Online Travel Agencies 32,399 36,256 39,426 42,700
Traditional Travel Agencies* 109,711 107,240 105,656 104,035
Tour Operator** 7,000 6,925 6,850 6,775
* Traditional Travel Agencies refers to travel agencies to the exclusion of online travel agencies, tour operators, consolidators, and group and event planners. These figures refer to all bookings made through travel agencies, including online bookings (e.g. a consumer booking via the AAA or American Express Web site).
** Tour Operator here refers to gross booking revenue to suppliers from tour operators. PCWI has excluded tour operator booking revenue with suppliers (the tour operator number above) from market share for consumer direct vs. intermediary (see next slide).
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The Balance Tips Toward Direct by 2008 Share of Total Market by Channel: Consumer Direct vs. Intermediaries, 2006-2009 ($M)
1) Total Market represents gross bookings for air, car rental, hotel, tour operators (less tour operator cost of air and hotel inventory to avoid double counting), cruise lines and rail. The Intermediary share of the total market pies excludes supplier revenue from tour operators. The balance of direct vs. intermediary for the total market includes tour operator sales to consumers directly and to travel agents (intermediary).
2) The tour operator slice of the intermediary pie represents supplier revenue from tour operators. This piece is excluded from the intermediary portion of the total market pie because tour operators then resell inventory as packages to consumers and travel agents.
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Historical View: Travel Agency Market Share Has Eroded as Leisure/Unmanaged Business Moves Online Travel Agency, Online and Offline Direct Channels Market Share, 2003-2009
Offline Direct: Call center and property direct / walk-up bookings Online Travel Market: Online travel agencies and supplier branded Web sites, leisure/unmanaged business travel Other: Tour operator and other channels Source: PhoCusWright Inc. supplier sizing methodology and historical PCWI data
19% 22% 26% 28% 32% 34% 37%
29% 29% 29% 28% 28% 27% 27%
49% 46% 43% 40% 37% 35% 33%
2003 2004 2005 2006 2007 2008 2009
Traditional Travel Agencies Offline Direct
Online Travel Market Other (<3%)
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Air Projected to Decline (Slightly) as Cruise Segment Gains (Slightly)
* Package here refers to all tour operator bookings and excludes FIT. FIT is included in air, hotel and car bookings, but cannot be accurately sized through supply-side methodology because suppliers do not have visibility into single component vs. FIT purchases.
Source: PhoCusWright Inc. supplier sizing methodology
Product Composition of Travel Agency Market, 2006-2009 (US$M)
*
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Agency Share Will Erode Across all Product Segments, Most Sharply in Air
55%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Air Hotel Car Package* Cruise Rail
2006 2009
Travel Agency Market Share of Each Product Category, 2006-2009 (US$M)
Source: PhoCusWright Inc. supplier sizing methodology.
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Note: Channel definitions on following slide Source: PhoCusWright Inc.
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Channel Explanations 1) Call Center represents centralized call centers for all supplier types and tour
operators for taking phone reservations directly from travelers (consumers, not travel agents). This also includes airport counter sales for airlines.
2) Walk-up / Property Direct represents bookings make by consumers directly with a hotel property or car rental location. Note: A portion of the “Property Direct” channel within hotel and lodging probably includes bookings by
travel agents and group and meeting planners. This channel is comprised largely of walk-up transient business, local direct corporate business, and groups and meetings. A significant portion of the groups and meetings segment is booked by travel agents and group/event planners directly with the property and not via the GDS (or centrally trackable channel). Therefore, PCWI’s travel agent estimate for hotel bookings may be understated, since it does not reflect this group business.
3) GDS represents GDS bookings for “traditional” travel agencies only. GDS bookings by online agencies are counted within the “Online Agency” category.
4) Agent Web represents all electronic bookings by travel agents excluding GDS (supplier Web sites, alternative online agent systems such as G2 SwitchWorks, Revelex, VAX, and includes supplier Web sites, agent bookings with online agencies and direct connects between agent in-house systems and suppliers).
5) Agent Phone represents bookings made by travel agents over the phone, through a supplier 800 number or call center dedicated to travel agent sales.
6) Tour Operator refers to gross booking revenue to suppliers from tour operators. Source: PhoCusWright Inc.
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2006 2009 2006 2009
Branded Web site 26,402 43,915 21% 31%
Call Center* 8,754 7,899 7% 6%
Intermediary 91,718 91,588 72% 64%
Online Agencies 18,642 23,982 15% 17%
Traditional Travel Agencies 70,076 64,756 55% 45%
GDS** 59,406 52,032 47% 36%
Agent Web*** 9,760 11,919 8% 8%
Agent Phone 910 805 0.7% 0.6%
Tour Operator 3,000 2,850 2.4% 2.0% * Call center includes walk-up to ticket counter locations ** GDS here excludes air bookings made by online agencies through GDS *** Agent Web includes supplier Web sites, Web-based travel agency booking engines (G2, AgentWare, BookingBuilder, etc.), agent
bookings with online agencies and direct connects between agent in-house systems and suppliers Source: PhoCusWright Inc.
Green = Significant increase
Red = Significant decline
Hotel by Distribution Channel, 2006-2009 (US$M) 2006 2009 2006 2009
TOTAL MARKET 99,487 122,262 100% 100%
Consumer Direct 68,405 87,451 69% 72% Branded Web site 13,259 21,867 13% 18%
Central Res 12,023 15,332 12% 13%
Property Direct* 43,123 50,252 43% 41%
Intermediary 31,082 34,811 31% 28%
Online Agencies 10,988 15,421 11% 13%
GDS** 14,923 14,045 15% 11%
Agent Web*** 672 910 1% 1%
Agent Phone 500 510 1% 1%
Tour Operator 4,000 3,925 4% 3% * Property direct segment may include some travel agent bookings because it includes groups and meetings. See definition, slide 33. ** GDS here excludes hotel bookings made by online agencies through GDS *** Agent Web includes supplier Web sites, Web-based travel agency booking engines (VAX, Revelex, etc.), agent bookings with online
agencies and direct connects between agent in-house systems and suppliers Source: PhoCusWright Inc.
