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October 2014
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Main Activities
The primary activities of this industry are:
Other travel-related services
Providing online tour information, booking, reservation and payment systems
Tour packaging
Tour wholesaling
The major products and services in this industry are:
Tour and packaged travel bookings
Cruise bookings
International and domestic airline bookings
Accommodation bookings
Other services
Car rental
Similar Industries
G4611-GL - Global Hotels & Resorts
This industry provides accommodations for travelers. Travel agents often book accommodations for
travelers.
H4831-GL - Global Airlines
This industry provides air transportation for travelers. Travel agents often book airline flights.
H4912-GL - Global Airport Operation
This industry operates air transport terminals.
X9001-GL - Global Tourism
This industry measures the performance of the global tourism sector.
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Additional Resources
For additional information on this industry:
www2.unwto.org
World Tourism Organization
www.wttc.org
World Travel and Tourism Council
www.worldtourismdirectory.com
World Tourism Directory
October 2014
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Industry Performance
Executive Summary
The Global Travel Agency Services industry has enjoyed strong revenue growth over the past five years, at
the same time as the industry's core services have changed dramatically. The migration of consumers to
online channels to research and book travel has turned the industry on its head. Online booking agents
now play a much larger role within the industry, alongside traditional brick-and-mortar travel agents. Like
most industries linked to consumer choices, the industry fell heavily in 2009 during the global recession as
consumers cut back on all forms of travel spending. Since then, however, global tourism has recovered
strongly, with emerging economies continuing to stimulate growth. The industry's revenue is expected to
increase 9.0% per year on average over the five years to 2014.
Brick-and-mortar travel agents have reinvented themselves to remain relevant and competitive over the
past five years as online booking engines have expanded their role. In developed economies, such as in the
United States and Europe, the number of brick-and-mortar establishments and employees has declined
over the past five years as consumers flock online to book travel. For this reason, many agents have sought
to specialize in certain destinations or forms of travel to showcase the value they provide to travelers.
Moreover, many forms of travel, especially complicated packages with multiple connections, are still best
suited to traditional travel agents. For example, over 60.0% of cruises are still booked through traditional
travel agents rather than online, according to travel analysts PhoCusWright. Industry revenue is expected
to increase 9.9% in 2014, making the industry worth $163.8 billion.
Demand for travel agency services will be boosted by strong per capita income growth, rising consumer
sentiment and declining global unemployment over the next five years. Much like the past five years,
emerging economies in Asia and South America will dominate growth and lead to increased investment by
the industry's major players in these regions. The industry will continue to evolve as the dust settles after a
decade of rapid change due to the internet. Over the five years to 2019 IBISWorld expects industry revenue
will increase an annualized 10.1% to $265.4 billion.
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Current Performance
The Global Travel Agency Services industry is undergoing rapid recovery following a difficult period during
the recession. Online and brick-and-mortar travel agents are benefiting from growing international tourist
arrivals due to increasing global per capita income and higher consumer sentiment. Business travel has
also picked up since the recession due to growing corporate profit. In 2009, demand for the entire tourism
sector declined, resulting in a significant drop in demand for travel agencies. Nevertheless, online travel
agencies weathered the storm better than their more traditional competitors, with some experiencing
growth in revenue and profit margins during the recession as consumers sought reduced fares that were
widely available online. IBISWorld expects industry revenue to increase at an annualized rate of 9.0% to
$163.8 billion over the five years to 2014.
Over the five years through 2014, the number of international tourist arrivals is expected to grow at an
annualized rate of 4.7% to 1.1 billion. The United Nations World Tourism Organization (UNWTO) forecasts
that international tourist arrivals will improve again in 2014 as household incomes grow and spending
picks up, leading to robust industry growth of 9.9% in 2014.
Industry structure
The Global Travel Agency Services industry comprises thousands of enterprises focused making their
clients' travel arrangements as seamless and stress-free as possible. Travel agents find the most affordable
airfares, accommodation and other travel-related services for business and leisure customers. The job of a
travel agent has grown and adapted to reflect the changes within the travel industry and the difference in
the way people think about travel in the 21st century. Consumers today are armed with price and location
knowledge because of the mountain of information available on the internet. For this reason, travel agents
must use their expertise to offer highly personalized services and add as much value to the customer
experience as possible. In 2014, there are estimated to be about 174,500 establishments in the Global
Travel Agency Services industry, a figure that has grown 5.6% per year on average over the past five years.
Consequently, the industry is highly fragmented, with the top four industry players accounting for less than
30.0% of the industry's market share.
