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TRENDS IN FINANCIAL PERFORMANCE ASSESSMENT OF TRAVEL AGENCIES

Conference Paper · January 2019

DOI: 10.7441/dokbat.2019.082

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 TRENDS IN FINANCIAL PERFORMANCE ASSESSMENT OF
TRAVEL AGENCIES

Nikola

Abstract
In today's dynamic business environment influenced by markets globalization, the ongoing
pressure on increasing enterprise performance leads to creating new trends in financial
performance system. Therefore, selecting the indicators and methods reflecting the financial
performance of enterprises belongs to the key elements of improving their competitiveness and
meeting long-term goals related to economic prosperity. The aim of this article is to assess the
financial performance of Slovak travel agencies using modern methods in order to create
performance portfolio based on average data over the years 2013-2017. Moreover, the attention
was focused on comparison of selected financial methods via concordance rate ranking of the
selected business entities. For measurement of enterprise financial performance, method of
Principal component analysis (PCA) and Creditworthy model (CWM) were applied. In this
regard, the best results were achieved for Pelicantravel.com, Ltd., on the contrary, AZAD, Ltd.
was identified as the worst performing one. The research findings revealed that the performance
portfolio of travel agencies by applying a multidimensional PCA method provide identical
results compared to the method of CWM (rs = 0.7459). According to the PCA results, 11 travel
agencies were classified as well-performing, while 30 enterprises were identified as non-
performing. In the case of CWM assessment, 2 business entities achieved excellent results,
while 4 travel agencies reached inappropriate results. In our opinion, presented findings can be
useful for financial managers of travel agencies. In practice, results can help to reveal potential
improvement opportunities. It is a simplified way for managers to review its business financial
operations and to create suitable financial strategy.

Keywords: Enterprise performance, Trends in financial assessment, Principal component

analysis, Creditworthy model, Travel agencies

1 INTRODUCTION
Tourism belongs to the most dynamic developing sectors in the world. According to Kajzar
(2018), the dynamics of development have turned tourism into a key driver for socioeconomic
progress. For this reason, tourism sector belongs to significant economic components. In this
regard, Ghosh (2019) explored the causal association of economic uncertainty between tourism
and selected macroeconomic variables. In the long run, findings showed that current economic
uncertainty adversely affects the tourism sector. The development in Slovakia indicates that
tourism sector has a great potential to positively influence and support the country's economy.
As reported by Sofronov (2018), the positive trend in the tourism industry is associated with all
the kinds of economic effects, with profound social, political, cultural and economic
implications. Of course, business entities (including travel agencies) are an important part of
this economic system. As participants in creating a tourism offering and as initiators of tourist
demand, travel agencies represent a key segment of the tourist market.
Demand for travel agencies (TAs) services increases under the influence of various aspects,
such as freedom of travel, lifestyle changes as well as people's growing desire to explore new
destinations. Nowadays, we often get to hear unfavourable news regarding the bankruptcy of

853
TAs, not only in Slovakia, which has a negative impact on many subjects. For example, the
oldest TA in the world - British Thomas Cook got bankrupt few months ago (after 178 years of
existence). The Slovak Association of Tour Operators and Travel Agents (SACKA 2019)
considers the development of organized tourism to be optimistic and favourable. Last year,
633.5 thousand people travelled abroad using domestic TAs services, which is a year-on-year
increase by 7 %. Despite this fact, 20 travel agencies have already gone bankrupt so far in
Slovakia. The analysis revealed that unfavourable financial situation and inadequate insurance
belong to main reasons of bankruptcy. For this reason, we have focused on assessing the
financial performance of a selected sample of TA in Slovakia and to identify the best and worst
enterprises by applying modern financial methods.
The article is structured as follows. The first chapter contains introduction and the justification
for the topic importance. The second chapter involves literature review and theoretical
description of used methods briefly. The third chapter contents research methodology and
describes aim of research, research sample, research question, statistical methods and its
mathematical and statistical processing. The fourth chapter involves presentation of the results.
The last chapter offers a summary of the article, research findings, recommendation for
managerial practice, including discussion section.