2006 2009 2006 2009
TVP Branded Web site 650 1,058 5% 8%
Call Center 2,914 3,002 22% 23%
GDS** 482 - 4% 0%
Online travel agencies± <100% <100% <1% <1%
* Traditional Vacation Packager, PCWI name (TVP) to distinguish tour operators from online packagers and online agency dynamic packaging
** Assumption that all GDS legacy tour platforms will be discontinued by 2008-2009 *** Agent Web includes TVP agent Web sites, VAX and other third-party tour booking systems for agents ± Travelocity, Away, iExplore, and a few others do resell other TVP packages. Volume estimated to be
immaterial to total market sizing Source: PhoCusWright Inc.
2006 2009 2006 2009
Traditional Vacation Packager* 13,200 12,900 73% 66%
Consumer Direct 3,564 4,061 20% 21%
Online Packagers** 4,912 6,773 27% 34%
* Traditional Vacation Packager (TVP) is PCWI term to distinguish tour operators from online packagers and online agency dynamic packaging
** Online packagers represent entities such as Expedia, Travelocity and the NEAT Group that sell fixed packages and dynamically bundled multi-component travel (or dynamic packaging) primarily via the Web
2006 2009 2006 2009
Branded Web site 205 505 2% 3%
Call Center 2,076 2,941 16% 19%
Intermediary 10,429 12,123 82% 78%
Online Agencies 675 788 5% 5%
GDS 878 1,020 7% 7%
Agent Web* 2,048 2,947 16% 19%
Agent Phone 6,828 7,368 54% 47%
* Agent Web includes cruise line Web sites and booking tools, Web-based travel agency cruise engines (Revelex, VAX, OVS, etc.), agent bookings with online agencies and direct connects between agent in- house systems and suppliers
Travel Agent Population: Three Categories
* This gross sales sizing is based on PhoCusWright agency survey and may vary from supply- side sizing
** BLS May 2006 figure, PhoCusWright Inc. *** For total market size estimate, booking volume of agency-affiliated home-based agents is
considered to be included in RS/OB agency volume to avoid double-counting **** Unverified estimates from company statements (YTB, GTI, etc.)
Office-based, Home-based Pros and Hobbyists Estimated Population
Gross Sales (US$M)*
1. Employed office-based travel agents: 80,000** 98,968 90 2. Home-based professionals 31,000 9,705 9
Agency affiliated (employee or independent contractor)***
14,000 3,564*** 3
TOTAL 111,000 108,673* 99
c.175,000**** c.500..? c.1,000..?
41
Category Overlap & Market Sizing Some overlap exists across the three travel agent categories.
* BLS May 2006 figure, PhoCusWright Inc.
42
Independents Represent 56% of the Home-based Population… Home-Based Travel Agent Population (31,100)
43
…but Almost Two Thirds of All Home-based Agent Sales Volume Share of Home-based Agent Population and Sales Volume, by Agent Type
US$M
44
The Top 65 Agencies Account for Almost Half of the Total Travel Agency Market Gross Sales Volume by Travel Agency Segment (US$M)
* For total market size estimate (supply-side), booking volume of agency-affiliated home-based agents is considered to be included in RS/OB agency volume
Source: ARC, PhoCusWright Inc.
• At least 20% of locations do not have ARC accreditation.
• This figure may be understated as smaller agencies (under $5M) increasingly share their GDS contract and ARC accreditation with other agencies, or use a host agency, to reduce costs and overhead.
46
Agents’ Decline in Volume Projected in Leisure as Corporate Grows a Little Below Market
Travel Agency Market Share by Travel Type, 2006 and 2009
(US$M) Agency Market Size (US$M)
2006 $109,711
4% growth in corporate mostly
from “Top 65 Agencies”
Product Composition of Travel Agency Leisure Volume, 2006-2009 Agency Leisure Volume ($M)
2006 $65,615
14% drop in leisure hotel volume
($M)
48
Consolidation Continues: Mega Agency Share of Air, Hotel to Grow All Travel Agency Air
(US$M)
2009 $64,756
2006 $16,095
2009 $15,465
The Travel Agency Landscape: Profiling the Population
50
3. Agency Organization Affiliations
51
If You Were a Typical Travel Agent Today, You… • Would likely be female (three out of four are women)
• Strongest male representation in owner/manager-only role: one third
• Would likely be over 45, and there’s a good chance you’re close to retirement • 44% of all agents over 55, almost 80% over 45
• Probably have more than 20 years of experience • 60% of agents, agencies, have been in the business over 20 years
• Have a one in three chance of living in the Midwest
• Most likely work in an agency that sells less than $5M travel, most of it (78%) is probably leisure
• And there’s a pretty good chance the agency does less than $2.5M
• Would be making the same or less money (probably less) this year than in previous years, just like the agency you work in
• Are a survivor. You know several agencies in your area that are no longer around, or have moved their business into their homes.
• And you might be thinking about doing the same
1 Typical Agent
73%
27%
73%
27%
75%
25%
Female
Male
Total
Q33: What is your gender? Source: PhoCusWright Inc.
84%
16%
67%
33%
75%
25%
Female
Male
Agent
Owner/Manager
53
With Almost Half of All Agents Over 55, Population Will Face Continued Decline Through 2020 Home-based Skew Older – 49% over 55
Q34: Which of the following age ranges describes your age? Source: PhoCusWright Inc.
1%
4%
17%
35%
32%
11%
0%
5%
17%
28%
35%
14%
Home-based
RS/OB
54
Profile of Survey Respondents: Home-based More Likely to Play Dual Roles
Q1: How do you describe your position? Source: PhoCusWright Inc.