Challenges and opportunities
Technology has revolutionized the industry over the past decade, which has presented both challenges and
opportunities for travel agents. The internet helps educate consumers and arms them with a vast amount
of information about prices, destinations and other travel options. This has made travel to new and exotic
locations more possible, which has ultimately helped the entire tourism sector grow. However, the internet
has also rendered some services provided by travel agents obsolete. For example, a simple return airfare or
a weekend getaway can easily be booked online via an online booking agent or directly through the airline
or hotel website. Nevertheless, technology cannot replace the expertise, guidance and personal service of
an experienced travel agent, especially for more complicated trips. Travel agents can provide added value
and help clients save time and money by cutting through the overwhelming amount of information that is
available online. To increase their relevance in the new travel landscape, some travel agencies have grown
and improved their business by becoming experts or specialists in certain types of travel to specific
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destinations, while other agencies have implemented new services that add value to client transactions,
such as tracking of frequent flyers accounts or helping customers get discounted upgrades.
Emerging economies
One of the biggest trends in the Global Travel Agency Services industry over the past five years has been
the rapid rise of demand for and supply of tourism in emerging economies. Since the recession, growth in
tourism spending (and hence demand for travel agency services) by emerging economies has outpaced that
of developed economies. For the first time ever in 2012, China became the biggest-spending country on
international tourism, with total expenditure of $102.0 billion, according to the UNWTO. Traditionally, the
biggest-spending countries on international tourism have been those in Western Europe and North
America, as well as Japan and Australia. While this is still largely the case, the rising middle class in
emerging economies have access to higher levels of disposable income and many are prepared to spend it
on international travel.
At the same time, the number of international visitors making trips to emerging economies over the past
five years has grown at a faster pace than those visiting advanced economies. According to the UNWTO,
the Asia-Pacific region saw the highest relative growth in international tourist arrivals in 2012, with a 7.0%
jump. Emerging economies now account for about 46.0% of international tourist arrivals, compared with
only 38.0% in 2000. This trend has been driven by the rapid urbanization of emerging economies, the
development of advanced tourism infrastructure and clever marketing aimed at attracting big-spending
tourists from the West.
Reduced reliance on labor
The Global Travel Agency Services industry is labor intensive, as quality customer service and product
knowledge are still key success factors. Although a range of computer and internet technology has been
implemented to reduce the labor intensity of the industry, travel agents remain dependent on having
personal knowledge of travel destinations, seasonal ticket price fluctuations and personalized service.
Wages are the largest expense for industry operators, accounting for an average 23.3% of revenue.
However, wages have declined as a percentage of revenue over the past five years due to the increased
prominence of online booking agents. Wages have increased at a slower rate than revenue, by 7.9% per
year on average to $38.2 billion over the period, which has ultimately helped operator profit margins.
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Industry Outlook
The Global Travel Agency Services industry's recovery is expected to continue over the next five years as
the global economy continues to strengthen. The industry will benefit as the global economy improves,
unemployment rates decline and consumers begin to spend money again, particularly on recreational
activities such as vacations and traveling. The number of international tourist arrivals worldwide is
expected to grow from 1.1 billion in 2014 to 1.4 billion by 2019. Business spending is also forecast to grow,
which should increase travel agency demand from business travelers. Both online booking agents and
brick-and-mortar travel agents will benefit, although internet operators will likely enjoy stronger growth.
Over the five years to 2019, industry revenue is expected to grow at an annualized rate of 10.1% to $265.4
billion.
Rising travel
With an expected decline in the global unemployment rate over the next five years and global GDP
forecasts appearing positive, global household income is also expected to improve. IBISWorld expects
global per capita income to grow 4.5% per year on average over the five years to 2019. Growth is expected
to be particularly strong in Asia and South America, where GDP growth is strongest. With access to more
disposable income, consumers around the world are expected to venture on international trips. As a result,
the number of global tourist arrivals is expected to increase by an annualized 4.3% over the five years to
2019.
Healthier profit
Direct online booking websites that offer information, reservations and payment systems will continue to
play a growing role in the industry. Consumers are growing more comfortable with using these websites
because they give them the flexibility to research and compare various packages and prices without
committing to purchase. Online travel bookings have already overtaken appointments made through travel
agency shop-fronts, and an even greater share of reservations will be made over the internet during the
next five years. The high penetration rate of smartphones and portable tablet devices has been one of the
main drivers behind the increase in online bookings.
Increased use of the internet to make travel bookings will cause the industry to become more price-driven.
Consumers conditioned to wait until the last minute in the hopes of securing a deeply discounted travel
package will base their travel buying decisions on cost. However, as personal time becomes increasingly
valuable, consumers will look to the value-added services that travel agents provide. For these reasons,
IBISWorld expects that the average industry profit margin will increase, with the greatest growth
concentrated in the online operations segment. By 2019, average profit is expected to equal 9.0% of
revenue.