2 THEORETICAL BACKGROUND OF THE ENTERPRISE

PERFORMANCE
The economy globalization greatly increases the requirements placed on assessing business
performance. In an intensive competitive environment, only those businesses are progressing,
which pay attention to financial situation at sufficiently measure and achieve stated objectives
in accordance with financial plans. However, according to Huttmanova & Valentiny (2019),
their achievement is complicated and difficult in practice. Therefore, the assessment of
company's financial situation is an essential part of its financial management. In this context,
we can state that measurement of enterprise financial performance and its evaluation belongs
to basic identifiers of the overall enterprise success in the local and global market.
According to Vochozka, Rownland & Vrbka (2016), it is important to select the performance
criteria that will reflect the key factors for business performance growth because it is not
possible to determine it with one performance indicator. Authors Kozena, Jelinkova (2014)
agree and emphasize that the right choice of performance measurement methods, considering
company specifics, can highlight in time the key issues and shortcomings that need to be
eliminated and where the business does not reach full potential. However, according to
Hyranek, Grell, Nagy & Durinova (2018), each model of performance measurement and
prediction uses different mathematical tools and works with different indicators. As reported
by Sofrankova, Kiselakova & Horvathova (2017), there are appearing significant changes not
only within the performance measurement approaches, but also changes affecting the
performance evaluation methods.
At present, modern methods and indicators, such as predictive financial analysis and non-
financial criteria, are preferred. The basic objective is to maximize the enterprise market value.
To the most popular modern measures of the enterprise performance assessment belong
indicators such as Economic Value Added, Return on Net Assets and non-financial methods
such as Balanced Scorecard, etc. In addition, as reported by Al-Eideh's (2016), performance
evaluation trends tend to use statistical tools enabling performance quantification much more
efficient and comprehensive. In the connection of presented findings, in this paper we decided
to apply two selected modern methods to assess the enterprise performance of the selected

854
sample, namely the Creditworthy model (CWM) and the statistical method, Principal
component analysis (PCA).
The issue of TAs performance assessment was investigated in many research papers. For
example, authors del Alonso-Almeida, Bagur-Femenias & Llach (2017) focused on examining
the motivations for adopting quality practices and their impact on the performance of travel
agencies. Findings showed that the adoption of quality practices significantly impacts the
competitiveness and financial performance of travel agencies. Furthermore, Holjevac & Basan
(2009) examined the relations between internal marketing factors and the performance of travel
agencies. Based on the results, authors concluded that the analysis of business performance
represents a basis for managers in making business decisions. Authors Aguiar-Quintana,
Moreno-Gil & Picazo-Peral (2016) provided insight into the trends affecting travel agencies
and propose strategies to improve their performance and competitiveness. The purpose of
research presented by Misoc (2018) was to point out the methods used nowadays to evaluate
the travel agents' performance. The results of the research showed that the most important
criteria taken into account when it comes to evaluate the performance of travel agents are: the
sales volume achieved by the employees, the number of customers, the average time for solving
the customers' demands, the number of complaints received, the image and behavior of the
employees. According to Lin (2011), financial performance of travel agencies is influenced by
market orientation and competitive environment.

2.1 Principal Component Analysis

The PCA has a wide use in the financial field, but not only there. According to Benasseni
(2018), the original data extracts characteristic features and at the same time reduces the
dimensionality of the set of multivariate observations, while it is important to preserve as much
as possible of their original variability. As reported by Nobre & Neves (2019), the PCA is used
to reduce the dimensionality of the financial input data set. Authors confirmed the importance
of the PCA method in assessment and the results obtained show that it greatly improves the
performance of the system. Simionescu & Dumitrescu (2018) in their study used the PCA
method to quantify the principal financial factors to examine the relationship between financial
performance and business social responsibility. Kocmanova, Docekalova, Lace & Nemecek
(2017) applied the PCA method in the process of determining the weights of the indicators
within the analysed index. Jiang, Li & Cai (2018) made comprehensive evaluation of the
economic performance of fifteen information technology companies by PCA and concluded
that PCA is an effective method for enterprise economic performance comprehensive
evaluation. Kristjanpoller & Minutolo (2018) also implemented the above-mentioned method
in the field of monetary policy and financial sector prediction. Robu & Istrate (2015) applied
PCA to identify the principal components of financial statements.

2.2 Creditworthy model

CWM was created by authors Horvathova, Mokrisova as part of solving the scientific research
tasks within the grant scheme, as modification of the creditworthiness model. The CWM of
performance is not the subject of many empirical studies. Horvathova & Mokrisova (2014)
analysed the performance of the selected transport companies operating in the Slovak Republic
using different diagnostic methods, including a CWM of performance. By various
modifications of CWM were dealt by the authors Horvathova & Sofrankova (2012). The
authors implemented this new performance evaluation method within the selected enterprises,
demonstrated its calculation and graphically displayed the position of the enterprise in the final
performance fields. The implementation of the model was also discussed in study of
Horvathova, Mokrisova, Suhanyiova & Suhanyi (2015). They focused on creating a modified

855
CWM of performance with the application of key performance indicators and risk factors within
the selected industry. Onuferova & Cabinova (2018) created 3D CWM of performance and to
supplement its third dimension by applying the selected modern assessment indicators the
Economic Value Added and the Return on Net Assets.

