MAKING TOUGHBUSINESS DECISIONSIndispensable Research for MeasuringTravel Agency Success

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2014 Benchmarking Research HighlightsDecember 2014

Table of CONTENTS

1. Introduction: GROWING Your Bottom Line in 2015

12. DEFINITIONS & Methodology

4. Sales Focus: Where’s your SWEET SPOT?

3. The PRODUCTIVITY Equation

6. GETTING SMART About Fees

5. GETTING PAID By Suppliers

2. The Bottom Line: PROFITABILITY

10. Getting Paid: HOW MUCH Do Agents Earn?

7. Is SOCIAL MEDIA paying o�?

8. Making Money ONLINE: Travel Agency Sales via the Web

9. The COSTS of Doing Business

11. GDS Trends: USAGE & REVENUES

Successful travel agents have always been passionate about their work. But today’s climate demands more than passion. To thrive in 2015, retail travel professionals need to make tough business decisions based in up-to-the-minute business intelligence.

Introduction: GROWING Your Bottom Line in 2015

To support travel agents in their success, Travel Market Report has partnered with ASTA to deliver the agency industry’s latest, most-relevant research. We have what no one else has: exclusive, must-have data on what you need to know to be successful.

This report details 10 key business metrics drawn from ASTA’s 2014 Travel Agency Benchmarking Series. Each benchmark sheds light on a critical aspect of travel agency profitability, including:

In the pages that follow, you’ll also find links to ASTA tools and resources, along with links to Travel Market Report stories providing the kind of news and commentary, advice and analysis that you won’t find anywhere else.

It’s all designed to give travel agents the indispensable tools, insights and information they need to grow their profits in 2015.

Like most industries today, the travel agency business is dynamic, fast-moving and subject to external and internal forces that can feel overwhelming.

In this environment, the pathway to continued success is to adopt an eyes-wide-open stance, stay open to change and maintain a keen focus on the business basics that will drive profits and keep yourcustomers coming back for more. The information in this report promises to guide you along the way.

Voice of the Travel Professional

AboutThe Research

A NOTE ABOUT ASTA’S BENCHMARKING SERIESASTA’s Travel Agency Benchmarking Series is a collection of detailed research-based reports available as a benefit of membership. The benchmarking reports give ASTA agents access to key data that they can use to measure their business practices and results against those of their peers.

Agency profit margins Social media ROI1 6

Frontline agent productivity Online sales2 7

Sales by segment Operating expenses3 8

Supplier commission levels Agent compensation4 9

Trends in service fees GDS usage and costs5 10

1

AllAgencies

Retail Leisure Agency (70%+)

IndependentAgent (incl. ICs)

CorporateAgency (70%+)

The Bottom Line: PROFITABILITY

LearnMore

ASTAAgency Sales & Revenue Trends

Travel Market ReportA Business Action Plan for Your Agency8 Tips for Building a Profitable Niche

More travel agencies enjoyed solid profit margins in 2014 than in recent memory. Nearly nine in ten––88%––expect to register a profit when they crunch the year’s numbers. And most anticipate stronger returns in 2015. But while agents’ average profit margin will be a healthy 9% in 2014, many agencies still exist on the edges of profitability. What will you do in 2015 to grow your agency’s margins and secure your future?

“Most travel agencies have successfully evaluated their product mix over the past few years, determined where they excel, and adjusted their sales focus to maintain long-term profitability. ASTA members are bullish about a continued increase in profits for 2015.”

Zane Kerby, ASTA

Average Agency Profits by Business Model: 2012-2015

2015Forecast

2014Projected

2013Revised

2012

8%

7%

8%

7%

6%

8%

8%

8%

7%

8%7%

10%10%

10%

9%

10%

2

“In today’s highly competitive retail travel arena, success means much more than simply making the sale. Top travel professionals must have a solid grasp of the business-profit angle behind every transaction.”

Libbie Rice, Ensemble Travel Group

Footnotes* Revenues include: commissions, overrides, markups, transaction or service fees, GDS incentives and “other.”

Running a profitable travel agency requires keeping close tabs on your sales-to-revenue ratio in addition to total volume. While the productivity of frontline agents is obviously key, other factors come into play. In managed corporate travel, high technology expenses coupled with the need to contain clients’ travel costs exert downward pressure on agencies’ bottom lines. For leisure agencies, a focus on customer service a�ects agents’ sales productivity, making it essential to charge appropriate service fees.

The PRODUCTIVITY Equation

LearnMore

ASTATravel Agent's Management Toolkit

Travel Market ReportWant To Boost Sales? Take a Tip from Improv TheaterRestaurants O�er Valuable Lessons on Profitability

Average Sales & Revenues* per Frontline Agent

Avg Annual Salesper Fulltime Agent

Avg Annual Revenueper Fulltime Agent

Corporate Agency (70%+)Retail Leisure Agency (70%+)Independent Agent (incl. ICs)

$388,684

$47,502

$714,077

$90,717

$1,119,155

$90,713

3

Sales Focus: Where’s your SWEET SPOT?