Changing landscape
Over the next five years, a greater share of the industry's revenue will come from emerging economies. In
fact, there is a real possibility that by 2019, emerging economies will have overtaken advanced economies
in terms of international tourist arrivals. Most of the industry's biggest players have already made
significant investments in these regions, especially Asia, to reap the benefits of these high-growth
economies. GDP growth of BRIC nations (i.e. Brazil, Russia, India and China) will outpace GDP growth of
the global economy, increasing by 8.1% per year on average over the next five years.
The number of establishments is projected to grow at an average annual rate of 5.1% to 224,148 locations.
During the same period, industry employment is expected to grow at an average annual rate of 5.9% to 1.2
million workers. Despite overall growth, some consolidation is expected to continue over the five years to
2019, particularly among brick-and-mortar travel agencies in developed nations, since online
establishments will replace them. The number of small agencies will continue to decline as merger and
acquisition activity intensifies. The growth of franchised operators and those linked to marketing groups
will also lead to a smaller average establishment size. Large agency groups will likely dominate the
industry, and the smallest agencies will continue to be at the greatest financial risk in the short term,
unless they are operating in a profitable niche market or location.
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11.0%
Car rental
3.0%
Cruise bookings
26.0%
23.0%
Other services
5.0%
32.0%
Traditionally travel agents earned revenue through vendor commissions, mainly from airlines, as tickets
were expensive, in demand and could only be ticketed by agents or the airlines. Travel agents also made
commissions from hotel, cruise, car rental and packaged tour sales. However, this model changed
dramatically in the mid-1990s when airlines capped and then eliminated commissions paid to agents. This
lack of vendor commissions severely disrupted the industry and many agents were forced to close their
doors. Today, travel agents make a greater proportion of their revenue through service fees charged to
clients, rather than vendor commissions. This business model has placed a larger onus of responsibility on
travel agents as they are forced to provide a higher level of service in order to retain clients.
All travel agents, whether they be corporate, leisure or custom focused, earn revenue in a slightly different
way. Corporate travel agencies, which accounts for about one quarter of the industry's total revenue, still
earn the majority of their revenue through airline commissions as they generally book higher-class fares
and have relationships with select airlines. Leisure travel agents make revenue mainly from commissions
on high-ticket products that still pay commissions, mainly vacation packages, cruises and other add-ons.
Those agents that create custom itineraries generally charge the highest fees. Custom itineraries are more
time intensive and agents charge higher consultation, trip planning and service fees to compensate. In
addition to service fees and commissions, top tier of travel agencies also earn significant revenue from
override bonuses. Vendors, including airlines, cruise lines, tour operators and car rental companies, pay
travel agents that pass certain sales quotas overrides, which are kickbacks or bonus payments.
Tours and packaged travel
Tours and vacation package bookings account for the largest share of industry revenue. Tour operators pay
agents commissions due to the highly fragmented nature of the industry and the wide variety of packages
available. Also, packaged tours require more time, meaning higher labor costs for travel agents. Sales of
customized packages are increasing at a faster rate than standardized packages and have become the
industry's most lucrative business. Over time, this segment has increased its share of total industry revenue
as commissions from other forms of travel have declined.
Airline travel
Revenue from airline reservations has fallen over time as commissions have been reduced or eliminated on
some types of flights by airlines. Falling airline ticket prices have also exacerbated the situation. Travel
agents now receive commissions only on high-value tickets, such as first class or business class tickets.
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Travel agents focused on corporate clients still earn the majority of their revenue through airline bookings
due to the high-value fares they are booking for clients.
Cruises
International cruise ship demand is a growth area for travel agents, as an increasing aging population often
with high disposable incomes is driving demand for cruises. A high proportion of cruises are booked
through travel agents as cruise booking engines have yet to reach the heights of airlines. The investment by
major cruise ship operators in new luxury vessels has also helped increase demand. The United States is by
far the greatest source of cruise passengers according to the Cruise Lines International Association, with
more than 50.0% of the global passenger share. However, over the past five years cruises have become a
popular choice among travelers of a growing number of countries, mainly due to rising disposable income
in emerging economies such as Asia.
Accommodation
While booking travel, agents still can generate significant commission from accommodation services.
However, travelers are increasingly booking directly with travel operators, or with travel sites that provide
side by side comparisons of hotel rates for various destinations. For this reason, the accommodation
segments has witnessed its proportion of industry revenue decline over the past five years.
Other
This other portion of industry revenue has grown over the past five years due to the ease of incorporating
add-on products with web-based travel agencies. This category includes products like travel insurance,
travelers' checks and foreign exchange and prepaid discounted meals.
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Demand Determinants
Demand for the Global Travel Agency Services industry is derived from both domestic and international
travel.