3 METHODOLOGY AND DATA

The aim of this article is to assess the financial performance of enterprises operating in services
sector using modern methods with the view of setting performance portfolio based on average
available data over the years 2013-2017. For measurement of enterprise financial performance,
the method of PCA and CWM were applied. Moreover, the attention was focused on
comparison of chosen financial methods via concordance rate ranking of the selected business
entities. We believe that business performance should be analysed from different financial
points of view, so we defined the following research question (RQ): Is the travel agency
performance portfolio identical when applying both applied methods (PCA and CWM) over
the analysed period? In order to determine the concordance rate of order of the analysed TAs
performance based on the PCA method and the EVA indicator, Spearman's rank order
correlation was applied. Its mathematical expression is given in the text below (Sharma, 2007).
All the statistical analyses were processed in STATISTICA 13.1.

(1)

rs Spearman's coefficient,
n number of observations,
(xi - yi) the difference between the ranges of the corresponding variables

3.1 Research sample

The research sample consists of 57 TAs operating in Slovakia, which according to the statistical
classification of economic activities (SK NACE Review 2) belong to section N - Administrative
and support services, namely to subclass 79120: Travel agency activities. The resulting research
sample was compiled by the TAs listed in Table 1.
Tab. 1 Overview and numeric designation of the analysed companies. Source: own research

Business name of travel agency Business name of travel agency

TA 01 Aeolus, Ltd. TA 30 Jazz Welt, Ltd.
TA 02 AGRITOURS Slovakia, Ltd. TA 31 JG SPORT AGENCY, Ltd.
TA 03 TA 32 KARTAGO TOURS, Inc.
TA 04 BUBO travel agency, Ltd. TA 33 Koala Tours, Inc.
TA 05 CASSOFIN, Inc. TA 34 LG TRADE, Ltd.
TA 06 TA 35 MAGIC Travel, Ltd.
TA 07 TA 36 Maximum Travel, Ltd.
TA 08 CK AZAD, Ltd. TA 37 MILLENNIUM TRAVEL, Ltd.
TA 09 CK EUROTOUR, Ltd. Stropkov TA 38 NA DOSAH, Ltd.
TA 10 CK FANY, Ltd. TA 39 ONE WORLD Travel, Ltd.
TA 11 TA 40 Orex Travel, Ltd.
TA 12 CK TRGOTURS, Ltd. TA 41 PEGAS TOUR, Ltd.
TA 13 CKM 2000 Travel, Ltd. TA 42 Pelicantravel.com, Ltd.
TA 14 CORADO, Ltd. TA 43 PHARMAEDUCA, Ltd.
TA 15 DERTOUR Slovakia, Ltd. TA 44 Premier Sport Tour, Ltd.
TA 16 Desirea, Ltd. TA 45 Relaxos, Ltd.
TA 17 DUBTOUR, Ltd. TA 46 SATUR TRAVEL, Inc.

856
 TA 18 ETI Slovensko, Ltd. TA 47 SENECA TOURS, Ltd.
TA 19 EZOTOUR, Ltd. TA 48 SETTOUR SLOVAKIA, Ltd.
TA 20 TA 49 SKI TRAVEL-PROEVENTS, Ltd.
TA 21 FERROTOUR, Inc. TA 50 SOLVEX, Ltd.
TA 22 FIRO-tour, Ltd. TA 51 SUNFLOWERS agency, Ltd.
TA 23 GLOBTOUR GROUP, Inc. TA 52 TIP travel, Inc.
TA 24 GO Travel Slovakia, Ltd. TA 53 Travelco, Ltd.
TA 25 Happy Travel.sk, Ltd. TA 54 TUI Reise Center Slovensko, Ltd.
TA 26 HEPEX Slovakia, Ltd. TA 55 VIP Travel, Ltd.
TA 27 TA 56 VIP Travel, Ltd.
TA 28 INCOFF AEROSPACE, Ltd. TA 57 VULPES-NR, Ltd.
TA 29 INTERBUS, Ltd.

At present, thousands of TAs operate in Slovak market. However, it was complicated to involve
all TAs, so we decided to choose only sample of enterprises. The sample was selected on the
basis of predetermined criteria. All TAs met the following criteria during the analysed years:
(a) TAs had to have positive value of equity, (b) TAs had to achieve profit over the current
accounting period, (c) TAs had to employ more than 9 employees (micro-enterprises were
excluded), (d) TAs had to be only Ltd. or Inc. enterprises.
The input data in the form of financial statements of the TAs analysed, considering all the above
criteria, were obtained from internet portal managed by a company DataSpot, Ltd., which offers
a database of Slovak business entities.