LearnMore

ASTABusiness PlansSales and Marketing Course

Travel Market ReportSurf Or Turf? Move Into Selling ToursCruise Agents Embrace All-Inclusives

Footnotes*Other includes travel insurance, services such as passport photos, and merchandising, such as luggage sales, etc.

Percentages are averages, based on agents’ projected sales for 2014.

Ever since leisure travel agents stopped focusing on selling air travel, tours and packages have been their single largest product segment, followed by cruise. Tour and package sales first surpassed air sales as a percentage of leisure agents’ business in 2005. For corporate agents, airlines sales still predominate. The most successful agencies are deliberate about their sales focus. They weigh factors such as consumer demand, changing supplier distribution tactics and their own passions, then write a business plan and review it annually. Is your product mix the most profitable it could be? If not, perhaps it’s time to update your business plan.

Overall

23% 26% 11% 3% 5%33%

Independent Agent (incl. ICs)

16% 27% 13% 4% 6%35%

Retail Leisure Agency (70%+)

19% 29% 8% 3% 5%37%

Corporate Agency (70%+)

61% 8% 15% 6% 1%9%

Other*Car rentalCruise Tour/PackagesAirline Hotel

“Cruise has always been my bread and butter, but recently tours have jumped from 5% to 30% of my business. There’s an explosion of peoplewanting in-depth experiences.”

Michelle Duncan, Odyssey Travel

Share of Sales per Segment in 2014

4

GETTING PAID By Suppliers

LearnMore

ASTACommission Resources in ASTA’s E-Library

Travel Market ReportSelling Cruises: Does It Still Pay?How to Boost Your Commissions on Cruise Sales Selling Travel Insurance: A Missed Opportunity for Agents?

As supplier commission levels fluctuate, agents need to track the trends, paying close attention to their own commission earnings as well as to the big picture. What products and services are likely to yield the highest returns over the long-term? Are certain segments or suppliers pulling away from the travel agency distribution channel? Is it time to redirect your sales e�orts? As Nolan Burris of Future Proof Travel Solutions says, “Agencies must take charge of their own financial future and not place it in the hands of a disinterested group of shareholders.”

“Advisors will choose the products they represent and sell more than ever before. Suppliers are taking note of that. We are advisors, rather than agents, and thatdistinction grows every day.”

Colleen Gillette, New Paltz Travel

Commisson Levels by Segment

Travel Insurance RailCar RentalHotelToursCruises Air-Corporate Agencies Air-Leisure Agencies

7%

5%

37%

8%

4%

36%

15%

12%

95%

10% 10%

90%

6%

5%

81%

15%

12%

90%

5% 5%

56%

20%

21%

86%

% of Agencies That Report Receiving

Commissions

AverageCommission

MedianCommission

5

LearnMore

ASTATravel Agency Consultancy Fee Course

Travel Market ReportTo Reduce Your Risk, Charge Fees Don’t Gamble With Your Bottom Line

Most travel agents stopped giving away their services years ago. Today the majority of ASTA agents charge fees when booking air and rail travel and when planning FIT vacations. More than four in ten charge for hotel-only bookings and for air-inclusive packages. The most striking recent development is a trend toward charging fees when booking cruises. More than one in five agents (21%) now charges an average of $41 to plan a cruise, and the number of agents who charge for cruise is growing. Agents have steadily increased the dollar amount they charge too—up from a median fee of $25 for air bookings in 2005 to $38 in 2013.

Agents reserve their highest fees for their FIT trip-planning services, charging an average $118. Their lowest average fee is $20 forcar-only bookings.

“Do something worth paying for and charge for it. If you have taken the time to get to know someone as a person—their likes, dislikes, desires, dreams, the reasons behind their trip—you’re doing much more for them than the booking. Fees are for all the wonderful things you do for your customers.”

Nolan Burris, Future Proof Travel Solutions

GETTING SMART About Fees

Average Fee by Travel Type % of Agencies that Charge a Fee

61%

23%

42%

21%

70%

88%

20%

45%

64%

16%

36%

$118

$53

$20

$33

$31

$54

$28

$39

$38

$28

Cruises$41

Trip planning (FIT)

Air-inclusive packages

Shore excursions

Accommodations only

Tour packages

Air- corporate

Air-leisure

Rail tickets

Car only

Booking ancillary services

6

% of Agencies Using Social Media

LearnMore

ASTASocial Media Webinars

Travel Market Report4 Ways to Avoid Sabotaging Your Social Media E�orts3 Keys to Measuring ROI on Social Media MarketingIs Social Media Pulling You O�-Course?

