REFORMA DE LA FORMACIÓN PROFESIONAL

• Increase sales of non-air products

As is the case with ethnic retail agencies, agencies with consolidator characteristics sell a very small share of non-air products (less than 1% of gross sales and net income). Expanding their sales to higher margin products such as packages (net margin of 11.5% vs. 7.2% of air) and hotels would help increase profitability. By increasing the share of packages to 20% of the total, the overall net margin increases in 1 percentage point. Even though the transition towards offering more diversified products is still at an early stage, agencies with consolidator characteristics are aware of the need to do so, not only to increase profitability but also to win clients’ loyalty by offering a value-added product.

• Expand business portfolios

In addition to diversifying their product offering, many of these agencies are also expanding their business portfolios. They are developing new business lines such as online sales for the retail segment (B2C) and tour operator for the retail segment and for selling to other sub-agencies as well (B2C and B2B), which have much higher margins than the consolidation business. Expanding to B2C business lines allows them to take advantage of the negotiated fares from their consolidation business. Plus, when selling to a sub-agency, if commission is 10%, they retain only 3% and 7% is given to the sub- agency; if they sell the same ticket to a traveler through their online booking engine, they get the whole 10%. In other words, B2C sales can give them a better margin from the very same products they already sell. In general, they have separate business units for their B2B and B2C segments, to avoid jeopardizing their relationship with airlines.

• Diversify revenue sources

As in ethnic retail agencies, commissions, service fees and mark-ups account for 92.4% of these agencies’ net income. In general, agencies with consolidator characteristics share commissions with sub-agencies (e.g. if commission is 10%, they usually retain 3%), but keep service fees, GDS and airline incentives. Mark-ups are manually defined based on market analysis (benchmark with other agencies) as these agencies do not use service fee management tools to automate their pricing strategy.

The cut in airline commissions will demand greater efforts in service fee and mark-up definition, as these will become even more significant revenue sources. Using service fee management tools to define fees and mark-ups depending on the type of client, service, fare, etc. would help these agencies with this upcoming challenge.

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• Explore multi-channel distribution

Multi-channel distribution is not exploited. GDS is the main booking channel for US ethnic agencies with consolidator characteristics. They usually have small call centers servicing sub-agencies. However, these agencies have no internet booking engines for their B2B business line. With growing internet penetration and provided these agencies continue to grow in their consolidator activity, this is an interesting opportunity for them to increase their revenues, streamline sales processes and increase customer loyalty.

Cost control

• Automate the fare upload and management process

Fare upload and management accounts for 3% of the total cost per ticket in ethnic agencies with consolidator characteristics. Provided these agencies continue to grow, using fare filing and fare management tools or enhancing the manual process of rule- checking and contracts information with scripting and quality control, could help improve efficiency and reduce costs.

• Measure the return on marketing expenditure and redirect it to the most efficient

channels

As is the case with ethnic retail travel agencies, marketing is a significant cost. This has to do with the fact that two out of four agencies have strong online sales for their retail segments which need heavy marketing. Plus, these agencies do not measure the return on marketing expenditure. Doing so would enable them to invest in the most effective channels, thus helping save time and reduce costs.

Ethnic agencies with consolidator characteristics do not use CRM tools. The use of these would not only increase revenues but also help monitor customer activity and satisfaction, prevent client attrition, and assist in tracking marketing effectiveness.

• Fully integrate and automate front-mid-back-office systems

Ethnic agencies with consolidator characteristics have a very low level of automation. Many tasks are performed manually:

• Fare uploading and management • Mark-up management

• Quality control: to reduce memos, agencies employ specific personnel for this

purpose

• Queue management

• Interface between systems: even though back-office systems usually have an

interface with the GDS, this requires manual intervention as it is not fully automated

• Taxes check and recheck • Commission tracking

37 Due to the high level of manual intervention, personnel costs, particularly administration personnel costs, are significant. Enhancing these processes with automation, for example adding scripting or automated checking tools, would help increase efficiency and save money.

• Invest in reporting technology

In such a competitive market, agencies need to be better equipped with information in order to negotiate with suppliers, particularly airlines. Yield management tools could be used to track sales and the higher yield providers. Moreover, having better quality

information on their business’ results would help agencies have a deeper insight into their performance, monitor costs, and make informed decisions and planning.

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Appendix