3.2 Methods
The performance of TAs was quantified by the method of PCA. The method is one of the basic
data compression methods, where the original "n" variables can be represented by a smaller
number of "m" variables, while retaining a sufficiently large part of the variability of the
original data set so as not to lose information. The system of new variables (principal
components) consists of linear combinations of original variables and is created gradually. The
first principal component accounts for the largest portion of the variability of the original data
set, the other principal components contribute to the overall scatter by a smaller share. This
method does not require the input variables to have a multidimensional normal distribution
(Kral, Kanderova, Kascakova, Nedelova & Bojdova, 2009). The study of Fan, Liao
& Mincheva (2013) shows that PCA is closely connected to factor analysis. This motivates new
methodological developments in multiple testing problems when tens of thousands of possibly
dependent statistical tests are evaluated simultaneously (Fan, Xue & Yao, 2017), which
partially solve the high dimensional inference problem. Hebak, Hustopecky, Jarosova
& Pecakova (2010) emphasize the necessary condition for using the PCA method, there must
be a correlation between the original variables. The search for the principal components is as
follows: (1) to create a correlation matrix from the input data (the first step of the analysis
implies testing the data using the Kaiser-Meyer- (2) to quantify
eigenvalues (i.e. the variability captured by particular component): (a) to determine the
eigenvalues of the correlation matrix, (b) to appoint allocated ratios of the variability assigned
to the components, (c) to identify cumulative ratios of variability to determine how many
principal components needs to be taken into account; (3) to select the number of principal
components based on the predefined rule; (4) to determine the correlation coefficients of the
principal components (factor coordinates of variables - the higher coefficient indicates that
variable more affects new principal component); (5) to quantify component weight for
individual variables; (6) to display graphically the original variables in the coordinate system
where the axes are formed from the first two principal components (performance portfolio).
The coefficients and weights of the principal components are estimated according to the
following rules, as reported by Hebak, Hustopecky, Jarosova & Pecakova (2010):
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(a) The total variability of the principal components will not change - the variance of the new
and original variables equals 1, i.e.:

(2)

(b) The independence of the new variables, i.e. the principal components, is ensured, i.e:

(3)

(c) All properties of the principal components are respected, i.e.:

(4)

In the next section, the assessment of TAs was realized by CWM of performance. As reported
by Horvathova & Mokrisova (2014), this model analyses and graphically illustrates the position
of the enterprise in individual portfolios in terms of two dimensions the financial performance
and company's success. The position of the enterprise is determined by cross point of the values
that are plotted along the x-axis and the y-axis. The company's success is plotted along the y-
axis and it is determined by the recalculation of prediction models' values using a scoring table.
Each chosen prediction model can get a maximum of 20 points, thus the maximum number of
points that an enterprise can obtain is 80 points. In this paper were included the following
prediction models: Quick Test, Altman's Model, Taffler's Model, and Creditworthiness Index.
The results of financial performance indicators converted into points by using the
transformation table are plotted along the x-axis. In this dimension, 10 financial ratio indicators
were chosen, whereas each of them can get a maximum of 8 points (80 points in total). The
choice of indicators compared to the original model was modified. We decide to apply the
indicators that include risk factor to calculate the cost of equity, namely Current liquidity,
Interest coverage ratio, Return on assets and Rate of financial independence. We also selected
indicators that represent the upper and lower branches of the INFA model, namely Return on
sales, Assets turnover ratio and Return on equity. We also included financial risk indicators,
such as Total indebtedness and the Business safety indicator. The ten of financial indicators
was closed by the activity indicator, which was identified as the most important one, namely
the Turnover money period. However, other modern indicators representing key performance
indicators can also be incorporated into the model. We can determine the position of the
enterprise within the five performance fields (Inappropriate, Doubtful, Substandard, Watch,
Excellent) that are presented in the following Figure 1, based on the cross point of the values
achieved.
Inappropriate Doubtful Substandard Watch Excellent
16 32 48 64 80
Enterprise's

Inappropriate Doubtful Substandard Watch Watch

success

Inappropriate Doubtful Substandard Substandard Substandard

Inappropriate Doubtful Doubtful Doubtful Doubtful
Inappropriate Inappropriate Inappropriate Inappropriate Inappropriate
16 32 48 64 80
Financial performance
Fig. 1 Framework of Creditworthy model. Source: Horvathova & Mokrisova (2014)

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4 RESULTS
Based on the information database from the financial statements, the performance of selected
TAs was quantified using the PCA method. Firstly, before the calculating and determining the
principal components, it is necessary to check that the original variables are correlated. If the
correlation between the variables was not confirmed, there would be no point in continuing this
analysis. The initial information concerning the correlation structure of the research sample was
obtained from the implementation of a correlation matrix of the selected 29 financial indicators
(on average over the analysed period) subsequently entering the analysis of the principal
components. The correction matrix confirmed the existence of statistically significant positive
and negative dependencies among the indicators. As the KMO value is greater than 0.6, we
were able to continue with the testing.
In the next part of the paper we have already proceeded to the PCA it-self. The aim was to
define the number of principal components that can be used to describe the monitored financial
indicators. In general, the number of principal components is always less than the number of
input variables. The first principal component represents the greatest variability of the primary
variables, the other components are always less variable. In the following Table 2 are presented
eigenvalues of the correlation matrix and related statistics.
Tab. 2 Eigenvalues of correlation matrix. Source: own research

