LECTURE 4

Travel Agency
Intended learning outcomes:
1 To describe the role of travel agent
1 To understand the international dimension of
travel agency
What is the role of a travel agent?
 Which functions do they perform?
The Travel Agent
Unlike other high street shops:
 they carry no stock and therefore exposed to much

less financial risk

 they never own the product they sell

 they don’t charge the customer for the service they

provide
 by earning commission they are more like estate

agents or insurance brokers

but, like other high street shops
 they share the same prime sites
 they have ‘goods’ on display (intangible -
brochures)
 they advertise their products
 they offer incentives to their customers (cash
discounts, free child places etc.)
 they employ trained sales staff

 they make a great deal of effort to be customer-led

and market-oriented

 they employ specialist buyers to bulk-buy from

their suppliers
Why use them?
They are under increasing pressure from the internet,
Teletext and from direct marketing

They offer:

 Personal service
 Expert advice
 ‘Unbiased’ advice on a wide range of products
 Ancillary services
 Convenience i.e, location, save time
 Choice of products (again, the independents
especially)
Types of Travel Agent
1 The Multinationals (a.k.a Multiples)
Comprises a number of national chains, often
owned by international conglomerates.
TUI AG (includes Thomson Holidays, rebranded
Lunn Poly)
2 The Nationals - Travelcare
3 Regionals – small chain
4 Independents – ranging from stand alone, family
business, or horizontally integrated
They can also be classified by the type of business they
conduct:
General/Leisure Travel
Offers the greatest range of products
Holiday Travel
Specialise in inclusive package holidays
Business Travel
Specialised; account-driven
Specialist
Geographical, niche, activity.
 The Licence System

 ABTA (Association of British Travel Agents)

Code of Conduct
Bond scheme
 IATA (International Air Transport Association)
Need it to sell scheduled international
airline tickets
Scale?
 Over 5,000 travel agents and tour operators
members of ABTA

 Over 6,000 ‘offices’ or retail outlets

in the United Kingdom

 Average staffing level - five people

Commission?
Inclusive Tours 10%
International Air (if offered) 9%
Domestic Air (if offered) 7%
Rail None
Coach Tour 10%
Ferries 9%
Cruises 10%
Car Hire 10-30%
Hotels 8-10%
Commission
 Generally commission is not charged to customer –
this comes from producer or holiday owner.
Most of these are under pressure because of

disintermediation
What is disintermediation?

Budget airlines don’t sell through travel agents

Travel agents have broadened their range of

products to provide other income streams

They also earn interest from customers’ deposits
The changes in the travel agency business has been
Vertical Integration with tour operators and airlines
Market concentration - fewer but bigger players -

oligopoly
Known as the ‘March of the Multiples’ in 1980s and

1990s
Multinational Enterprises (MNEs) in
Travel Agencies and related services

Until recently relatively few because:

1. little pressure to do so because technical
economies of scale did not really exist
2. travel service enterprises tend to specialise, to
differentiate, and this does not lead to easy
internationalisation
MNEs in Travel Agencies and
related services
3. licensing and qualifications tend to be
very country-specific in spite of IATA
and the EU, for example
4. travel businesses are often subsidiaries
of domestic operations and therefore
there is little inclination to
internationalise a subsidiary
 MNEs in Travel Agencies and
related services
There are examples however:
1. Thomas Cook - operates in 21 countries (operate throughout the
world under the principal brands Thomas Cook, Airtours,
Neckermann, Condor, Ving, Direct Holidays and Sunquest)
2. Carlson Wagonlit - originally a Belgian sleeping car operator; now
part of the US Carlson group (55%ish) One Equity Partners
(45%ish) includes hotel chain, cruises and business travel,
operating in 33 countries as a travel agent
3. American Automobile Association (AAA)- provides travel services,
insurance, car purchasing, and many other services. Estimated
having over 50 million members