Domestic tourism
The majority of travelers are domestic, taking business or vacation/pleasure trips, or visiting friends and
relatives. Domestic demand for travel agencies is, therefore, dependent on factors that affect travel, such as
changes in household disposable income, which is influenced by changes in labor market growth as well as
movements in local interest and tax rates. Changes in disposable income affect both the number of trips
and expenditure by households while away, which in turn affects the growth and economic impact of this
industry.
Leisure time availability can affect tourism numbers. This includes the availability of leisure time and the
recent reducing propensity of people in the labor market to use their vacation leave, due to work and family
commitments. The relative cost of taking a vacation relates to the availability of cheap airfares and vacation
packages, and the increasing supply of airline seats. Tourism promotions by private operators and federal
and state governments, through travel and vacation shows, TV programs, and special sporting and other
major events may also stimulate travel.
Business travel
Business travel, including for attendance at seminars and conferences, is also significant. However, this
travel is more influenced by changes in economic growth, business sentiment and profitability. Also,
economic conditions directly affect the number of business trips, the length of stay and budgeted travel
amounts. Trip substitutability also influences business travel. Increasingly, some business travel can be
substituted by communications and IT technology, including teleconferencing and conference calls.
International tourism
International tourism is one of the most highly competitive industries globally, with a multitude of
countries and major cities seeking their fair share of this activity. International tourism is affected by
global economic conditions, especially changes in economic growth, and particularly in major visitor origin
countries/regions. Movements in relative exchange rates between countries also have an impact on the
cost of travel, as well as the relative attractiveness of traveling to competing destinations.
Wars, increasing geopolitical tensions or heightened fears of or actual terrorism activities affect
international travel plans. Also, fears associated with the spread of SARS, avian flu, or swine flu influences
travel demand and patterns.
Other
Technology is a growing factor affecting demand, particularly in terms of travelers making their own direct
bookings and reservations via the internet. Ticketless travel using smart (i.e. computer chip imbedded)
credit cards or e-tickets will influence the demand for the services of this industry over the next five years.
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Major Markets
Leisure
72.0%
Corporate - managed
14.0%
Corporate - unmanaged
11.0%
Other
3.0%
Leisure
Leisure travel is the largest market for the industry. This market is made up of travelers taking both
domestic and international trips. The total number of international tourism departures is expected to have
exceeded 1 billion in 2014. The top three countries for departures are Germany, the United States and
China. Many travelers going overseas still use travel agency services for part or all of their trip components,
such as accommodations and airline bookings. However, in mature markets such as the United States,
travelers are increasingly likely to use online services to book their domestic trip, or make arrangements
directly with hotels and airlines.
Corporate
Managed and unmanaged corporate travel makes up a smaller percentage of industry revenue than leisure
travel, but is often more lucrative for agents. Demand for business travel is highly correlated with business
confidence. Global uncertainty about the recovery in Europe and the United States has led to a decrease in
bookings over the past five years.
International Trade
Exports in this industry are low and steady.
Imports in this industry are low and steady.
While international trade is not technically a component of the Global Travel Agency Services industry due
to its status as a service industry (IBISWorld does not measure imports and exports within this report), in
reality there are significant imports and exports related to the industry. Exports can be defined as spending
by international residents on services provided by domestic companies, while imports, on the other hand,
can be defined as spending by domestic residents on services provided by international companies.
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Business Locations
Region
Europe
52.0
North America
14.5
North Asia
12.0
7.0
6.0
South America
4.5
2.5
Oceania
1.5
The key factors affecting the regional distribution of the Global Travel Agency Services industry include a
country or region's share of global population. This is important in terms of the actual volume of people
available to travel. The region's share of global GDP is also important in terms of the population's available
discretionary income and the region's share of global economic activity.
The relative geographic location of a country and the ease of travel to other countries is a major factor
affecting tourism levels, particularly for the United Kingdom and Western and Eastern Europe. Travel by
automobile, as well as by train or air, is available to many short haul tourist destinations for short or longer
breaks. For this reason Europe accounts for the highest proportion of international travel in terms of both
revenue earned and visitors attracted.
Comparing regional shares of international arrivals with receipts indicates that North America, Oceania
and South-East Asia all have above-average shares of receipts compared with share of arrivals. This is due
to the relatively long haul and expense in traveling to these areas, the generally greater than average length
of stay of visitors who travel long distances, and the relatively higher average daily expenditure from
exchange rate and cost of living differences between countries.
Europe has a lower share of international tourist receipts compared with its share of visitors, due to the
opposite of the above, particularly being a short haul destination, the greater use of autos to travel within
Europe and shorter average length of stays of visitors.
Despite attracting this high proportion of international visitors, Europe over the past five years has seen its
share of revenue decline as spending levels have reduced in the region in reaction to the effects of the
global financial crisis and European debt crisis. North America has also seen its share of revenue decline
due to lower spending activity worldwide, especially since it is seen as a distant and expensive destination.