Component Eigenvalues Eigenvalues

Eigenvalues % of variance
cumulative cumulative (%)
01 6.336049 21.84844 6.33605 21.8484
02 4.305304 14.84587 10.64135 36.6943
03 3.345813 11.53729 13.98717 48.2316
04 2.492548 8.59499 16.47971 56.8266
05 2.261533 7.79839 18.74125 64.6250
06 1.821669 6.28162 20.56292 70.9066
07 1.534269 5.29058 22.09718 76.1972
08 1.165009 4.01727 23.26219 80.2145
09 1.070106 3.69002 24.33230 83.9045
10 1.005339 3.46669 25.33764 87.3712
11 0.895838 3.08910 26.23348 90.4603
12 0.749333 2.58391 26.98281 93.0442
13 0.589012 2.03108 27.57182 95.0752
14 0.347535 1.19840 27.91936 96.2736
15 0.292431 1.00838 28.21179 97.2820
16 0.249108 0.85899 28.46089 98.1410
17 0.153245 0.52843 28.61414 98.6694
18 0.141028 0.48630 28.75517 99.1558
19 0.090867 0.31333 28.84603 99.4691
20 0.056972 0.19646 28.90301 99.6655
21 0.046176 0.15923 28.94918 99.8248
22 0.032932 0.11356 28.98211 99.9383
23 0.015209 0.05245 28.99732 99.9908
24 0.002099 0.00724 28.99942 99.9980
25 0.000515 0.00178 28.99994 99.9998
26 0.000058 0.00020 29.00000 100.000
27 0.000005 0.00002 29.00000 100.000
28 0.000000 0.00000 29.00000 100.000

Based on the results, we can state that Factor 1 explains 21.85% of variability, Factor 2 explains
14.85% and Factor 3 explains approximately 11.54% of variability within the original variables.
Each other factor gradually explains the smaller and smaller proportion of variability that is not
explained by the previous factors. If we consider the Kaiser rule, we would consider those

859
principal components whose value of the number is greater than 1. In this case, the number of
principal components would be 10. If we use the rule that it requires, so that the principal
components account for at least 70% of the total scatter, resulting count would be 6. When
determining the number of principal components, we can also apply a Scree plot, where we
identify the break point, taking into account the principal components in this break. Based on
Scree plot, we identify that the number of principal components would be 8 and the break point
explained 4.0173% of total scattering.
As mentioned in the methodological section of the paper, there are several ways to determine
the number of principal components. In this paper, we decided to apply the second option, and
to work with 6 principal components within research, which together account for 70.9066% of
total variance.
The next step of the analysis was to determine the factor coordinates of variables based on
correlation of variables with factors after Varimax method rotation. The high absolute value of
the coefficient (the high-lighted variables) means that this variable is significantly represented
in this factor (see Table 3).
Tab. 3 Factor loadings table. Source: own research

