Travel agencies offers travel information, booking and reservation services including transport and accommodation, as well as, tourist attractions to both business travelers and private individuals.
The main activities of this industry include ticket consolidation, booking service provision, ticket selling, tour retailing, tour guide service provision, tourist bureau service provision, tour wholesaling and travel agency operation. Also, the key products for the industry include conference travel, business travel, tour wholesaling and ticket consolidation, inbound tours and leisure travel. A related industry is X0003 Tourism in Australia, which offers tourism services for both international and domestic tourists.
Industry Performance
The key external drivers in the industry include international travel by Australians, real household disposable income, consumer sentiment index, systems and technology for services offered by travel agencies and total visitor nights. First, almost half of the Services offered by the travel agency industry serve Australians travelling overseas. In the five years, through 2011-12, the quantity of temporary, resident departures is anticipated to increase at an annualized 9.5%. This shows increased disposable income for most Australian residents.
Second, patterns in real household disposable income, from which individual travel (either in Australia or overseas) gets financed, impact the industry. Third, households usually cut flexible expenditures, during economic gloom. Fourth, the consumption of new technology in the industry is fast. Transformations, in technology, have placed the industry in rivalry with direct, online booking and reservation systems provided by travel and accommodation dealers. Lastly, the industry is impacted by the increase in total visitor nights used on holiday or other travel functions, by Australian inhabitants and global tourists, in Australia.
Industry revenue is anticipated to decline at 0.7% per year, over the five years through 2011-12. In 2011-12, industry revenue is predicted to increase by 1.5% to $3.16 billion. Low development in overseas arrivals has upset the industry. However, there is expected to be a 2.1% increase in the figure of international visitors to Australia, per year, in the five years through 2011-12.
Changes in real, household, disposable income, as well as, the time available for travel, influence the amount of travel. Real household disposable income is projected to increase at an annualized 3.7%, over the five years through 2011-12. Equally, international travel by Australians is projected to rise at an annualized 9.5%, over the five years through 2011-12. Budgets allocated by businesses and governments, as well as, travel expenditure are predicted to remain unchanged, in 2011-12, after recuperating in 2010-11.
Growth in technology has made players at all heights to deal directly with clients via online platforms and call centers, which require reduced amounts of labor. Presently, travel agencies are rivaling directly with their providers for the same revenue.
Small enterprises dominate the industry, with 40.1% of enterprises recruiting no staff in 2010-11. Jetset Ltd, which is a subsidiary of Qantas, acquired the travel agent operations of Stella, in 2010, and it became the second-largest industry operator. However, the numbers of enterprises are anticipated to reduce at an annualized 1.5% over the five years through 2011-12.
The rise in industry revenue is anticipated to be 2.1%, per year, during the five years through 2016-17. From 2012-13, A 2.3% rise in industry revenue is projected. Besides, global economic rise is expected to lead to further rise in international travel. Nevertheless, business travel is projected to offer subdued revenue increase for the industry, while a slight rise in domestic tourism is expected. Again, in five years, the industry’s profit margin is expected to vary from 15.5%to 16.0%, while profits are anticipated to stabilize.
Regarding consolidation, noteworthy restructuring of operators are expected to occur, in the next five years. Consequently, the quantity of enterprises is predicted to fall by an annualized rate of 1.3%. While retail networks contract, establishments are predicted to decrease at an annualized 1.7%, in the five years. Employment will, as well, decline, but by just 0.7% per year. Technological growth will augment the amount of direct bookings to travel operators completed by companies and individuals.
Estimates by IBIS World reveal that the industry is in the final stages of its cycle of life. All heights of the industry’s supply chain are shifting to online platforms that enable direct access to clients. Consequently, industry dealers are currently rivaling amongst themselves, for similar revenue, which they had once shared using an intricate fee and commission system.
Products and Markets
Industry departments arrange and book travel, tours and accommodation for clients. Clients utilize services offered by travel agencies for business and leisure functions, booking tours, obtaining tickets, as well as, for conferences. The industry uses different systems to offer its services, including retail outlets, call centers and websites.
Service providers, at Travel agency, mostly sell to clients who are leisure travelers. The agents operate as mediators between suppliers and the buying community. This segment has grown dramatically to represent 70.7% of revenue, since the global financial crisis. The leisure travel sector increased by 66.4%, in 2008-09, from 37.9% of revenue to 70.0%, and has maintained this level through 2011-12.
Leisure travel is predicted to constitute 65.4% of industry revenue in 2016-17, since growth in international travel is anticipated to moderate and demand for conference and business travel is projected to recuperate, in the coming years.
The key revenue producers include commissions from international package sales and international airline ticket sales. Nevertheless, profit margins are declining, and agents are trying to shift, into new areas like luxury cruises, to retain profits. Also, the online travel bookings sector of leisure travel is developing substantially. However, the use of online booking for domestic travel has been superior to for international travel, through famous websites like Wotif.com.