Regions that have been growing in proportion have been confined to Asia, as growing prosperity in the
region encourages travel to neighboring countries. IBISWorld expects this trend to continue over the next
five years.
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Competitive Landscape
Market Share Concentration
Industry concentration is medium.
IBISWorld estimates that in 2014, the industry's top four players will account for over 15.6% of the
available market, giving this industry a medium level of concentration. There are a number of large
companies in the industry that control significant market share and earn billions in revenue annually.
However, small, independent and privately owned companies serving niche markets comprise the majority
of players. Market share concentration has increased over the past five years as industry consolidation has
intensified, especially with the growing online booking engines segment. Smaller players have banded
together to use their combined knowledge to better serve new and existing clients.
According to the American Society of Travel Agents' Member Demographics profile 2013, there are an
average of 10 full-time employees per agency, with three part-time and 17 independent contractors. About
31.0% of agencies are owner-operated businesses and do not have employees or independent contractors,
highlighting the small-business-oriented nature of the industry. The industry's small-business nature also
relates to revenue, as 43.0% of operators have less than $1.0 million in revenue and 22.0% have between
$1.0 million and under $2.0 million in revenue. Overall, 75.0% of members earn under $3.0 million in
annual revenue. The proportion of small revenue operators (less than $1.0 million a year) has increased
over the past five years. There has also been strong growth in the share of operators with more than $5.0
million in annual revenue. Mid-range agencies (in terms of revenue) are being squeezed by both larger
agencies and niche operators.
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Wages
23.3%
Purchases
18.0%
11.4%
Marketing
9.4%
Depreciation
1.5%
Other
27.6%
Profit
8.8%
Profit
The average global industry profit margin for travel agents is estimated to be 8.8% of total revenue,
reflecting the high level of competition in the industry. When travel demand weakens, many industry
operators reduce commissions and margins in an attempt to retain business and cash flow. Airlines' recent
reduction of agents' commission has slowed profit margin growth over the past few years. This has
necessitated that agents charge a fee for services and for preparation of a detailed travel itinerary, where
bookings may not be confirmed. Industry profit also varies according to the size of the operator and their
selling method. Many travel and tour operators have established internet information and booking sites to
attract customers. These sales have a higher gross profit margin because they involve little direct labor
input. Direct online booking systems are proving popular for airline and accommodation bookings.
However, the retail business model is more popular for packaged tours, which have higher margins.
Overall, profit margins have increased slightly during the past five years due to the growth of the online
segment of the industry and rising travel demand from emerging economies.
Wages
Wages are the largest expense for industry operators, accounting for an average 23.3% of total revenue.
The industry is still a personal one, where quality customer service and product knowledge are still key
success factors. Travel agents assemble travel itineraries and make reservations involving a number of
elements, such as air and ground transportation, hotels, restaurants and local guides. Although a range of
computer and internet technology has been implemented to reduce the labor intensity of these activities
(and the proportion of wages to revenue has fallen), the industry remains dependent on personal contacts,
networking and hands-on local knowledge.
Depreciation
Access to online booking systems is a necessity for industry participants. These systems provide various
customers travel date options and the associated prices for airlines and accommodations. Customers also
have the option to tailor their own travel package and make their own choices and decisions. Given this,
depreciation is increasing because office equipment purchases have increased, as have the costs associated
with subscribing to an online global travel distribution service. Despite the increase in capital investment,
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depreciation accounts for a relatively low proportion of total industry revenue, at an estimated 1.5% in
2014.
Other
Advertising and marketing (9.4% of revenue) is an important way in which companies publicize deals and
increase brand identity. For online booking agents, marketing expenses can represent over 40.0% of
revenue, consisting of traffic-generation costs from search engines and internet portals, public relations
and television, radio and print spending. However, the large majority of industry revenue is generated by
brick-and-mortar operators, which do not allocate as much of their budgets toward marketing, so the
industry average is considerably lower.
Travel agencies are exposed to a range of other costs, including selling, general and administrative costs,
insurance, property expenses and equipment rental, as well as professional fees. Rent and utilities are
estimated to equal 11.4% of industry revenue in 2014, and are decreasing as a share of revenue due to the
falling need for brick-and-mortar establishments.
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Basis of Competition
Competition is high and increasing.
Competition in this industry has become largely price based. Operators must offer customers the best price
for domestic and international travel. The increasing number of travel websites has led to an increasing
number of customers browsing to find the best price deal and booking with the best-priced agency. Online
ticket price and booking services have increased consumer information on travel prices and have
introduced more price-based competition to the industry.
However, there are some important nonprice elements in the competitive environment, particularly for
business, conference and inexperienced travelers. These elements include the quality of service provided,
having detailed knowledge of destinations and products, providing good recommendations to clients and
being part of a chain or franchise. Franchised travel agents can take advantage of computer systems, office
support and brand advertising. Location is also important, including having access to corporate clients,
and word-of-mouth recommendations by friends and relatives. For some agencies, these elements may be
more significant than price alone.