37%
45%
16%
2%
54%
24%
18%
4%
Home-based
55
60% of Agents, Agencies Have More Than 20 Years of Experience Number of Years in the Business: Agents and Agencies
Q35: How many years have you and your agency been in business? Source: PhoCusWright Inc.
Agent
Agency
35%
7%
27%
6%
45%
33%
45%
36%
19%
60%
28%
58%
Home-based
56
Detail on Number of Years in Business
Q35: How many years have you and your agency been in business? Source: PhoCusWright Inc.
Agent
Agency
5%
12%
6%
13%
7%
4%
14%
10%
5%
22%
12%
9%
19%
11%
7%
21%
27%
27%
27%
25%
26%
24%
49%
58%
28%
47%
60%
19%
2%
2%
Homebased
Les s than 2 years 3 5 years 6 10 years 11 20 years Over 20 years Don't know
57
21%
17%
6%
34%
23%
19%
24%
6%
27%
25%
Northeast
Southeast
Mid-Atlantic
Central
Western
AR DC CT AL AK
IA DE MA FL AZ
IL MD ME GA CA
IN VA NH KY CO
KS WV NJ MS HI
LA NY NC ID
MI PA SC MT
MN RI TN NM
SD
TX
WI
59
55% of All Agencies Produce Under $2.5 Million Retail Storefront / Office-Based Agencies, Gross Booking Volume Detail
Q26: Please check the volume range that best represents the annual gross sales volume (the total value of all travel sold) of your travel agency for the year 2006. Base: RS/OB Source: PhoCusWright Inc.
4%
6%
14%
31%
20%
10%
5%
4%
6%
< $250,000
55%
75%
60
If You Were a Travel Agent Working in an Office… It would probably be a leisure agency
• 68% of RS/OB agencies are leisure* (at least 70% of volume is leisure)
And if it is a leisure agency, then • You’re even more likely (47%) to be over 55 • The agency very likely (80%) does under $5 million, or even under $1 million (28%) • There’s only a one in five chance it’s more profitable than two years ago. Although
that’s low, it’s still a better chance than if you were corporate or home-based • There’s only a 36% chance your agency does any managed corporate travel at all
But if your agency does at least 60%** in managed business travel (at 7% of all RS/OB agencies, it’s unlikely) then
• Your agency is probably larger – 45% do at least $5 million, and 20% do more than $25 million
• You’ve got a three-in-four chance of being under 55, and even if you are not, you are almost certainly sitting next to someone younger (one in three are under 46)
• But unfortunately you and your agency are even less likely to be making more money than two years ago. Only 12% of corporate agencies are more profitable.
2 Leisure/
Corporate
•PCWI’s definition of a “leisure” agency ** PCWI’s definition of a “corporate” agency Source: PhoCusWright Inc.
61
Agency Community Swings to Leisure Business Mix as a Percentage (mean) of Booking Volume by all Agencies and Agency Type
Q7: What percentage of your agency’s gross sales volume is leisure, unmanaged business travel and managed business travel? (mean) Source: PhoCusWright Inc.
78%
14%
9%
72%
16%
11%
90%
8%
2%
Leisure (%)
62
Seven out of 10 Agencies (RS/OB) are Leisure; Nine out of 10 Home-based are Leisure Agency Population by Business Mix Types (as defined by PCWI*)
Q7: What percentage of your agency’s gross sales volume is leisure, unmanaged business travel and managed business travel? (mean) * Leisure: At least 70% of sales volume is leisure * Corporate: At least 60% of sales volume is managed business travel * Blended: Remainder = <70% leisure, <60% managed business and 0-100% unmanaged business travel Source: PhoCusWright Inc.
75%
6%
19%
68%
7%
24%
91%
1%
8%
Home-based
63
More Than One Third of Agencies Do Some Managed Corporate Travel Only 7% Consider Themselves a “TMC”
Q9: Are you a travel management company (“TMC”)? (If managed business travel >0.) Source: PhoCusWright Inc.
7%
36%
100%
0
5,000
10,000
15,000
20,000
25,000
s
64
Corporate Agencies Smaller in Number, but Much Larger in Volume 80% of Leisure Agencies Under $5M; at Least 49% of Corporate Agencies Over $5M
Q7 / Q26: Business mix segmentation by booking volume. Base: Retail Storefront / Office-based Source: PhoCusWright Inc.
Leisure Agencies Corporate Agencies
$1M- $5M 38%
$5M -$25M, 25%
30%
29%
65
Almost Half of Leisure Agents Are Over 55; Corporate Has Youngest Population Across All Agency Segments Mean Age by Agency Type
Q34: Which of the following ranges best describes your age? Base: Total, RS/OB Source: PhoCusWright Inc.
22%
34%
44%
19%
34%
47%
36%
39%
16%
66
Most Agencies Have Organization Affiliations Consortia are the most common type of affiliation:
• 66% of RS/OB • 47% of home-based
Franchise model represents only 15% of the RS/OB market • And only 7% of home-based
One in four home-based agents use a host agency, vs. 6% of RS/OB
14% of RS/OB, 29% of home-based have no affiliation
Consortia-affiliated agencies tend to track the leisure market. They are smaller, sell more leisure, and their agents are older
Franchise agents/agencies also track the leisure market, but lean a little more corporate. They tend to be a little larger, do more corporate travel, and their agents are a little younger
3 Agency Orgs.
* PCWI’s definition of a “leisure” agency ** PCWI’s definition of a “corporate” agency
Home-based
Consortia by Far the Preferred Org Type; Three in 10 Home-based Choose Consortia, Hosts and Independence!
Agency Organization Participation, Total and by Agency Type
Q10: Do you or your agency participate with (or use the services of) any of the following types of travel agency organizations? (check all that apply) Source: PhoCusWright Inc.
68
Consortia Skew Older Age by Agency Organization Affiliation
Q34: Which of the following ranges best describes your age? Source: PhoCusWright Inc.