Are you wasting time on social media? Despite steady growth in travel agents’ social media presence, it’s still tough to see a tangible ROI. Fully 30% of agents active on social media say they derive zero revenue from their e�orts, and 80% say their time online yields just five or fewer new client leads monthly. But a growing number are finding a payo�. For 13%, social media activity now generates upwards of 20% of revenues. You need to have a plan, commit to spending the time, follow through, then track your results.

“People naturally want to buy from people they trust. Online you build trust by answering questions, networking and o�ering valuable information to your target customers.”

Sophie Bujold, social media strategist

Is SOCIAL MEDIA paying o�?

20142013201220112010200920082007

UseSocial Media

Do Not UseSocial Media

53%

72%

45%

55%

47%

74%

32%

68%

26%28%

80% 79%

24%

76%

21%20%

% of Revenue Derived from Social Media

0%Revenue

1-4%Revenue

5-10%Revenue

10-15%Revenue

20+%Revenue

30%

29%

26%

2%

13%

AgencyBreakdown

7

Footnotes*Base: Agencies with online booking tools

Making Money ONLINE: Travel Agency Sales via the Web

LearnMore

ASTASales and Marketing Course

Travel Market ReportBuilding Agency Websites That Work in a 2.0 World

Sales booked via travel agency websites have risen slowly but remain relatively low. For the 34% of travel agencies that o�er an online booking tool, those tools generate an average 10% of revenues.Corporate agencies earn the most via online tools. For service-oriented leisure agencies and independent agents, branded websites are more e�ective at spurring online requests for assistance, which agents then service directly and convert to sales. These online requests yield 18% of revenues for independent agents and 16% for retail leisure agencies.

"For most agents, online bookings are not necessarily a big factor, but online shopping is critical. Website content is key. A combination of unique content about the agency’s expertise and value, plus supplier content and an easy call to action, provides a robust, content-rich shopping experience. This is proving to be a highly successful online and o�ine sales scenario."

Marilyn Macallair, Passport Online

Agency Revenue Earned via Online Tools* Online Customer Requests for Assistance

9%Total Revenue

of

12%Total Revenue

of

12%Total Revenue

ofRetail Leisure Agency (70%+)

Corporate Agency (70%+)

Independent Agent (incl. ICs)

Independent Agent(incl. ICs)

22%

18%

Retail Leisure Agency

27%

16%

Corporate Agency(70%+)

16%

8%

% of Total Requests via Agency Website

% of Total Revenue Generated From OnlineRequests for Assistance

8

Corporate Agency (70%+)Retail Leisure Agency (70%+)

Independent Agent (incl. ICs)All Respondents

Other*

O�ce supplies and equipment

Telephone, fax, Internet

Travel and entertainment

Advertising and promotion

Rent/mortgage

Outside contractors (travel agents)

Salaries and benefits (employees/management)

The COSTS of Doing Business

LearnMore

ASTATravel Agent's Management Toolkit

Travel Market Report5 Business Lessons We Learned in 2013Put Outsourcing to Work for Your Home-Based Agency

For all types of travel agencies, labor costs are the single largest operating expense by far, accounting for 70% of costs. Rent ormortgage payments constitute agencies’ second-largest expense. Other categories of expenditures vary by type of agency. For instance, leisure agencies and independent agents spend more on advertising and promotion than corporate agencies, while corporate agencies spend more on salaries. Independent agents spend a significantly bigger chunk on travel andentertainment, presumably because they do not enjoy the supplier perks available to higher-volume agencies. For all agencies, keeping a watchful eye on operating costs is critical.

“In good times and bad, the travelagencies that survive and prosper are those that are tenacious about routing out unnecessary expenditures.”

Dr. Robert W. Joselyn, CTC, TAMS

Average % of Operating Expenses

Footnotes*Other includes non-travel contractors, training, utilities, dues & fees, automotive, insurance, rebates, GDS payments, postage, agent error, bad debt, etc.

60%

10%

15%

10%

2%

7%

11%

7% 7%

5%

5%

4%

1%

2% 10%

2% 2%

2%5%

2% 2%

2%

13%17%

12% 11%

40%

55% 74%

2%

2% 2%

9

Getting Paid: HOW MUCH Do Agents Earn?

LearnMore

ASTASalary Tool

Travel Market ReportHow to Avoid a Sta�ng Crisis 6 Tips for Attracting & Retaining Top Leisure Agents Finding & Keeping Young Agents

Paying competitive salaries has long been a challenge in the travel agency industry, making it di�cult to attract and retain talented travel sellers. With profit margins thin, owners and managers need to get creative, providing non-monetary rewards and perks that showemployees they are valued while giving them opportunities to grow. Some agencies find that paying a mix of salary and commission is the best solution.