External competition to this industry results from direct online information, booking and reservation
systems provided by accommodation and transport operators that allow travelers to book and pay over the
internet. These transactions allow travelers to bypass travel agencies and wholesale services altogether.
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Barriers to Entry
Barriers to entry are low and steady.
Level/Impact
Industry Competition
Industry Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation and Policy
Industry Assistance
High
Medium
Mature
Low
High
Light
None
SOURCE: IBISWORLD
The Global Travel Agency Services industry has low barriers to entry, with no restrictive factors prohibiting
new players from entering the industry. There are no obstructive licensing requirements that preclude new
travel agents from opening for business, and capital requirements are relatively low compared with other
industries.
The industry has a low level of concentration with a few large, dominant online players. However, beyond
these large players the industry is highly fragmented with a large number of small, independent operators,
many of which are owner-operators with no employees. Over the past five years the industry has become
increasingly specialized, giving rise to a number of new companies entering the industry to focus on niche
segments.
Economies of scale are important, because most travel agents require access to booking systems controlled
by large corporations. In this way, links with franchised brands or marketing chains can assist entry and
help reduce initial start-up costs.
One of the main barriers to entry is the availability of substitutes, such as booking reservations systems
provided by travel services like hotels and airlines. To negate this, many smaller players have been focusing
on niche markets, such as the corporate sector or those with high disposable incomes that are prepared to
spend big to make their trip as seamless as possible.
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Industry Globalization
The level of globalization is medium and increasing.
Globalization measures the extent to which this industry operates on a global scale. This industry has a
medium level of globalization, though this level is increasing.
The industry depends on international movement for a substantial proportion of its revenue, although
domestic travel is the most significant revenue driver. International travel is important because it generally
involves higher commissions from airline travel, cruise ships, accommodation, tours and travel insurance,
as the level of expenditure by travelers is generally greater.
The majority of operators in this industry are regarded as having a low level of globalization, as they are
domestically owned and earn most of their sales from domestic activity. However, there are many agencies
that are internationally linked or owned, such as American Express and Carlson Wagonlit Travel. Many
agencies are linked to one of a few global computerized reservation systems, usually through their agency
agreement. The industry's level of globalization has been increasing due to the growing popularity of online
information, bookings and reservations systems. This trend is expected to continue over the next five years.
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Major Companies
There are no major players in this industry
Other Players
Priceline.com Inc.
Estimated market share: 4.8%
Priceline is a Norwalk, CT-based company and website that allows users to purchase discount travelrelated products such as airline tickets, hotel stays and car rentals. The company was founded in 1998 and
operates under the brands of Priceline.com, Booking.com, Agoda.com and Rentalcars.com. Priceline
provides TripFilter advanced search technology and offers discount prices through its Name Your Own
Price service. Booking.com is one of Europe's largest hotel reservation services and operates across 60
countries in 16 languages. Priceline employs about 9,500 staff, of which 1,800 are based in the United
States.
Priceline made a major acquisition in November 2012, purchasing leading travel meta-search service
KAYAK Software Corporation, owner of Kayak.com, for about $1.8 billion in cash and stock. Meta-search
engines collate results from multiple search engines, and it is expected that this purchase will help
Priceline close the gap with Expedia in the US market and reduce its dependence on paid Google
placements. Priceline's previous acquisitions, Booking.com (2004), Agoda.com (2007) and TravelJigsaw
(2010), have contributed substantially to the company's international growth. Booking.com, for example,
had more than 45,000 partners globally, mostly hotels, and increased Priceline's reach to Europe.
Agoda.com is the main Asian online hotel-booking service.
Over the five years to 2014, Priceline's revenue is expected to grow at an average rate of 27.3% per year to
$7.8 billion. The company was hardly affected by the recession and has experienced dramatic growth due
to the movement of a large amount of travel bookings from offline to online. The widespread adoption of
mobile devices and tablets, as well as the increased functionality of apps, has helped drive substantial
business toward Priceline. Although year-on-year growth has been strong, growth has generally
decelerated as the online segment of the industry has become more competitive.
TUI AG
Estimated market share: 3.8%
TUI AG is headquartered in Hannover, Germany, and is involved in travel (including travel agencies), hotel
and resort accommodations, cruise ship services and container shipping. TUI Travel, which handles the
company's travel operations, operates in about 180 countries, servicing about 30 million customers from
31 markets through more than 200 products and brands. It provides a one-stop shop for vacation tours
and operates mostly in Europe. TUI Travel holds leading market positions in several specialized and active
vacation markets and occupies strategic positions in growth markets such as Russia, China and India. TUI
Travel includes a about 1,800 travel agencies, with its largest presence in Central Europe, Northern Europe
and Western Europe. TUI is pushing an online strategy, meaning its traditional travel agents are
increasingly less significant to its business. TUI is estimated to earn $6.2 billion in industry-related
revenue in 2014.