17%
34%
48%
29%
32%
39%
31%
27%
42%
Playing Around: Most Consortia, Franchise Members Stay Faithful to Organization Type Participation in More than one Type of Agency Organization
Q10: Do you or your agency participate with (or use the services of) any of the following types of travel agency organizations? Source: PhoCusWright Inc.
19%
Q7/Q10: Business mix (mean) by agency organization affiliation. Base: Retail storefront / office-based N: Consortia – 684; Franchise – 158; Host – 59 Source: PhoCusWright Inc.
Business Mix of Retail Agencies as a Percent (mean) of Volume by Agency Organization Affiliation
73%
17%
10%
65%
18%
18%
71%
16%
13%
Leisure (%)
> $5M 19%
< $5M 76%
Don't Know
Consortia, Franchise Membership by Booking Volume, Under/Over $5M
Q26: Please check the volume range that best represents the annual gross sales volume (the total value of all travel sold) of your travel agency for the year 2006. Base: Agency organization affiliation Source: PhoCusWright Inc.
> $5M 30%
< $5M 65%
Don't Know
72
Home-based Slightly More Focused on Cruise; RS/OB Agencies Stronger in Packages and Destinations
Specializations by Agency
Q8: If you and/or your agency have specializations, please indicate which of the following best describe the specialization(s) (check all that apply): Source: PhoCusWright Inc.
80%
75%
70%
55%
33%
38%
23%
22%
7%
84%
61%
62%
57%
35%
11%
21%
11%
6%
Cruise
Industry Association Membership by Agency Type
Q8: If you and/or your agency have specializations, please indicate which of the following best describe the specialization(s) (check all that apply)
Note: IATAN, CLIA, ASTA, ARC provided source lists; source lists respondents were eliminated from the counts for the relevant industry association
Home-based
74
If You Were a (Home-based) Travel Agent… • There’s a better than one-in-four chance that you work from home
• 28% of travel agents are home-based
• But you don’t produce a great deal in sales volume • One in four sell less than $50,000 in travel annually • Less than half (44%) sell more than $250,000 annually (that’s at most $30,000 in
take-home assuming a 12% margin)
• You may work full time (57%), but the income is likely secondary to your household (58%)
• You could well be over 55 (49%) and are more than likely (52%) to be making less money this year than two years ago
• You are probably independent. Over half (56%) have no agency or host agency affiliations, and 30% have no consortia or franchise affiliations
• If you are independent, you are older, more experienced, more productive, you work more, and there’s a (slightly) better chance your income is up
4 Home- based
* PCWI’s definition of a “leisure” agency ** PCWI’s definition of a “corporate” agency
75
56% of Home-based Agents Produce Under $250,000 Home-based Agents, Gross Booking Volume Detail
Q27: Please check the volume range that best represents the annual gross sales volume (the total value of all travel sold) you personally sold for the year 2006 Source: PhoCusWright Inc.
24%
17%
15%
14%
16%
11%
3%
0%
< $50,000
$5,000,000 +
76
“Independents” (no host or agency link) Comprise Majority of Home-based Population Contractors and Employees Represent 44%
Q4: Which of the following best describes your home-based business? Source: PhoCusWright Inc.
Employee of travel agency,
IC of hos t agency, 27%
Independent home based agency, 56%
77
57% of Home-based Agents Work Full Time; For 58% Income Is “Secondary” Home-based Profile by Working Hours and Type of Income
Q28: Please check the sentence that best describes your work profile as a travel agent. Base: Home-based Agents HHI: Household Income Source: PhoCusWright Inc.
Part-time; important component to my HHI
9%
11%
23%
24%
33%
78
Part Time 30%
Full Time 70%
Full Time vs. Part Time by Home-based Agent Type Agency-Affiliated:
Full time, primary income source: 21%
Independents: Full time, primary income source:
45%
Q28: Please check the sentence that best describes your work profile as a travel agent. Base: Home-based Agents Source: PhoCusWright Inc.
Part Time 56%
Full Time 44%
< $250,000 62%
> $250,000 38%
Half Meet the Key “$250K” Mark
Q4: Which of the following best describes your home-based business? Source: PhoCusWright Inc.
> $250,000 50%
< $250,000 50%
$257,500
$355,660
80
“Independents” Are More Productive Booking Volume by Home-based Agent Type (detail)
Q27: Please check the volume range that best represents the gross sales volume (the total value) you sold in 2006. Base: Home- based Agents Source: PhoCusWright Inc.
33%
17%
12%
12%
14%
12%
16%
19%
16%
17%
17%
16%
< $50,000
$1,000,000 +
Non-independent
Independent
Agency-Affiliated
81
“Independents” Are More Experienced: 67% in the Business for More than 11 Years Number of Years as an Agent, by Home-based Type
Q35: How long have you and your agency been in business? Base: Home-based agents Source: PhoCusWright Inc.
32%
35%
17%
9%
7%
23%
17%
20%
21%
19%
> 20
11-20
6-10
3-5
< 2
Non-independent
Independent
Agency-Affiliated
82
“Independents” Also Tend to be Older: 54% Over 55 Travel Agent Age, by Home-based Type
Q34: Which of the following age ranges describes your age? Base: Home-based Agents Source: PhoCusWright Inc.
7%
20%
27%
37%
8%
2%
15%
28%
35%
19%
Independents
83
Almost One in Two Independents Have No Affiliation; Those Who Do Use Consortia
Agency Organization Participation of Home-based Agents
Q10: Do you or your agency participate with (or use the services of) any of the following types of travel agency organizations? (check all that apply) Base: Home-based Agents
Non-independent
Independent
Agency-Affiliated
84
CLIA, IATAN Are Most Common, but Independents Tend to Participate Less Association Membership by Home-based Type
Q11: With which of the following industry associations, if any, do you or your travel agency have a membership or accreditation? (check all that apply) Base: Home-based agents Source: PhoCusWright Inc.
