The Covid 19 pandemic not only shut down the travel industry, but also ended a number of travel agents businesses.
But it wasn’t just about not selling holidays. How did Hayes Travel survive the pandemic ( and hoover up some smaller agents who could not afford to keep going)? How is Trailfinders such a strong business?
The key, as many will know, is down to cash and having enough. What the pandemic taught us was that when the world can’t travel, no holidays are sold and the rules of the Package Travel Regulations mean that customers need refunding. If you’ve used that cash for running your business then you are in trouble.
Why the boom made businesses financially dangerous?
We’ve had a good run at it, even the 2008 financial crisis failed to make a dent in travel. New businesses started up and the line between tour operator and travel agent became more and more blurred. Agents felt they should dynamically package to get better margins ( better margins = increased risk of course) and the industry had many different ways of being able to trade.
You can become a travel agent with no money. That can’t be said of manay businesses. Think of the Pub Owner – even buying a lease costs around £150,000. When was the last time you saw a small travel agent have that sort of start up money?
So margins are tight, there is no cash buffer and unless there was a cash buffer ( Hayes / Trailfinders) , you would be in trouble.
2021 / 2022 ATOL Reforms
As if the industry has not had it bad enough – now the CAA want to change ATOL rules to ensure that all client monies are held in a Trust Account until the holiday has ended ( that is how Trailfinders has always traded and Mike Gooley, the founder is very vocal on this as in this Travel Weekly article > ). He states that in effect lots of travel businesses are undercapitalised and put consumer money at risk.
The CAA seems to agree and is putting forward proposals for all travel companies to use Trust Accounts for client monies.
This makes the business of starting a Travel Business as ‘Principal’ very expensive ( akin to putting in £150k of funding to get the business off the ground)
Tour Operators and Travel Agents
While some agents may act as principals sometimes, the vast majority of Independent agents act as an agent for a tour operator. They sell the tour operator holiday, collect the cash, manage the booking etc.
All well and good if it weren’t for the Package Travel Regulations. Any conference you go to you won’t find agents discussing market trends or how to build businesses. You’ll find big sessions on regulation. Agents are selling a regulated product, and as such, need to be up to date and ensure they are legally selling.
So what happens if Trust Accounts come into force? Agents and Operators will have to manage money this way. It will be less easy to sell travel.
The Current State of the Travel Agent
They then manage money flows / booking forms / booking questions etc. In fact, all the same processes that a tour operator does with direct clients.
The pandemic brought up a new issue – that of Privacy ( not that dreaded GDPR again!). When the world shut down Operators had a huge issue in dealing with bookings where the agent wasn’t available ( and vice versa I may add!)
Gordon McCreadie said ( https://travelweekly.co.uk/articles/393404/comment-contact-details-must-be-shared-with-operators )
” There have been many lessons over the past 12 months. For me, the most apparent and important is that the relationship between travel agent and tour operator has to change. We talk a lot about the ‘new normal’ of travel in response to Covid-19, but I believe a necessary shift in the way we work together with agents has been on the cards for some time and has simply been underlined by current circumstances.”
What he was referring to is that background ‘trust’ issue and who ‘owns’ the client. It’s a bold statement to make, but no one actually owns the client. the Tour Operator fulfills their role of providing the product and the agent of their service and hopefully, the agent will have done a good enough job that the client trusts them to select the right holiday next time. There has been an aweful lot of chat about operators marketing to travel agency clients, but the reality is that if you recommend a Tour Operator, most people are quite capable of deciding to look at the Tour Op online and may sign up to their newsletter. So long as you compete on a level playing field ( and yes, that means don’t waste your time building a business where the Tour Op won’t offer parity pricing), then there is no reason why the client won’t continue to book with you – they need to know you offer Parity pricing BTW!
The New Travel Agent
The new age will see more selling controls / trust accounts / better funds required to trade / more sharing with Tour Operators.
If you make money out of ‘processing bookings’ you are in for a hard time.
If you are in the business of sharing expert knowledge and gaining Trust – then you have options and some of these may even make you more money.
Tour Operators in the main don’t care whether you process the booking or they do. What they care about is getting the booking. In this Travel Weekly Article from Fox Williams on Analysis: The different types of ‘agents’ an interesting ‘new trading type’ could be the ” Introduction agent / marketing agent / marketing affiliate” You’d get paid for finding the client and helping them choose their holiday. The Operator could then ‘do the paperwork’ / take the money and the ‘responsibility’ and then pay you for the ‘client’.
It would be a shared client of course … but then as an agent you have helped that client select that Tour Operator based on a specific set of requirements. It’s hardly likely that the requirements for the next holiday will be the same and so if you’ve done your job properly, it won’t matter if you ‘share’ the client as the client will always return to you ( especially if you are visible about the price parity issue and keep in touch via email marketing and the like). BUT, you’d have saved yourself a whole load of agro processing money (and the cost involved in dong that admin) and have more time to spend building your business and doing what you like best – planning holidays. My guess is that you’d have even stronger relationships with operators as well.
I think we are in for a new dawn in selling travel. It’s not all going online, that is for sure, and people are looking for and are happy to pay for experts. I just recommended someone to a Travel Agent who then selected a Tour operator for their £15,000 trip. My guess is that the Tour Op would have been just as happy if I had just called up and said ‘this person will buy from you – do you want to pay for the referral” It would be an easier business to set up / run and in pandemic times, would have saved the grief of refunds and not being able to furlough staff.
It’s worth thinking about.