Thomas Cook Group PLC
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Operating Conditions
Capital Intensity
The level of capital intensity is low.
The industry is customer service focused
Employee's direct product knowledge is a key to success in a highly competitive market
Internet bookings through retail agency websites is increasing, and is increasing the capital intensity of
this industry
The Global Travel Agency Services industry has a low level of capital intensity. For every dollar spent on
wages and associated labor costs, operators in the industry will spend about $0.06 on the use and
replacement of capital.
The industry is labor intensive because a high level of personal contact is required of successful operators
in order to win and retain business. Sales staff need to have significant travel-product knowledge and must
be able to tailor packages depending on the client's needs. Staff need to be adept at sales, client relations
and have a specialized knowledge of the travel industry. The average wage has increased over the past
decade as the industry has shifted to become a specialist provider of services to higher-end travelers.
Operators in the industry are exposed to relatively few capital costs. Buildings and equipment can easily be
rented or leased and little heavy machinery is required. Computer and other office equipment is the main
depreciable asset, however, this represents a relatively low cost as a percentage of total revenue. The
industry's level of capital intensity is unlikely to change over the next five years.
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High-speed internet connections and improved web interfaces allow travel agents to connect with
customers faster and more effectively. Instant video, voice and text communication can be used around the
globe, often at considerably less expense than traditional methods. According to the American Society of
Travel Agents, over one-third of travel agents communicate with their clients via the internet, through their
website or email. This number is up sharply over the past decade. Over the same time period, the number
of phone interactions has decreased steadily, while walk-ins or face-to-face appointments have remained
steady, at about 20.0% of communications.
Outlook
The past decade has been one of rapid change for the industry. While further technological change is
expected and the industry will continue to evolve, further technological change will likely have a limited
impact as successful travel agents now rely on a mix of both online and offline bookings.
Revenue Volatility
Industry revenue volatility is medium.
Revenue volatility has been moderate over the five years through 2014. As demonstrated during the
recession, the industry is sensitive to global economic conditions and factors such as unemployment,
household income and consumer sentiment. Most travel is a discretionary expense and is one of the first
expenses to be cut by consumers when economic times are difficult. In times of global economic stability,
the industry is subject to a lower level of volatility, mainly due to the diverse range of services it provides.
Recently, rising demand from emerging or developing nations has assisted the industry and contributed to
lower volatility.
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that foreign travel agents would be permitted to establish branch offices nationwide from July 1, 2007.
This was previously forbidden, apart from in Beijing, Shanghai, Guangzhou, Shenzhen and Xi'an. However,
agencies operating in China require an international travel agency license. The General Administration of
Civil Aviation has provided ticket licensing rights to the China Cargo Transportation Association. Under
existing arrangements, full ticketing licenses can only be awarded to travel agencies that are wholly or
mostly Chinese-owned. The national computer reservation system, TravelSky, holds the monopoly for the
issuing of tickets and is owned by major domestic state-owned air carriers. The international computer
reservation system is not permitted to issue tickets. The outbound travel market is also restricted for
international operators in China.
The United Kingdom
The sale of air travel is restricted through the Civil Aviation (Air Travel Organisers' Licensing) Regulations,
1995. The regulations are designed to protect customers. However, airlines do not have to comply with
these regulations for the sale of seats on their own flights. The regulations are supported by a system of
bonds, which defines who is responsible to refund travelers if the services paid for cannot be provided.
Australia
In Australia, the industry is regulated by state or territory consumer affairs departments and is financially
monitored by the Travel Compensation Fund. Those who operate in the industry on a franchised basis
must consistently meet the terms and conditions of that franchise agreement. While there have been
numerous proposals for the self-regulation of this industry, none have proceeded.
The main industry association is the Australian Federation of Travel Agents, which had 55% of agents as
members in mid-2005. The major in-bound tour wholesalers are all associated with the Australian
Tourism Export Council, which promotes tourism in Australia and internationally. It represents
independent in-bound tour wholesalers. Another major association is the Council of Australian Tour
Operators. All wholesalers have to have International Air Travel Association accreditation to be able to
make international airline bookings.
Industry Assistance
The level of industry assistance is none and the trend of industry assistance is steady.
There are no specific tariffs for this industry.
The industry has a low level of industry assistance and, aside from general consumer protection laws, faces
relatively light regulation. There are a number of industry associations that represent industry interests
and provide government advocacy, education and training to members. These include national and
regional organizations like the European Travel Agents' and Tour Operators' Associations, the American
Society of Travel Agents, the Pacific Asia Travel Association and the Malaysian Association of Tour and
Travel Agents.
