CATO View: Why land makes sense

The key to improving yield is to focus on changing your sales mix, writes CATO chairman Dennis Bunnik.

Dennis Bunnikby Dennis Bunnik, chairman Council of Australian Tour Operators

I recently attended one of the retail consortium conferences and one topic that frequently came up was the question of yield. Yield has always been a major issue for travel agencies because they have little direct control over it. Airfare margins are continually pushed down by market forces and for land product it is the wholesaler that generally determines the commission rate.

Speaking to numerous agencies and hearing some of the guest speakers it is clear that margins have reduced in the past few years – hardly surprising considering so much of the cost of an airfare these days is made up of taxes and levies.

So as a retail travel agency how do you turn around your yield and get it moving back in the right direction? I believe that CATO members can provide the answer.

The key to improving yield is to focus on changing your sales mix. Across the board commissions on land product are much higher than airfares. This is especially so at this time of the year when airlines tout their earlybird specials further limiting the scope for travel agents to set their own flight pricing.

By focusing not on the flights but the land components that make up the bulk of a client’s holiday experience you’re shifting your focus to a much higher earning product. You’ll also be helping your clients avoid a nasty pricing shock when they get their post-holiday credit card bill.

The Australian dollar has devalued as much as 20 per cent against the USD in recent months. This, together with fluctuations in the share market, has created a lot of uncertainty for travellers. Especially for those travellers who book online and pay locally at the time of travel. By encouraging them to book with you through Australian-based wholesalers, your clients are able to reduce this uncertainty and lock in their holiday costs now in Australian Dollars. Your clients will be grateful and you’ll reduce your reliance on low yielding airfares.

The time to act is now. This is brochure launch season for CATO members so there are plenty of opportunities for your staff to attend product updates and brochure launches. You might even want to put some incentives in place to get them thinking land as well as air. You’ll find most CATO members would jump at the chance to work with your team to increase sales.

CATO as an organisation is also going through a period of change and refocus. The committee recently held a strategic planning day and the new plan will be launched at CATO events in Melbourne and Sydney on 24-25 November. There are a number of exciting initiatives planned for 2016 and beyond and all CATO members are encouraged to attend.

As part of our desire to work closer with the other sectors of the industry we are also inviting airlines and the managers of the retail consortia to attend and network with Australia’s leading product suppliers – email Peter Baily on [email protected] for details.

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