US $1,295.00

PhoCusWright's Travel Agency Distribution Landscape: 2006–2009

April 2008
US $1,295 CA $1,306 £855 €956

As the online channel matures, its growth has also slowed. While more travel continues to be booked online, there remains a significant portion of travel that is purchased offline. In 2007, PhoCusWright undertook a comprehensive study of the travel agency marketplace in the U.S., conducting both a market sizing exercise and travel agency survey. The purpose was to acquire a rich and complete picture of the total market size and opportunity, as well as to identify the key trends and dynamics shaping this important distribution channel.

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Report Overview Table of Contents Methodology

REPORT OVERVIEW ^top

Travel Agents Today: A Large, Dynamic Opportunity

The Internet has been a significant area of growth and central driver of change in travel distribution over the past decade. However, the traditional travel agency segment (excluding online travel agencies) remains significant, compelling and deserving of careful study and consideration. U.S. travel agents sold nearly $110 billion in travel in 2006, representing 41% of the total travel marketplace. Including online travel agencies, that figure exceeded $140 billion, more than half of the total travel market.

The dramatic shifts upending travel distribution have both imposed and facilitated tremendous change among agencies. Once the primary means by which consumers purchased travel, agencies have seen a substantial amount of their business – primarily sales of stand-alone flights, hotels and car rentals – shift online and supplier commissions erode. As a result, agency owners and managers have had to rethink their strategies, retool their businesses and reinvent their tactics. The typical leisure agency today is focusing on more complex travel such as cruise, vacation packages and independent itineraries, where commissions are still relatively high and more experience and expertise is needed to facilitate the consumer’s purchasing decision. Many of these agencies now charge fees on air or try to avoid selling air at all.

These changes have also created opportunity for new travel agency models, such as cruise-only, home-based, specialized (focused on a particular destination or type of travel, such as adventure, family or honeymoons and weddings) and host agencies. The latter, for example, enable other travel agencies and home-based agents to forgo the cost of GDS contracts, ARC accounts (Airlines Reporting Corporation, the settlement service between airlines and travel agents; in order to issue airline tickets, an agency must register with ARC) and other agency requirements by piggybacking on the host agency’s booking, fulfillment, accreditation and other services.

Changes on the corporate side of the agency business have been no less dramatic. The Internet’s impact on pricing and content, as well as the aggressive efforts by the largest online travel agencies to enter the corporate market, have generated tremendous competitive pressure on travel management companies (TMCs) large and small. Corporate agencies have responded through cost-cutting, investment in technology and consolidation. American Express’ 2003 acquisition of Rosenbluth and Carlson Wagonlit Travel’s purchase of Navigant in 2006 created two TMC behemoths, each more than twice the size of its next largest competitor.

Research Objectives

PhoCusWright undertook a comprehensive study of the travel agency distribution landscape to assess the size of the total agency market, identify key developments and project future trends. The objectives of the study were as follows:

Profile and size the U.S. agency community

How many travel agencies and agents are there?
What is the profile of the agency community in terms of

Business mix (leisure vs. corporate travel focus)
Affiliations with agency organizations such as franchises, consortia and host agencies

Profile and size the home-based agent community

How many are there and how much travel do they sell?

Size the U.S. travel agency marketplace in terms of gross bookings (US$)

How much travel as a percent of the total U.S. market do travel agents sell?
What is travel agents’ share of the major travel product segments (air, hotel, car, tour, cruise and rail) and how is this trending?

Understand agencies’ product mix

What are agents booking and why?
How does this vary by different types of travel agencies (e.g., leisure vs. corporate)?

Understand how travel agents research and book travel

What technologies and tools are they using, and what prompts channel choice when booking one product or another?

Assess the overall business conditions of the travel agency environment

What are the key opportunities and challenges facing this channel?