The industry also benefits from the tourism advertising and promotional activities of national and
provincial governments to attract international tourists. These funds are of direct assistance to industry
operators, many of which do not directly contribute. Most countries have a tourism agency responsible for
promoting the country to the world as a destination for business or leisure travel. This area is becoming
increasingly competitive, especially as emerging economies have realized that tourism can deliver a
significant boost to the domestic economy and have subsequently ramped-up their marketing campaigns
to attract wealthy tourists.
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October 2014
Key Statistics
Industry Data
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Revenue
($m)
IVA
($m)
93,262.3
98,283.3
110,493.8
119,448.8
106,322.0
114,182.6
125,572.6
136,988.2
149,099.7
163,807.2
185,511.7
211,483.4
228,401.9
246,103.1
265,423.1
31,988.9
34,202.6
36,904.9
40,851.5
36,149.5
38,022.8
41,941.2
45,754.1
49,948.4
55,039.2
61,960.9
70,635.5
76,286.2
82,198.4
88,916.7
Establishments
Enterprises
135,670
137,941
144,063
143,435
132,601
136,554
145,541
156,582
164,839
174,500
184,974
196,466
205,494
215,124
224,148
108,139
110,331
114,935
117,432
109,579
113,432
119,638
127,363
132,699
139,023
145,842
153,295
158,698
164,433
169,653
Employment
Exports
($m)
Imports
($m)
Wages
($m)
Global
tourist
arrivals
(Million)
622,607
639,732
676,894
689,948
634,430
666,298
719,926
786,332
833,394
891,411
955,918
1,027,185
1,080,303
1,136,607
1,189,542
23,315.5
24,079.4
26,629.1
29,862.2
26,048.9
26,832.9
29,384.0
31,918.2
34,740.2
38,167.1
42,853.2
48,852.7
52,532.4
56,603.7
61,047.3
805
851
911
929
894
952
996
1,035
1,087
1,127
1,203
1,289
1,320
1,341
1,391
Annual Change
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Revenue
(%)
IVA
(%)
5.4
12.4
8.1
-11.0
7.4
10.0
9.1
8.8
9.9
13.3
14.0
8.0
7.8
7.9
6.9
7.9
10.7
-11.5
5.2
10.3
9.1
9.2
10.2
12.6
14.0
8.0
7.8
8.2
Establishments
Enterprises
(%)
(%)
1.7
4.4
-0.4
-7.6
3.0
6.6
7.6
5.3
5.9
6.0
6.2
4.6
4.7
4.2
2.0
4.2
2.2
-6.7
3.5
5.5
6.5
4.2
4.8
4.9
5.1
3.5
3.6
3.2
Employment
(%)
Exports
(%)
Imports
(%)
Wages
(%)
Global
tourist
arrivals
(%)
2.8
5.8
1.9
-8.0
5.0
8.0
9.2
6.0
7.0
7.2
7.5
5.2
5.2
4.7
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
3.3
10.6
12.1
-12.8
3.0
9.5
8.6
8.8
9.9
12.3
14.0
7.5
7.8
7.9
5.7
7.1
2.0
-3.8
6.5
4.6
3.9
5.0
3.7
6.7
7.1
2.4
1.6
3.7
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Key Ratios
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
IVA/revenue
(%)
Imports/
demand
(%)
Exports/
revenue
(%)
Revenue per
employee
($'000)
Wages/
revenue
(%)
Employees
per est.
Average
wage
($)
34.3
34.8
33.4
34.2
34.0
33.3
33.4
33.4
33.5
33.6
33.4
33.4
33.4
33.4
33.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
N/C
149.8
153.6
163.2
173.1
167.6
171.4
174.4
174.2
178.9
183.8
194.1
205.9
211.4
216.5
223.1
25.0
24.5
24.1
25.0
24.5
23.5
23.4
23.3
23.3
23.3
23.1
23.1
23.0
23.0
23.0
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
37,448.2
37,639.8
39,340.1
43,281.8
41,058.7
40,271.6
40,815.3
40,591.3
41,685.2
42,816.5
44,829.4
47,559.8
48,627.5
49,800.6
51,320.0
Jargon
GLOBAL DISTRIBUTION SYSTEM A computerized system for agents, comprising details on international
and domestic travel product.
INTERNATIONAL ARRIVALS Travel across an international border by any mode for short term tourism
purposes.
INTERNATIONAL DEPARTURES Counts of travelers leaving their resident country for short term
tourism purposes
PERSON-TRIPA trip that involves one person traveling 50 miles or more (one way) from home and
possibly staying overnight.
TICKETLESS TRAVEL Electronically issued tickets able to be printed by travelers over the internet, after
payment.
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