67%
65%
24%
33%
26%
17%
17%
9%
7%
5%
55%
43%
30%
14%
12%
20%
18%
3%
13%
3%
CLIA
IATAN
OSSN
ARC
ASTA
What’s On Travel Agents Minds?
1.1. TodayToday’’s Agents Are Survivorss Agents Are Survivors: all agents have seen closures in their area, seen colleagues close up shop, lose jobs and/or leave the business »» ButBut – they are have mixed, usually ominous feelings about the future.
Only those who are close to retirement or not reliant on the income seem less concerned
2.2. They Love What They DoThey Love What They Do: the idea of travel, the customer interaction, this keeps them satisfied »» ButBut – they are frustrated with their income, which has declined (and isn’t
very high to start with), and somewhat resigned to their relatively low take-home
86
Agents in Their Own Words About Their Jobs
I love the variety of the job that I get everyday, being able to help people travel around the world. There’s a big learning curve and no day is the same.
But it’s becoming more and more difficult to survive it. I don’t know how brick and mortar agencies can stay in business. The expenses are so high.
— owner recently converted to home-based
What do I like the most? The travel involved with it. I love leading tours.
But with the diminishing benefits and money to the travel agency business, you have to be a global junkie to stay in the business. — agent at a leisure retail agency
Will I do it for another 19 years? I don’t know…
— agency owner / manager
I get an innate satisfaction when people tell me that was one of the best vacations I ever took. We call people after their trip.
87
What’s On Travel Agents’ Minds? 3.3. Most Accept Most Accept –– Even Applaud Even Applaud –– the Changes in the Industrythe Changes in the Industry:
Say changes have compelled more professionalism, and forced “order-takers” out of business
»» ButBut – they are distrustful of suppliers, especially hotels and cruise lines: the former “nickel and dime” with non-commissionable rates, long-payment periods and processing fees, and the latter with increasing non-commissionable components.
» Commission erosion (albeit “discreet”) is already here – more ostensible cuts are merely a matter of when
“Hotels charge you back for the system 1-3%. So you book a $300-a-night room for 2 nights and you think you’re going to get $60, but no. It is insulting that we are subsidizing their computer systems.
In a small way it dissuades us from using those hotels.”
“[Cruise] commission cuts are already here. It’s just not
obvious like the airlines. More and more things are
not commissionable. The air is just the latest.”
88
What’s On Travel Agents’ Minds? 4.4. Customer Service Is the Name of Their GameCustomer Service Is the Name of Their Game: their key market
differentiator (from the Internet and booking direct) is service. » Service and relationships are what they offer their clients, and it’s what they want
from their suppliers
»» AndAnd – since they are the first line of defense when something goes wrong, that have no tolerance for suppliers that do not step up for their customers
When we deal with a vendor, airlines, it’s our fault no
matter what. Our clients sit on tarmac, we get blamed.
“Sales representatives for suppliers – we see them few
and far between – they come and then do nothing
but just give us brochures.”
“It’s important to me that suppliers know that
relationships are everything. If you don’t pay attention,
we’re not going to sell your product.”
89
In Their Own Words: “What Do You Value Most in a Supplier?”
Problem solving. If there is a problem that needs to be resolved, the agency wants suppliers to work with them to resolve the problem to the best advantage for the client.
Help – that suppliers bend a little for the client. I value when suppliers bend the rules a little and help when someone screws up. But you don’t see that much anymore.
With the vendors I work with, if there is an error, I can pick up a phone and know it will get fixed. Second would be commission, third would be perks. Free nights, free trips.
Good customer service. I need to count on them to get my clients through if they are stranded. I need suppliers standing behind us. I also value sales reps who check in with
you by calling or even email.
We have a lot of special requests, and I value how suppliers deal with it when you ask for something out of the rulebook. First answer is always “no.” Suppliers are rigid. And of course we look like the bad guy to our client. Well, I can tell you – bad news travels
fast.
91
1. Market Size by Product Category: 2006-2009
2. Agent Survey: Product Mix Average • Total population, RS/OB and Home-based • Travel type (leisure vs. corporate) • Affiliation • Booking volume • Region
3. Packaged Travel Detail
4. Travel Insurance Detail
6. Product Selection Drivers
92
Key Findings: 1. Air, at 64%, continues to represent the lion’s share of travel agency volume,
driven principally by the largest TMCs (source: sizing)
2. However, agents in general associate their business activity with leisure: cruise, packages and FIT represent 62% of business (source: survey)
3. For home-based agents, the same leisure bucket is even higher (71%)
4. Affiliation – Size – Business Mix trend persists: • Consortia/smaller book more leisure (cruise, tour package) • Franchise/larger lean toward business travel (more air, more components)
5. Higher incidence of cruise bookings by agents in Southeast, while Central, Western agents show higher incidence of package/tour bookings
6. Agents book tour operator packages over escorted by three or four to one • FIT represents 25% of all agent package bookings
93
Key Findings cont’d…. 7. Leisure agencies, home-based agents favor travel insurance: half of all
bookings include it! • For corporate agencies, only 16%
8. Agents are reporting highest increases in cruise, travel insurance and tours/packages, while hotel and car are steady • Only corporate agencies report flight bookings are on the rise
9. Personal product knowledge, supplier reputation and client feedback are the dominant drivers behind product selection and recommendation • Software-based drivers (GDS/Web advertising and ranking in search results) scored
the lowest • Larger agencies place greater emphasis on preferreds, while smaller and home-
based place the least • Small, leisure and home-based segments pay more attention to trade media
10.Supplier reputation is really about tracktrack--recordrecord: agents view their core value- add as knowledge and customer service. They remember (and do not forgive) suppliers who do not deliver on the latter
Air Projected to Decline (Slightly) as Cruise Segment Gains (Slightly)
Source: PhoCusWright Inc. supplier sizing methodology.
