How agents can stay profitable in an ever-changing travel industry

Inside story – May 2012

By Ian McMahon

WHEN Tony Hopwood began his travel industry career in the 1970s at a small travel agency in the NSW country town of Young, the only automation tool was the telephone used to contact airlines (a number of whom no longer exist). Of course there were some agencies with additional technology: they had telex machines.

The agency hand-wrote paper tickets. There were six fares to London and the once-a-year fare changes were detailed on a piece of paper.

Mind you, even in those days, the agency was into value-added selling. It doubled as a clothing store and issuing a ticket to, say, London was seen as an opportunity to sell items such as a new suit or luggage.
Fast forward through Hopwood’s subsequent career and technological developments such as dumb terminals, faxes, PCs, GDSs, mobiles, the internet, email, smartphones and mobile devices flash past and, in many cases, vanish into the ether.

You see the business of selling travel becoming ever more complex as a multiplicity of new airlines, particul-arly low cost carriers (LCCs), arrive on the scene (and often disappear again), fares changing as constantly as prices at the fruit and vegetable market, e-ticketing and robotic ticketing transforming processes and customers becoming better informed because of the inte-rnet among a host of developments impacting on agencies.

Over those 30-plus years Hopwood graduated to senior IT-focused positions at Commonwealth Bank Travel (bank-owned travel agencies are another phenomenon that are no longer part of the Australian travel scene) and Traveland (a casualty of the Ansett collapse). He progressed to Carlson Wagonlit where he spent close to 15 years in vice president positions, based in Paris and Singapore, responsible for IT, operations and transaction services.

He has now departed the global corporate travel giant and set up Hopwood TMC Consulting in Australia.
His core message is that change is a constant and successful agents are those that can adapt and identify opportunities and solutions.

He likes to quote Charles Darwin: “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”

Or this from an anonymous source: “When you’re through changing … you’re through”.

He cited both during a keynote presentation at a series of workshops held around Australia and throughout Asia Pacific over the past few weeks under the banner “Winning together in the world of travel”.

Sponsored by Travelport, the half-day workshops also featured a presentation by the company’s head of solutions and support Linda Kelly-Smith (to be covered in next issue’s technology feature).

At a series of breakout sessions agents (including a number of non-Travelport users) were briefed on Travelport technology, including the company’s Universal Desktop, which Travelport’s country manager Australia and New Zealand, Sean Cummins, claimed can “future proof” their businesses and make them more profitable.

Hopwood told the agents they now operated in an environment where they need aggregated content at their fingertips on their desktops to service the needs of well-informed, internet-savvy clients.

He said this content “must be relevant and make sense to clients who are much better informed (than in the past) but often confused by the amount of information available to them”.

He warned that this “extends the time needed to service your clients and potentially limits income and revenue opportunities … Time is critical. Are you measuring the amount of time people spend on processes?”

He advised agents to identify their key cost drivers which typically will be:

  • Staff costs (including, salary, benefits and training) – 65-70 per cent;
  • Premises – 15-20 per cent; and
  • Telecommunications (data, telephone, IT systems) – 5-10 per cent.

With staff costs by far the biggest component of agency expenditure, Hopwood said agents need to measure employee productivity using criteria such as dollar value of sales, number of transactions, value of revenue or income generated and average “handle time” of processing a booking.

He added: “While staff are your biggest cost, they are also your biggest asset, your window to the world …

It’s not about reducing head count. It’s about making your existing head count more productive.” 

His analysis of the proportion of staff time allocated to bookings came out as

  • Selling and booking – 25 per cent;
  • Fare/costing validation – 30 per cent;
  • Invoicing – 10 per cent;
  • Ticketing and supplier payments – 10 per cent;
  • Client documents – 20 per cent; and
  • Host-trip follow-up – 5 per cent.

And he calculated the average amount of time spent on booking transactions – including such factors as client follow-up, visa and insurance, waitlist follow-ups, ticketing and documentation, client changes and cancellations as follows:

  • Domestic air – 20 to 25 minutes;
  • International air – 35 to 65 minutes;
  • Hotel – 10 to 20 minutes; and
  • Online booking fulfilment – 10 to 30 minutes.

Hopwood said it is important for agency proprietors to consider the complete transaction process in evaluating productivity. For example there are highly experi-enced consultants who can complete a reservation using cryptic commands faster than those using point and click processes in conjunction with graphical user interface (GUI) displays.

But taking these times in isolation may be a misleading indicator of productivity if they do not also factor in efficiencies generated by the integration of booking processes with mid and back office administration.

“You are not paying them (con-sultants) to be experts in formats,” he said.

“Yes, ‘green screens’ can be fast but you must take into account accuracy and the impact on after-sales processes. 

“GUI tools can make them (consultants) far more efficient in front of a client, and they can assist in attracting the ‘new’ workforce, reduce training time and give you greater control over the booking process.”

Hopwood said further productivity gains can come from the removal of duplication, getting all key information in a single entry and pre-populating forms with this information.

He urged agents to consider solutions using content aggregation tools that integrate GDS and online content in a single display and, ideally, capture it 
all within a single PNR.

Hopwood said improving agency productivity need not involve large expenditure – often agents can achieve significant productivity improvement simply by consulting with their technology supplier about leveraging the full capabilities of existing tools.

Among Hopwood’s tips for a more profitable travel agency business are:

  • Ensure you have a business plan, share it with your teams, challenge it often and review it annually;
  • Remove processes or formats that are not adding value to the sales experience;
  • Don’t take on massive projects that will stretch resources. Focus on smaller “big win” items;
  • Store re-usable profiles of customers, travellers and the agency’s staff. Keep them updated and create a simple template maintained as standard procedure;
  • Consider partnering with an online booking tool provider to move basic point-to-point bookings online and allow your consultants to focus on more complex itineraries to drive high revenue opportunities;
  • Spend time “on the floor”. Get feedback directly from the front line staff. They are able to provide valuable ideas and recommendations; and
  • Keep it simple. Do not over-engineer solutions. Once a new process is in place you can refine and improve with incremental enhancements.

Illustrating the last two points, Hopwood cited a major TMC that developed a process generating 1500 pieces of data. 

On checking with front line staff it was discovered they actually only needed 50 of them.

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