Factor Loadings (factor scores); Extraction: Principal components

Indicators
Method Varimax raw; Marked loadings are >.700000
(variables)
Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6
Quick Ratio 0.979851 0.025686 -0.024909 -0.082345 0.010889 0.104503
Current Liquidity 0.975163 0.065423 -0.018054 -0.076047 0.013929 0.129583
Total Liquidity 0.937111 0.032864 0.019195 0.267729 0.028604 0.123177
Net Cash 0.202578 -0.044428 -0.027207 0.215573 -0.034996 -0.142910
Net Cash Assets 0.135473 0.677110 0.008292 0.285651 -0.021196 -0.012858
Net Cash Assets 0.135009 0.430191 0.075666 0.822123 0.011610 -0.001673
Business Safety Indicator 0.262563 0.227854 0.040928 0.176661 -0.012126 0.801207
Days Rec. Outstanding -0.075493 0.018173 0.924814 0.006560 0.002750 0.029852
Days Inv. Outstanding 0.060850 -0.083025 0.240964 0.927709 0.044160 0.001463
Days Pay. Outstanding 0.028513 -0.089170 0.861234 -0.000931 -0.020588 -0.331813
Turnover Money Period -0.016553 0.036455 -0.290371 0.754543 0.058970 0.369068
Assets Turnover Ratio -0.255005 0.132521 -0.522747 -0.107057 0.086479 -0.090991
Turnover of LT Assets -0.112055 0.769866 -0.171090 -0.025259 0.010463 -0.030791
Total Indebtedness -0.172794 -0.024642 0.078319 -0.129203 -0.068196 -0.938290
Rate of financial independence 0.172795 0.024643 -0.078318 0.129204 0.068196 0.938290
Debt to Equity Ratio -0.082875 -0.081827 0.093635 -0.067569 -0.557052 0.027288
Equity to Debt Ratio 0.887950 -0.017396 0.015437 0.338221 0.047296 0.130184
Degree of Over-Capitalization 0.086144 0.899419 0.008277 0.005397 0.015248 0.119352
Degree of Under-Capitalization -0.026666 0.944283 0.031475 0.019917 0.006639 0.024635
Interest Coverage Ratio 0.038016 0.025961 -0.490033 0.142156 -0.349017 -0.025374
Interest Load -0.019713 0.141570 0.072424 -0.041559 -0.030974 0.156996
Loan Indebtedness -0.205574 0.419281 0.056911 -0.000788 0.143452 -0.004202
Loan Repayment Period -0.163533 0.721935 -0.162622 -0.013075 0.070353 0.000319
Stability Indicator 0.203114 0.882028 0.007863 0.065192 0.021878 0.133015
Return on Assets -0.085400 0.021483 -0.489730 0.070706 -0.067793 0.638787
Return on Equity -0.037222 -0.021294 0.015876 -0.036421 -0.952356 0.006745
Return on Sales 0.212323 -0.027112 -0.215313 0.819760 -0.015343 0.378645
Return on Costs 0.118945 -0.037902 -0.434315 0.518658 -0.131702 0.243623
Return on Investment -0.034556 -0.022128 -0.055866 -0.003708 -0.893693 -0.131776
Exploration Variance 4.068224 4.538300 2.827099 3.488010 2.215280 3.426348
Principal Total 0.140284 0.156493 0.097486 0.120276 0.076389 0.118150

Table 3 shows that all Liquidity Ratios and indicator of Equity to Debt Ratio are directly related
to the first component (factor). The second component directly correlates to the most indicators,
namely the Turnover of Non-Proprietary Assets, the Degree of Over-Capitalization, the Degree

860
of Under-Capitalization, the Repayment Period, and the Stability indicator. The third factor
achieved positive correlations with the indicators of the Days Payable Outstanding and the Days
Receivable Outstanding. The fourth component had shown direct correlations with Net
Working Capital, the Days Inventory Outstanding, The Days of Payment Turnover, and Return
on Sales. The fifth component confirmed negative dependency for the Return on Equity and the
Return on Capital Invested. The significant positive direct correlation of the sixth factor was
quantified with the Business Safety Indicator and the Equity Ratio. On the contrary, indirect
negative dependence was confirmed in the case of Debt-to-Assets Ratio.
Based on the analysis of the principal components, it was created a Component Score figure,
so called performance portfolio of TAs (see Figure 2). The first two principal factors were
applied in the construction of the figure. The principal Factor 1 included indicators such as the
Cash Ratio, the Current Liquidity, the Total Liquidity and the Equity to Debt Ratio. The
principal Factor 2 correlated with the Turnover of non-proprietary Assets, the Degree of Over-
Capitalization, the Degree of Under Capitalization, the Repayment Period, and the Stability
indicator. Based on the Component Score figure, we can monitor the position of the TAs, as
well as their interdependencies. TAs located further away from the coordinate system may be
termed as extremes. The position of these enterprises was determined by significantly different
financial indicators in both positive and negative terms. In this case, it was the CORADO travel
agency, Ltd., HYDROTOUR, travel agency, Inc., PHARMAEDUCA, Ltd., and Travelco Ltd.
On the contrary, TAs located as close as possible to the coordinate system can be considered
the most typical for a given industry, group of monitored objects.

Fig. 2 Component Score figure. Source: own research

For the compilation of the resulting performance portfolio of TAs, we analysed the individual
quadrants of the component score figure (identification of TA's see Table 1). In Quad-rant A
there were enterprises that achieved very good results at Principal Factor 2 and worse results
for Principal Factor 1. In this quadrant were located 6 TAs in total (TA 03, TA 19, TA 25, TA
34, TA 35 and TA 50). In the Quadrant B there were 11 TAs (TA 01, TA 04, TA 15, TA 18,
TA 21, TA 27, TA 32, TA 38, TA 40, TA 42 and TA 47), which achieved very good results at
both principal factors. The Component Score figure confirmed that this quadrant can be
considered the best. The third Quadrant C, characterized as the worst, to due the worse results
for both principal factors, there were up to 30 TAs (TA 02, TA 06, TA 07, TA 08, TA 10, TA
12, TA 16 , TA 17, TA 22, TA 23, TA 24, TA 26, TA 28, TA 29, TA 30, TA 31, TA 33, TA
37, TA 39, TA 41, TA 45, TA 46, TA 48, TA 49, TA 51, TA 52, TA 53, TA 54, TA 55 and TA
57). In the Quadrant D of the Component Score figure, the TAs were placed, which achieved