Transport, accommodation, and leisure services are among the key services offered to business clients, by Travel agency. From 2007-2009, this sector experienced theatrical declines in demand, owing to the worldwide financial crisis. At this time, income from business travel declined roughly by 65.6%. However, from 2017-2018, the sector is anticipated to recuperate, due to advancements in use of communication technology. Also, in 2016-2017, the business sector is predicted to comprise about 24.1% of industry returns.
Tour wholesalers structure packages for travel and trade them to agencies that handle clients directly. This subdivision offers commodities that are useful in the entire industry and is, thus, prone to deviations in demand, for the entire industry services. Consequently, revenue shares, for travel consolidation and tour wholesaling are likely to shift as other areas of thee industry change. Nevertheless, a lasting propensity towards decline exists, in this field, because dealers make use of their key databases to give other services and products.
On the other hand, inbound tour operators conduct bookings and offer local planning and advice. Revenues from inbound, tour operators declined by 30.5% when the global financial crisis struck. However, the sector has enhanced, since then, to embody 3% of industry revenue in 2011-12.
Transformations in business profitability and business outlook influence demand for summits and conference-linked travel. Besides, demand, for the industry’s products, is affected by threats of war, terrorism attacks and international, health concerns. The demand for leisure services in the country is also affected by fluctuations in the disposable income and exchange rates.
Besides, demand for services offered by travel agencies gets influenced by available leisure time, chiefly, the availability of holidays. On the supply side, appreciation in aviation and automotive fuel prices may influence the cost of travel, as well as, travel budgets of holidaymakers, as seen in 2009. However, growing competition between airlines has led to reduced domestic airfares. Other advancements in technology like use of specialized software for booking and reservations and increased internet use also increase the demand for travel.
Major Markets
The leisure industry in Australia can be categorized into international and domestic travelers. The segment of domestic overnight travel is expected to decline in the five years through 2011-12 as both quantity and rates have reduced. This sector accounts for about 15% of industry revenue, because of the lower commission rates on sales compared with international travel. From 2002 to 2009, domestic visitor nights reduced at an average rate of 2.1% per year, because of subdued economic expansion and the increase in Australians travelling globally. At that time, the domestic sector grew by about two thirds of the rate of real GDP, with just a 1.0% for holiday trips.
International travel by Australians is approximated to account for almost 55.0% of industry whole revenue. A 6.7% increase in the short term international trips is projected for 2011-12. From 2003-04, international travel by Australians has developed robustly. The key destinations were New Zealand, Indonesia, the United Kingdom, Thailand and the United States.
International visitors comprise almost 30% of industry revenue. Arrivals of International visitor declined between 2008 and 2010 due to the credit crucnh, priced-based competition and flat arrivals development. Latest changes in visitor origins demonstrate far fewer visitors from Japan and a rise in visitors from China and other Asian states.
Total revenue resulting from Australians travelling abroad (imports) and worldwide visitors travelling to Australia (exports) is momentous. In 2011-12, industry-related imports are estimated at $29.1 million and exports are projected at $38.6 million. In the five years through 2011-12, arrivals of international visitors have increased by 2.1% per year, while Australian short-term, habitats departures have developed at about five times the rate, at 9.5% yearly. In the five years, the difference is estimated to hold firm. In 2016-17 short-term resident exits are anticipated to slow to annualized increase of 3.6%, near the 3.9% per year expansion anticipated in visitor arrivals.
Travel agencies have their most of their businesses and corporate head offices in Victoria and New South Wales. Besides, Wales has most head offices of international airlines. Western Australia’s agencies relate to the huge tendency for its residents to travel abroad on holidays because of its closeness to Asia.
Competitive Landscape
Travel Agency Services industry has a standard height of concentration, with the leading, four operators comprising 51.4% of the market in 2011-12. Concentration has augmented from 37.7% in 2006-07, because of the surfacing of mergers and acquisitions, as well as, franchise chains among the key operators. Concentration on a brand height is deemed to be high, with brands like Jetset Travel World and Flight Centre constituting a projected 61.8% of revenue in 2011-12.
The level of industry concentration is anticipated to rise gradually over the next five years, because of online platforms and additional acquisition of medium-size operators.
Key success factors comprise closeness to chief markets, access to the newest, available and most competent technology and practices, being part of a group buying, advertising and marketing plan and having a loyal client base.
In the past five years, industry profitability has decreased because of poor demand for tourism actions and profound discounting by both tourism providers and travel agencies. Many travel agencies have cut down prices, in order to guard themselves and draw clients. In the five years through 2011-12, industry profit is projected to decrease by 1.7% per year, with margins declining from 16.1% in 2006-07 to a projected 15.3% in 2011-12.
