Travel agencies

Travel agencies in recovery have a cash flow problem: Travel Weekly

The consensus among consortium leaders is clear: If a travel agency has survived the pandemic so far, it will likely still be in business on the other side of the Covid-19 crisis.

But agencies nonetheless face a series of challenges between now – what some cautiously call the start of the industry’s recovery – and when revenues flow more freely into agency coffers.

The biggest concern remains the cash flow. The pandemic shed light on the structure of agency payment models, which in their previous forms threatened the chain’s ability to survive. Because commissions are paid at or shortly after a client’s trip, it can take months or even years from when an agent makes a reservation and is paid for that work. The cancellation of 2020 bookings and long payment windows for future bookings have left agencies in a severe financial crisis.

Over the past year, several vendors have launched commission prepayment initiatives that have helped some, but not all, agencies close the cash flow gap. Professional fees charged to clients, old and new, have also given agencies a boost. And close bookings to open destinations like Hawaii, Mexico, and the Caribbean provide some relief.

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“If busy directly equaled commissions, then we would be swimming in the money,” said Alex Sharpe, CEO of Signature Travel Network. “They’re really busy, and that’s a challenge and an opportunity. They’re busy because there’s a lot of pent-up demand. People want to travel. But at the same time, I would say until recently, the last one. couple of weeks, a lot of what they book is [for] 2022 and beyond, especially for cruises. “

But Sharpe is optimistic that shorter-term booking agencies are currently making reservations through the end of the year.

“This will allow people to continue until we get to [payment for] the really amazing bookings we have for 2022 and beyond, ”he said.

Travel agency closures remain low

Despite fears that the pandemic will mean a mass cull of agencies, this has largely turned out not to be the case.

Signature has only experienced three agency closures. Ensemble Travel Group has experienced seven closures this year and 25 last year, CEO David Harris said (although, he noted, agencies do not have to notify Ensemble if they close). Virtuoso has seen “very few” closures, but the number of consortium members is actually up 10% year-over-year, said David Kolner, senior vice president of product and strategy. network.

John lovell

John Lovell, president of Travel Leaders Group, expects industry-wide consolidation of 10% to 12% due to the pandemic, with some coming from closures and others from changes in business model. MAST Travel Network has seen around 10 agency closures. Ten more are still in business by affiliating as an independent contractor with another MAST agency and shutting down their agency, President and COO John Werner said.

At Travelsavers, a “small percentage” of network members have closed their doors for good, said sales manager Kathryn Mazza-Burney. More common has been the shift from the Travelsavers trademark to Network of Entrepreneurs Selling Travel (NEST), the company’s trademark for home agents. Mazza-Burney said it was still a small number, around 5% of Travelsavers agencies, but already she sees a new trend emerging.

“Now that business is starting to come back, some of our accounts that moved from the Travelsavers side to NEST are now reopening their brick and mortar and returning to the Travelsavers side,” she said. “It was a crazy rocker – which we obviously had never seen before -.”

Travel agents busy, but waiting to be paid

“The agencies are busy,” Mazza-Burney said. “Thank goodness they’re busy. That pent-up demand we talked about last year is definitely here now.”

Entertainment and sunshine destinations have made up the majority of bookings in recent months, she said. And with the recent wave of cruise line restart news, this industry is recovering. Europe is also starting to come back, particularly for 2022 and 2023, which “far exceed 2019 numbers,” Mazza-Burney said.

Kathryn mazza burney

Kathryn mazza burney

Likewise, MAST members book many all-inclusive packages in Mexico and elsewhere, Werner said. But MAST agents have been reluctant to make any new European reservations before the fourth quarter of this year.

The consortium leaders agreed that while the agencies face headwinds, if they made it this far, they will survive the Covid crisis.

“They are determined to continue,” Werner said. “If you ask one of them, they will tell you that there is not enough money [coming in at the moment], but they’re going to do whatever they can to keep it going. “

The cash flow problem persists, but things are starting to improve. Travel Leaders’ Lovell highlighted close bookings for destinations such as theme parks, national parks and resorts, as well as the Caribbean and Mexico.

“The cash flow is going to be tight for the next six, seven months,” he said. “But people do what they have to do. They sell other products, work with their favorite suppliers to generate money where they can.”

Many have found vendor commission prepayment programs useful. Kolner called them “crucial” and said he believed advisers gave preference to vendors who offered them.

While Werner said the programs haven’t been very helpful at MAST, Harris said Ensemble’s agents have found them helpful as well.

“I think the conversation and the revised protocol for the agency commission payment schedule is long overdue,” Harris said. “Constructively, we understand the vendor models. However, the role of the advisor and the agency is to sell travel. As long as there are proper commission recall agreements, the majority of commissions should be paid much closer. of the time of sale as opposed to what has historically been the time of travel. “

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