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very good results in the Principal Factor 1, but the worse results in the Principal Factor 2. In
total there were 10 TAs (TA 05, TA 09, TA 11, TA 13, TA 14, TA 20, TA 36, TA 43, TA 44
and TA 56).
In the context of these results, we can state that in order to increase performance, TAs should
focus primarily on improving the principal Factor 1 and principal Factor 2 indicators, depending
on which factor had worse results. For enterprises located in Quadrant B, where both principal
factors have been quantified to a very good level, the level of performance still needs to be
maintained.
The second modern method evaluating the average performance of TAs during the period of
2013-2017 was CWM of performance. The development of the performance for the years
analysed on average, in order to create the performance portfolio of the selected TAs, is shown
in Figure 3 below (identification of TA's see Table 1).

Fig. 3 Average performance of travel agencies based on CWM. Source: own research

Based on the above chart we can conclude several facts. On average, travel agencies were
located in the range of all performance fields from "inappropriate" to "excellent". Colour
scaling by points made it possible to better identify overall position of individual enterprises in
this matrix. The results showed that most enterprises, (exactly 20), were situated in the
"substandard" performance field, while 19 enterprises were placed in the "doubtful"
performance field. Furthermore, significantly less enterprises (exactly 12) were included into
the "watch" performance field.
Over the years analysed, the following TAs were identified as non-performing ("inappropriate
performance field") - CK AZAD, Ltd., CK TRGOTURS, Ltd., INTERBUS, Ltd., SKI
TRAVEL PROEVENTS, Ltd. On the contrary, the following travel agencies can be
considered as the best performing enterprises ("excellent" performance field) based on findings
- Pelicantravel.com, Ltd., VOX, Ltd. Of course, in order to evaluate certain enterprise within
competitive environment, this model can be modified and financial indicators as well as
predictive models can be further analysed to identify the strengths and weaknesses. The overall
average performance of the 57 TAs was located in the "substandard" performance field over
the period analysed, with a financial performance score of 38 points and future success score
of 59 points. It follows that the current financial position of enterprises achieved below-average
level. However, in the future is expected improvement based on the predictive models' results.
In order to meet the main objective and to find out the answer to RQ, we have focused on
revealing the concordance rate of order of the TAs performance by applying two selected

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methods, the PCA and the CWM. To determine the concordance rate of order, we have used
Spearman's rank order correlation. In the following Table 4, we compared the ranking of
individual TAs to their performance in terms of compared financial instruments.
Tab. 4 Travel agencies performance ranking. Source: own research

Final order CWM PCA Final order CWM PCA Final order CWM PCA
01. TA 56 TA 27 20. TA 25 TA 36 39. TA 46 TA 17
02. TA 42 TA 21 21. TA 17 TA 44 40. TA 33 TA 02
03. TA 11 TA 40 22. TA 31 TA 03 41. TA 37 TA 31
04. TA 38 TA 18 23. TA 32 TA 25 42. TA 39 TA 06
05. TA 07 TA 04 24. TA 44 TA 34 43. TA 55 TA 26
06. TA 36 TA 32 25. TA 18 TA 35 44. TA 53 TA 33
07. TA 09 TA 15 26. TA 19 TA 50 45. TA 48 TA 52
08. TA 04 TA 42 27. TA 16 TA 19 46. TA 35 TA 12
09. TA 13 TA 47 28. TA 20 TA 07 47. TA 24 TA 22
10. TA 21 TA 01 29. TA 50 TA 39 48. TA 54 TA 10
11. TA 01 TA 38 30. TA 02 TA 30 49. TA 49 TA 55
12. TA 47 TA 43 31. TA 52 TA 23 50. TA 57 TA 24
13. TA 14 TA 14 32. TA 06 TA 16 51. TA 05 TA 45
14. TA 15 TA 09 33. TA 30 TA 37 52. TA 10 TA 57
15. TA 43 TA 56 34. TA 51 TA 48 53. TA 03 TA 54
16. TA 41 TA 13 35. TA 22 TA 51 54. TA 29 TA 46
17. TA 27 TA 11 36. TA 26 TA 53 55. TA 28 TA 29
18. TA 23 TA 05 37. TA 34 TA 49 56. TA 12 TA 28
19. TA 40 TA 20 38. TA 45 TA 41 57. TA 08 TA 08