TABLE OF CONTENTS ^top

Table of Contents
Introduction & Executive Summary
Travel Agents Today: A Large, Dynamic Opportunity
Key Findings
Commercial, Demographic & Market Outlook

Research Methods & Terminology
Market Sizing
Travel Agency Survey

Travel Agency Market Overview
Key Findings
Travel Agency Market Background
Market Profile: Agency Types, Locations & Population
Size of the Market: By Product
Size of the Market: Agency Booking Channel

Bricks & Mortar: Travel Agencies
Key Findings
Market Size & Profile
Leisure vs. Corporate Agencies
Channels & Technology: How Agencies Book

Home-based Agents
Key Findings
Market Size & Profile
Product & Channels: What and How Home-based Agents Book
Home-based Agent Types: Independents vs. Agency Affiliated
Going Home: Agent Resurgence or Retrenchment?

Market Outlook: Key Trends
Key Trends
Travel Agents and the Internet
Customer Service Agents (the "Anti-Internet")
Higher Yield: More Service, Bigger Sale
Changing Models: From Commission to Fees
Financial Outlook: Pressure on Profitability
Age & Experience: Whence New Blood?
Market Outlook: The Future of Travel Agents

Listing of Tables
ARC Reported Travel Agency Retail Locations, 1995-2007
U.S. Online Travel Agencies and Total U.S. Online Travel Market, Leisure and Unmanaged Business Travel, Gross Bookings 1999-2007
Online Travelers Who Usually Book via a Travel Agency, 2000-2005
Three Categories of Travel Agency Population, Gross Sales Volume, And Share of All Agency Sales, 2006
Home Based Travel Agent Segments
Market Share and Gross Travel Sales Volume by Agency Segment, 2006
Total Travel Market and Agency Share, 2006-2009
Comparative Product Composition of the Total Travel Agency Market, 2006 and Projected 2009
Total U.S. Market and Travel Agency Share for Air, Hotel and Rental Car, 2006 and Projected 2009
Travel Agency Share of Each Product Segment, 2006
U.S. Total Market and Travel Agency Share for Packaged Travel and Cruise, 2006-2009
Travel Agent Booking Method, 2006 and Projected 2009
Travel Agent Bookings by Channel for Air, Hotel, Package and Cruise, 2006 and Projected 2009
Total Travel Agency Locations, ARC and non-ARC, 2006
Travel Agency Sales Volume Distribution
Travel Agency Organization Participation
Business Mix as a Percentage (Mean) of Booking Volume, all Travel Agencies
Percentage (Mean) of Product Booked by Leisure and Corporate Agencies
Leisure vs. Corporate: A Different Breed Indeed
Usual Booking Channel for Air and Hotel, Leisure vs. Corporate Agencies
Travel Agent Packaged Travel Sales by Booking Channel and Packaged Travel Type, 2006
Agent Use of Booking Channels for Cruise, 2006
Home-based Agent Share of Travel Agent Population and Sales Volume, 2006
Home-based Agent Working Profile and Sales Volume
Share of Home-based Agent Sales Volume by Travel Product Type
Home-based Agents' Usual Booking Channel by Product Category
Home-based Agent Population by Home-based Agent Type
Share of Home-based Agent Population and Sales Volume, by Agent Type
Home-based Agent Working Profile by Agent Type
Gross Bookings by Online Travel Agencies and Traditional Travel Agencies, 2006 and Projected 2009
Sources of Revenue by Travel Agency Type
Profitability vs. Two Years Ago by Travel Agency Type
Age Distribution of Travel Agents vs. the U.S. Population of Adults Over 25
Age Distribution of Travel Agents by Leisure, Corporate and Home-based Agents
Years of Experience: Office-based Travel Agents and Home-based Agent Type

METHODOLOGY ^top

The study was conducted in the second half of 2007 and consisted of two concurrent phases:

Travel Agent Survey: Nation-wide survey of travel agents to acquire agent and agency profile information, sales volume and business mix, and product research and booking behavior. Conducted in partnership with ARC, ASTA, CLIA and Performance Media Group, the survey yielded nearly 1900 valid responses.
Market Sizing: PhoCusWright conducted interviews or acquired data from more than 60 travel suppliers, technology companies, travel agencies, travel agency organizations and industry associations representing the full spectrum of the travel agency landscape in the U.S. PhoCusWright used this data to develop market size estimates, acquire supply-side perspective and generate trend analysis.