Wage overheads are the leading expense in the industry. Over the second half of the previous decade there has been a growth in wages, and these are anticipated to grow more in the five years through 2016-17. Rent, as a part of revenue, has decreased over the five years through 2011-12 as the industry shifts from a structure of stores to online selling. The online suppliers are projected to capture even superior market share over the next five years, making rent as a share of revenue inferior.
Strong expansion in technology costs for online infrastructure has made the mean industry capital expense rise progressively over the past five years. The industry uses 6.5% of revenue in printing brochures and promoting its services. Promotion and brochures have developed as an expense and are anticipated to continue to do so as the struggle for clients gets tough. Other costs particular to the industry include license fees and access franchise at 5.4% of revenue, and insurance at 4.5%. Additional costs include IT services and maintenance. Internal rivalry has become price-based. New technology, for instance, booking services and online ticketing has caused more price-based rivalry. Non-price factors include the quality of service offered, products on offer, detailed knowledge of destinations and word-of-mouth approvals. External competition to this industry is raising from online information, airlines reservation and accommodation dealers.
Some barriers to entry include regulation, economies of scale and licenses. The intensity of globalization, in the industry, is high and growing. The industry has traditionally been highly globalised, due to internationally connected computer booking and reservation systems. Furthermore, all inbound tour operators and international tour wholesalers develop global connections in collecting travel packages to and from Australia. Main agency like Flight Center is escalating their quantity of global outlets.
Major Companies
The main companies in the industry are Flight Center Limited, and Jetset Travelworld Ltd. Flight Center Limited is active in the industry through three sectors including leisure, CiEvents and business travel. The leisure sector runs travel agencies under Escape Travel, Flight Centre, Student Flights and Travel Associates brands. The business travel sector functions under the brand FCm Travel Solutions, which offers travel booking and itinerary services for business clients.
Besides, the company is active in the conference travel market, running an events management firm called CiEvents, which focuses in conferences and other group events.
The company surpassed the market in the five years through 2011-12, in spite of a revenue decrease of 11.2% in 2008-09. Flight Centre has, as well, surpassed the industry in terms of revenue growth, growing its market share from 28.3% in 2006-07 to an approximated 33.9% in 2011-12.
On the other hand, Jetset Travelworld Ltd sells both domestic and international travel products and services. The Company, also, runs a franchised network of travel agents. In 2011-12, Jetset Travelworld’s brand is projected to comprise a 33.5% share of industry revenue through the joint activities of franchisees. Jetset Travelworld and Stella Travel Services formed a merger, in 2010. Revenue is anticipated to increase by 6.1% in 2011-12.
Other Companies affiliated to the agency include Wotif.com, Consolidated Travel Pty Ltd, Diethelm Keller Group (STA Travel), Expedia Inc, Sabre Holdings Corp, Amadeus and Money Direct.
Operating Conditions
Similar to other service industries, services of travel agencies are labor intensive, even though, how technology is used is emerging more significant. Presently, the intensity of technology advancement is high. The main technology for this industry is databases, which comprise choice of several powerful, computerized reservation systems. Online sales are a rising field for the industry. Most key companies have sales and booking websites, at times, supported by a call center.
Remote from internet travel services, the travel segment has four, chief supply chain levels. Providers of travel services like hotels or airlines disperse information regarding price and accessibility through a ticket consolidator. The ticket consolidator then passes this information to a travel aggregator, through software like Sabre or Amadeus. The aggregator then passes the information to a travel agency, who handles the client. Besides, there are emerging chances related with booking through wireless technology and mobile phones. Bookings made through mobile phones have increased with increased investment in mobile application development by major internet and mobile phone companies.
Over the five years through 2011-12, revenue volatility is high, as tentative economic circumstances have dampened demand, as there has been vicious competition in the industry. From 2007-2008, the rise in oil prices led to a rise in transport costs, although, these prices fell in subsequent years. On the other hand, the intensity of regulation leading this industry is considered modest. The industry is regulated by national and territory government, department of consumer affairs. First, the Travel Compensation Fund oversees financial standards planned for the industry. Second, those who work in the industry on a franchised base should meet the terms and conditions of that franchise accord, constantly. The chief industry associations include the Travel Agents Federation (AFTA) and the National Association of Independent Travel Agents. The main inbound tour wholesalers are all related with the Australian Tourism Export Council (ATEC). Another key association is the Council of Australian Tour Operators.
Lastly, the level of industry support is low, and the tendency is steady. The industry obtains no tariff fortification. Nevertheless, some operators receive compensation for some of the costs related with selling tour packages abroad under the Federal Government’s Export Market Development Grant scheme. This lack of support discourages independent entrepreneurs as government support would help mitigate the risks involved.