Based on the results, we have quantified the identical concordance rate in performance in the
case of two TAs - TA 08 (AZAD, Ltd.) and TA 14 (CORADO, Ltd.). A total of 4 TAs (TA 01,
TA 28, TA 29 and TA 51) were identified as having the lowest order difference (only 1 place).
On the contrary, the highest order difference was identified for TA 05 (CASSOFIN, Inc.).
According to results in the comparison of the PCA method and the CWM, it can be stated that
the best performing enterprise was not determined clearly. However, as the worst performing
was indicated TA 08 (AZAD, Ltd.) in the case of both methods. We have used the Spearman's
rank order correlation to confirm the compliance/noncompliance of concordance rate of order.
Spearman's rank order correlation achieved value of 0.7459; which indicates a strong
correlation, but it is not a complete match of order. Based on the research findings, we can
answer positively to the RQ. In our opinion, the performance portfolio of TAs by applying
a multidimensional PCA method provide identical results compared to the method of CWM.

5 DISCUSSION AND CONCLUSION

The research paper was focused on assessing the financial performance of selected TAs based
on the multidimensional PCA method and at the same time using method of CWM in order to
create performance portfolio of enterprises for the period of 2013 2017. Furthermore, the
research was aimed at revealing the concordance rate of order within the selected enterprises
based on above-mentioned methods.
The results showed that the best performing TA was Pelicantravel.com, Ltd.; on the other hand,
the worst performing was quantified TA AZAD, Ltd. By the PCA application, 11 TAs were
classified as well-performing, while 30 enterprises were identified as non-performing. In
contrast to PCA, in the case of CWM application, only 2 TAs were classified as well-
performing, while 4 were identified as non-performing. Spearman's rank-order correlation
confirmed identical concordance rate of order in performance rankings, and we can state that

863
the performance portfolio of TAs by applying a multidimensional PCA method provide
identical results compared to the method of CWM, so RQ was confirmed.
In addition to enterprise performance assessment, the article offers useful practical implications.
By applying the PCA method, 29 interdependent variables (financial ratios) were reduced to 6
principal factors (correlation independent components), which together account for up to
70.9066% of total variance, as well as we identified key performance indicators. In our opinion,
presented findings can help in the process of quantifying the performance of TAs. To conclude,
it is important to emphasize that the application of the methods of PCA and CWM has made it
possible to create a performance portfolio of TAs and thus to create a performance ranking of
the selected research sample. The presented performance evaluation methodology can be
implemented in any business sector in financial practice.
Based on literature review, we can state that no authors applied the PCA method and the CWM
for enterprise performance assessment at the same time, so we consider this research for useful
in theoretical, as well as practical point of view. Traditionally, authors implemented only one
of presented methods. For example, Li & Zhang (2011) quantified enterprise performance
through financial indicators using the PCA method. Sofrankova, Horvathova, Kiselakova
& Matkova (2016) applied PCA methods in order to identify key indicators of enterprise
performance based on secondary data from the financial statements of the 200 selected food
enterprises. Using the method of PCA, authors identified two principal components, on which
the performance of the enterprise depends. Davidescu, Vass Paul, Gogonea & Zaharia (2015)
analysed performance through multidimensional analysis techniques, including the Multiway
Principal Components Analysis. The method of CWM as a performance evaluation tool was
used in the study of Kiselakova, Horvathova, Sofrankova & Soltes (2015). Authors devoted to
modification of this model and extended the original two-dimensional CWM about the third
dimension - the dimension of risk - and created a new model of performance evaluation, so-
called Enterprise Risk Model.
The issues performance and growth, as well as the competitive features and success factors, are
examined in all economic areas (Stefko, Jencova, Litavcova & Vasanicova, 2017). We agree
with the above-mentioned authors who claim that using these methods help to classify
enterprises into performance fields. In our opinion, it is necessary to include several methods
for enterprise performance assessment. Of course, research paper has several limitations. The
research sample is limited and the analysed period is too short because of data availability. For
future research, all TAs operated in sector should be analysed. Furthermore, another financial
methods and statistical tools should be applied for purpose of benchmarking market segment.

Acknowledgement
Scientific Paper was elaborated within the framework of the project VEGA No. 1/0279/19
Model approaches to increase performance and competitiveness in the European area in the
context of sustainable development.

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Contact information

, Faculty of Management

E-mail: erika.onuferova@smail.unipo.sk
ORCID: 0000-0001-8529-8843

, Faculty of Management
080 , Slovakia
E-mail: veronika.cabinova@smail.unipo.sk
ORCID: 0000-0003-4367-3590

Ing. Peter Gallo, PhD.

, Faculty of Management
080 , Slovakia
E-mail: peter.gallo.1@unipo.sk
ORCID: 0000-0001-5193-1997

, Faculty of Management
6, 080 , Slovakia
E-mail: matijovam.kf@gmail.com
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, Faculty of Management
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E-mail: nikola.sikorova@gmail.com
ORCID: 0000-0003-2584-849X

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