“Compensation is important, but it is not the only factor in finding the right balance for employees. Young talent coming into the industry value flexibility in work schedules and having access to a strong mentor. More seasoned talent value work flexibility more than compensation.”

Nicole Mazza, TRAVELSAVERS

Travel Agent Compensation*

AVERAGECorporate Agency

AVERAGERetail Leisure Agency

MAXIMUMAll Respondents

AVERAGE All Respondents

Footnotes*Compensation includes salaries, commissions and bonuses for fulltime agents

Agent Pay Packages

30% Salary and Commission Mix

58% Salary Only

13% Commission Only

Managerial position withoutsales responsibilities

Managerial position withsales responsibilities

Starting travel agent withlimited experience

$21,915

$40,000

$21,906 $25,643

$42,026

$115,000

$40,528

$56,753

$34,012

$137,527

$32,771

$45,157$44,970

$175,000

$42,629

$63,671

Travel agent

10

GDS Trends: USAGE & REVENUES

LearnMore

ASTAASTA’s E-Library Content on GDS

Travel Market Report: GDSs Support New DOT RulesLooking Back With Travel Market Report, Technology

Travel agency usage of GDSs has dropped steadily in the last 15 years, with much of that decline linked to the growth of independent agents and ICs. Fully 80% of retail leisure agencies still rely on GDSs, and 100% of corporate agencies do so. But it’s primarily high-volume corporate agencies that make money from GDS incentive payments. For many leisure agencies, GDSs are an expense. Agents should take a hard look at their GDS contracts, negotiate aggressively and consider all their options.

“The shift away from the GDSs to various online and app-derived solutions isclearly seen in the booking trends.”

Richard Eastman, The Eastman Group

GDS: Cost Center or Revenue Source? Agency GDS Usagein 2014

Use a GDS Do not use a GDS

Overall

67% 33%

Independent Agent (incl. ICs)

42% 58%

Retail Leisure Agency (70%+)

80% 20%

Corporate Agency (70%+)

100%

Footnotes Base: GDS Users *Net equals GDS credits/incentive income minus GDS fees/charges.

Inde

pe

nden

t Agent (i

ncl. ICs)

Retail Leisure Agency (70%+)

Corporate Agency (70%+)

Overall

50%

7%

14%

54%

43%

39%

27%

25%

29%

16%

5%

9%

4%

15%

10%

4%

6%

8%

6%

14%

17%

$20,000 or more

$10,000 - $19,999

$5,000 - $9,999

$1-$4,999

$0

-$1 or less (owe money)

Net Impact*on Agency: GDS Costs & Incentives

11

DEFINITIONS & Methodology

This report di�erentiates among three types of agencies:

• Independent Agent (Including ICs): One-person agency has no employees and may or may not be hosted.

• Retail Leisure Agency: Agency has employees and derives 70% or more of its sales volume from leisure travel.

• Corporate Agency: Agency has employees and derives 70% or more of its sales volume from corporate travel.

The data in this report are drawn from ASTA’s Travel Agency Benchmarking Series, including:

• ASTA Agency – Demographics of ASTA members including sales and type of agents.

• Financial Benchmarking Report – Benchmarking data on sales, revenue sources, revenue by type of travel, and operational expenses.

• GDS Report – Trends in GDS usage, contract lengths, contract negotiations, and incentives/penalties and information on non-GDS users.

• Labor and Compensation Report – Detailed data on compensation and benefits by region and agency size and type, plus turnover rates and hiring practices.

• Service Fee Report – Data on average service fees by travel type, service fee policies, service fee collections, service fee revenue and consulting fees.

• Supplier-Travel Agent Relationship Marketing Report – Analysis of preferred supplier relationships, booking channels and e�ectiveness of incentive programs.

• Technology and Web Usage Report – Examines business practices related to agencies’ Internet usage, technology usage, agency websites and online bookings.

The Travel Agency Benchmarking reports are based on survey data collected through the ASTA Research Family. The ASTA Research Family is a panel comprised of a representative sample of ASTA member travel agency owners and managers. The Research Family reflects ASTA members in key agency demographics including sales volume, leisure/business mix, number of part-time and full-time employees and geographic location.

The size of the Research Family ranges from 300 to 465 responses per survey. Survey size varies due to non-response, agency closings, mergers, and changes in membership status, but is designed to yield a response representative of all ASTA agency members.

LearnMore

Additional research resources can be found on ASTA’s Research Program page. Custom breakouts of data are available as a custom research request.

For further information, contact Melissa Teates, Director of Research at ASTA, at mteates@asta.org.

12

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