Editorial October 2006
By Janchrister EgneforsThe travel sector is thriving – judging by the growth in volume we have seen so far this year, and assuming that such growth implies improved profitability for those who produce, distribute and sell travel.
It is however very uncertain whether things will continue this way, because in many cases players in the chain are being paid less than previously per sold unit, while costs have remained at more or less the same level. If margins decline too much, greater volumes will not help – multiplying zero gives zero.
This equation cannot of course prevail for those who run a business. Two things are required in order to achieve a positive bottom line in a company’s income statement:
- Sell more items that provide good and additional income.
- Reduce production costs so as to improve margins.
There exists a lot of scope within both areas. For example, we know that certain travel agencies – through hard and target-oriented work – have succeeded in increasing their sales of hotel rooms, insurance and other items that generate good margins, while other agencies remain at their previous levels – thus missing out on relatively large sums of money. We also know that operating costs differ tremendously from one travel agency to another.
Such differences are often due to the technical support available and how much additional manual work is required – but also by establishing distinct directives and procedures based on a thorough analysis of the actual costs of the various stages of the booking process.
We have therefore assigned an independent consultancy firm to carry out an Activity-Based Costing survey within the travel agency sector, and will soon issue a report that will hopefully provide inspiration for those who wish to study these questions in more depth.
The results will be published at our customer conference in November, setting out how much money the average agency uses in the various parts of its business process. Should you as a travel agency manager or decision-maker feel uncomfortable with the picture obtained when you compare the report with your own business, we will be only too willing to help you find related solutions.
In this pilot number of the new Amadeus Magazine (previously called Dialogen), we write about the transition to Amadeus Central Ticketing. And one of our colleagues in the sector talks about what is known as cross and up-selling, as well as about offering and being paid for full service. You will also be able to read about cruises, which are becoming an increasingly important phenomenon within the area that shows the absolute greatest growth in volume and turnover – the leisure sector.
Pleasant reading!
Janchrister Egnefors
P.S. Should you, as travel agency manager or decision-maker, be unable to attend the conference but are nonetheless interested in the report, please get in touch with us.
(3.25/5)