*
95
…Even Though as an Industry They Have Shifted Toward Complex Leisure (or at Least Say So) Percentage (mean) of Product Booked (survey)
Q14: Please indicate how much of each product category your agency books as a percentage of your gross sales volume (mean score) Source: PhoCusWright Inc.
Hotel/Lodging 9%
FIT 9%
Traditional Retail Agencies Do More Flights; Home-based Focus on Cruise
Percentage (mean) of Product Booked by Agency Travel Type
Q14: Please indicate how much of each product category your agency books as a percentage of your gross sales volume? (mean score) Source: PhoCusWright Inc.
22%
23%
25%
9%
8%
4%
42%
20%
10%
9%
9%
4%
Cruise
Tour/Package
Flights
Hotel/Lodging
FIT
Home-based
97
Air/Car/Hotel Represent 86% of Corporate Business, but Less Than a Third of Leisure Business
Percentage (mean) of Product Booked by Agency Travel Type
Q14: Please indicate how much of each product category your agency books as a percentage of your gross sales volume? (mean score); Base: RS/OB Source: PhoCusWright Inc.
18%
36%
11%
28%
4%
59%
6%
27%
4%
0%
35%
26%
19%
13%
3%
Flights
Franchises Do More Flights; Consortia, Hosts Skew to Leisure
Percentage (mean) of Product Booked by Agency Organization Affiliation
Q14: Please indicate how much of each product category your agency books as a percentage of your gross sales volume? (mean score) Source: PhoCusWright Inc.
32%
27%
20%
13%
4%
27%
26%
27%
13%
4%
28%
35%
15%
13%
5%
Tour/Package/FIT
Cruise
Flights
99
Larger Agencies Tend to Book More Components (Air/Car/Hotel); Smaller Skew to Leisure Products
< $1,000,000
Percentage (mean) of Product Booked by Agency Size
Q14: Please indicate how much of each product category your agency books as a percentage of your gross sales volume? (mean score); Base: RSOB Note: Excludes “Other” Source: PhoCusWright Inc.
25%
34%
20%
14%
23%
32%
24%
13%
21%
28%
30%
14%
16%
24%
36%
16%
Cruise
Percentage (mean) of Product Booked by Agencies, by Region
Q14: Please indicate how much of each product category your agency books as a percentage of your gross sales volume? (mean score); Base: All Note: Excludes “Other” Source: PhoCusWright Inc.
26%
25%
18%
14%
10%
37%
17%
17%
13%
8%
29%
21%
23%
12%
8%
24%
27%
22%
13%
8%
26%
22%
22%
13%
10%
Cruise
FIT
Northeast
Southeast
Mid-Atlantic
Central
Western
101
Travel Agents Represent Three Fourths of Packages, but a Smaller Share of Escorted Agent vs. Direct Share of TVP Market, by Package and Escorted Segments
US$M*
Vacation Package: Conventional tour operator vacation package, which may include some or all of the following: flight, accommodation, rental car or transfer, day tours or activities, travel insurance, etc. Providers include AA Vacations, Apple, Funjet, GoGo, MLT, Pleasant, Southwest, United, etc.
Escorted: Fully escorted (i.e. “escorted” by a tour guide) as well as specialty programs that usually include more components and complexity than packages and have fixed departure dates. Providers include A&K, Globus & Cosmos, Grand Circle, FirstChoice companies, brands of The Travel Corporation (Insight, Trafalgar, etc.).
73%
27%
75%
25%
Consumer Direct Travel Agents
* Figures based upon company revenues. Where companies offer both types of packaged travel, PCWI has counted all company revenues in the category that best represents volume and brand.
102
“Packages” Account for 81% of Traditional Vacation Packager (TVP)* Marketplace
Vacation Packages
Escorted Tours 19%
TOTAL TVP MARKET ($USM) 13,200** Tour Operator Package 10,700 Escorted 2,500
ALL PACKAGED TRAVEL BY TRAVEL AGENCIES ($USM) 15,019 Tour Operator Package 9,636
FIT 3,758
Escorted 1,625
Tour operator market represents $13.2B in 2006
* PCWI defines Tour Operators as “TVPs” to distinguish from online packagers, online agency dynamic packaging ** Does not include FIT *** FIT “Flexible itinerary or independent travel” refers to bundling individual components (usually from different booking sources)
into a custom itinerary Source: PhoCusWright Inc.
Packages 64%
FIT 25%
Escorted 11%
103
Package, Escorted Operators Percentage (mean) of Package/Tour Type of All Packages Booked
Q15b: What is the mix within the vacation tours and packages you book? (mean score) Source: PhoCusWright Inc.
Escorted 26%
Home-based Independents Book More Escorted Percentage (mean) of Package/Tour Type of All Packages Booked by Home-based Agent Type
Q15b: What is the mix within the vacation tours and packages you book? (mean score); Base: Home-based Agents Valid N: Independent = 133, Agency-Affiliated = 94 Note: Excludes “Other” Source: PhoCusWright Inc.
66%
19%
9%
63%
26%
5%
Northeast Southeast Mid-Atlantic
Percentage (mean) of Package/Tour Type by Region
Q15b: What is the mix within the vacation tours and packages you book? (mean score) Note: Excludes “Other” Source: PhoCusWright Inc.
66%
26%
54%
35%
61%
26%
69%
23%
69%
21%
Leisure, Home-based Favor Travel Insurance Percentage (mean) of Bookings that Include Insurance, by Agency Type
Q15b: What percentage of your total bookings include travel insurance? Source: PhoCusWright Inc.
51%
39%
42%
Leisure, Home-based Favor Travel Insurance Percentage (mean) of Bookings that Include Insurance, by Agency Organization Affiliation
43%
41%
45%
Consortia
Franchise
108
Central, Western Regions Book Less Insurance Percentage (mean) of Bookings that Include Insurance, by Region
38%
42%
45%
45%
44%
109
Leisure, Insurance on the Rise, Flights on the Decline Mean Score (scale 1-3) of Whether Product Type is Increasing, Decreasing, or the Same, as Share of Bookings
Q15: How is the mix of products that you book changing? (mean score) Source: PhoCusWright Inc.
Decreasing (1) Same (2) Increasing (3)
Cruise
Rail
Flights
110
Leisure, Home-based Agencies Booking Fewer Components, While Corporate Agencies See Growth in Their Bread and Butter Mean score (scale 1-3) in Change of Product Mix, by Agency Type
Q15: How is the mix of products that you book changing? (mean score). Base: RS/OB, Home- based Source: PhoCusWright Inc.
Leisure
Flights
111
Product Knowledge, Brand and Clients Influence Agents Most Mean Score (scale 1-3) of Factors Influencing Product Selection and Recommendation
Q19: When it comes to recommending products to clients, please indicate the level of influence, if any, the following things have on your decision. Source: PhoCusWright Inc.
NOT AT ALL (1) Somewhat (2) VERY (3)
Personal knowledge of product
The rank in search results of system
Ads in GDS or other desktop software
NOT AT ALL (1) Somewhat (2) VERY (3)
112
Home-based Less Influenced by Preferred, Commissions, but Read More Trade Media Mean score (scale 1-3) of Factors Influencing Product Selection and Recommendation by Agency Type
Q19: When it comes to recommending products to clients, please indicate the level of influence, if any, the following things have on your decision. Source: PhoCusWright Inc.
Retail Storefront Home-based
Personal knowledge of product
113
Significant Difference Across Most Drivers for Leisure vs. Corporate Agents: Price, preferreds more important for corporate agents, while product knowledge, client feedback, and trade media stand out for leisure agents
Mean score (scale 1-3) of Factors Influencing Product Selection, Recommendation by Agency Type
Q19: When it comes to recommending products to clients, please indicate the level of influence, if any, the following things have on your decision. Base: RS/OB Source: PhoCusWright Inc.
Corporate Leisure
Some big differences!
114
Smaller Agencies Less Influenced by Preferreds, but Slightly More Influenced by Trade Media Noted Differences in Factors Influencing Product Selection Across Agency Size
Q19: When it comes to recommending products to clients, please indicate the level of influence, if any, the following things have on your decision. Base: RS/OB Source: PhoCusWright Inc.
NOT AT ALL (1) VERY (3)
NOT AT ALL (1) VERY (3)
SOMEWHAT (2)
SOMEWHAT (2)
Preferred supplier
< $1,000,000
116
2. GUI vs. Original GDS Interface Usage
3. Channel Analysis Across Product and Agency Segments • Air • Hotel and lodging • Packaged Travel • Cruise
4. Channel Selection Drivers
5. Research and Shopping
Section Contents:
117
Channel: Key Findings 1. Sabre leads market share with 34% of locations, and more than half of the corporate
agency market (56%) • Amadeus has high penetration among smaller, leisure agencies
2. More than half of home-based agents have no GDS at all, driven by “Independents” (only three in 10 use a GDS)
3. Strong correlation between GUI vs. “classic CRS” usage and agency type and size: • Larger, corporate agencies favor original GDS interface • Smaller, leisure and home-based agencies use more graphical interfaces
4. Air, Car and Hotel: GDS dominant channel for components, especially air, but agents (especially leisure and home-based) are turning to online alternatives • Agents who usually use supplier Web sites: 34% for air; 40% for hotel
5. Complex Leisure: Phone is most usual method for booking packages, tours and cruises • Agents more likely to book packages electronically, more likely to call for escorted tours • Cruise: Three out of four agents cite phone as usual channel • Cruise line Web sites, tour operator Web sites and VAX (for packages only) most frequently
cited electronic channels for complex leisure
118
Channel: Key Findings cont’d…. 6. Why agents use the Phone: technical issues and need to speak with a
person drive phone use • Leisure, home-based agents call for complex bookings, group space on cruises
7. GDS scores high on convenience, functionality and agency mandate, but is even with or outscored by Supplier Sites on functionality, convenience, product selection, technical support and financial incentive
8. Research & Shopping: Agents rely on supplier sites, GDS for research and shopping • Corporate agencies rely overwhelmingly on the GDS, while leisure agencies use
more sources (search engines, print materials, email promotions and online travel agencies)
9. Four in 10 agencies offer online booking to consumers, with larger agencies far more likely to than smaller ones
119
Sabre, with One Third of Locations, Leads Market, While Home-based Prefer No GDS at All GDS Market Share by Agency/Agent (not segment volume) Percentages exceed 100% because multiple responses allowed.
Q12: Which of the following global distribution systems (GDS), if any, do you use? Source: PhoCusWright Inc.
Home-basedRetail / Office-Based
120
Sizing GDS Market Share by Transactions, Sabre Far in the Lead, While Amadeus Share is Under 10%
Galileo 23%
Sabre 42%
Worldspan 28%
Source: PhoCusWright Inc., based upon latest publicly available financial documents from GDS companies
Total Market Share (online and traditional agencies)
7%
121
Sabre, Galileo Dominate Corporate Agencies, While Amadeus and No GDS Play a Bigger Role in Leisure GDS Usage by Agency Type Percentages exceed 100% because multiple responses allowed.
Q12: Which of the following global distribution systems (GDS), if any, do you use? Base: RS/OB Source: PhoCusWright Inc.
CorporateLeisure Agencies
70% of “Independent” Home-based Agents Do Not Use a GDS
GDS 26%
Agency-Affiliated Independents
Other 5%
61%
Q12: Which of the following global distribution systems (GDS), if any, do you use? Base: Home-based agents Source: PhoCusWright Inc.
123
Home-based, Leisure Agencies Favor GUIs, While Corporate Agencies Stay Loyal to “Original” CRS GUI vs. GDS Interface Usage by Agency Type
Q12: When searching for and booking products using a reservation system or Web site, what percentage of the time do you use the original GDS screen vs. graphical booking tools and Web sites? Base: Total and RS/OB Source: PhoCusWright Inc.
56%
44%
87%
13%
23%
78%
Leisure
Corporate
Home-based
124
Smaller Agencies Favor GUIs, but as Volume Increases, so Does Use of GDS GUI vs. Format-driven Screen Use by Agency Booking Volume
Q24: When searching for and booking products using a reservation system or Web site, what percentage of the time do you use the original GDS screen vs. graphical booking tools and Web sites? Base: RS/OB Source: PhoCusWright Inc.
0%
10%
20%
30%
40%
50%
60%
70%
80%
Agency Booking Volume
125
VAX, Supplier Sites Most Commonly Cited Non-GDS Booking Channels Percentage of Agents Who Indicated They Use These Systems at All
Q13: Please indicate to what extent, if any, you use additional reservations software. (Multiple responses) Source: PhoCusWright Inc.
64%
57%
13%
8%
5%
4%
4%
3%
VAX
126
In-house Systems, Supplier Sites, Most Cited as Primary; VAX, Supplier Sites Important Secondary Systems; Alt. Systems Used Little Extent to Which Agents Use Non-GDS Systems
Q13: Please indicate to what extent, if any, you use additional reservations software. (Multiple responses) Source: PhoCusWright Inc.
System Agency Type Use a little
Use somewhat
Home-based 15% 31% 54%
127
Agents Turning to More Online Channels for Air Percentage (mean) of Agents Who Usually Use that Channel to Book Air
Q16: Please tell us how you usually book flights, lodging, rental cars and various tours. (Multiple responses) Source: PhoCusWright Inc.
67%
37%
14%
12%
8%
5%
6%
86%
33%
12%
10%
6%
5%
4%
25%
44%
19%
17%
13%
5%
10%
GDS
Home-based
128
Agents Turning to More Online Channels for Air Percentage (mean) Who Usually Use That Channel to Book Air, by Agency Type
Q16: Please tell us how you usually book flights, lodging, rental cars and various tours. (Multiple responses) Base: RS/OB Source: PhoCusWright Inc.
82%
34%
12%
11%
7%
3%
97%
23%
10%
3%
7%
19%
97%
32%
13%
10%
4%
9%
GDS
Alternative Agent System
Larger Agencies Use GDS and New “Alt” Systems
Q16: Please tell us how you usually book flights, lodging, rental cars and various tours. (Multiple responses); Base: RS/OB Source: PhoCusWright Inc.
Percentage (mean) Who Usually Use That Channel to Book Air, by Agency Size
66%
39%
13%
13%
9%
3%
88%
34%
12%
10%
6%
3%
93%
31%
15%
7%
4%
6%
99%
28%
15%
6%
6%
25%
GDS
$10,000,000 +
130
Multiple Channels Flourish for Hotels Percentage (mean) of Agents Who Usually Use That Channel to Book Hotels
60%
40%
36%
20%
4%
4%
78%
36%
36%
19%
4%
3%
19%
51%
38%
22%
6%
6%
GDS
Home-based
131
Hotels: Retail / Office-based Agents Favor GDS, but Other Channels Play a Growing Role Percentage (mean) Who Usually Use That Channel to Book Hotels, by Agency Type
Q16: Please tell us how you usually book flights, lodging, rental cars and various tours. (Multiple responses); BASE: RS/OB Source: PhoCusWright Inc.
72%
39%
38%
22%
4%
3%
19%
23%
4%
4%
3%
92%
30%
34%
16%
2%
2%
Leisure
Corporate
Blended
132
Hotels: Larger Agencies Favor GDS, While Smaller Ones Turn to Alternatives More
Percentage (mean) Who Usually Use That Channel to Book Hotel, by Agency Size
55%
32%
44%
22%
7%
6%
4%
82%
38%
35%
22%
6%
3%
2%
82%
29%
36%
15%
8%
3%
3%
93%
43%
34%
11%
8%
4%
5%
GDS
General travel site (e.g., Expedia, etc.)
Packaged Travel: Phone Still (but Barely) Preferred Booking Method; Home-based Use VAX Less
Percentage (mean) of Agencies Who Usually Use That Channel to Book Vacation Packages
56%
55%
42%
15%
60%
57%
47%
20%
49%
50%
32%
5%
Agents Prefer Phone for Escorted; Home-based Book Less
Percentage (mean) of Agencies Who Usually Use That Channel to Book Escorted Tours
65%
45%
9%
8%
72%
47%
10%
10%
52%
41%
6%
3%
Escorted Behind Packages in Agent Electronic Channels
Percentage (mean) of Usual Booking Channel for Vacation Packages vs. Escorted Tours
56%
55%
42%
15%
65%
45%
9%
8%
VAX
GDS
Package
Escorted
136
Agents Use Electronic Channels More for Packages, FIT, while Phone Dominates Escorted
Source: PhoCusWright Inc. (sizing, not survey)
Agent Use of Booking Channels by Packaged Travel Type
137
Phone Preferred Booking Channel for Cruise by Far
Q17: How do you usually book cruises?. (Multiple responses) Source: PhoCusWright Inc.
Percentage (mean) of Agencies Who Usually Use That Channel to Book Cruise
76%
47%
21%
12%
6%
5%
76%
44%
28%
13%
5%
5%
76%
54%
5%
9%
7%
5%
Cruise Channels: Little Significant Difference among Home-based Agents
Q17: How do you usually book cruises?. (Multiple responses); Base: Home-based Agents Source: PhoCusWright Inc.
Percentage (mean) Who Usually Use That Channel to Book Cruise, by Home-based Agent Type
74%
50%
12%
9%
6%
6%
77%
57%
7%
5%
5%

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