Has your agency got what it takes to be profitable?

By
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19 January 2001

A recent study commissioned by Carlson Wagonlit reveals some interesting findings as to what makes a model agency. The goal was to construct a benchmark for Carlson agencies. This article first appeared in TravelWeekly US.

Is yours a model travel agency? Are your revenues up, your overhead costs stable and your technology state-of-the-art?

That's what Evelyn Engert and Pat Stack asked a sample of Carlson Wagonlit Travel's 1,200 independently owned franchise locations recently.

Using a detailed questionnaire, the two women, partners at the Jasper Group consulting firm of Chicago, were "digging deep" at Carlson Wagonlit agencies, finding what works and what does not to make an agency profitable.

The ultimate goal is to construct a hypothetical model agency that Carlson agencies can use for benchmarking.

The first phase of the project has already revealed some intriguing findings, Engert and Stack said at the recent Carlson Wagonlit Travel annual meeting.

For one, service fees now make up 11 percent of the average Carlson Wagonlit Travel agency's revenues - and they contribute mightily to agency profitability.

The top revenue producer for agencies remains airline commissions, which make up 36 percent of the average agency's revenues, followed by tour commissions, at 24 percent.

After those revenues producers are cruise commissions, hotel and car rental commissions, overrides and others, such as rail, travel insurance and interest income.

Engert and Stack focused on the agencies' gross sales, widely used as a measure of profitability when commissions levels were consistent, but on revenues.

"With the commissions caps, gross sales are no longer important because they no longer indicate how much an agency makes," said Engert.

"It's more important to understand where the revenues are coming from."

The study also showed that the average profit per transaction of Carlson Wagonlit agencies is $4.87. The average cost per transaction is $47.56 and average revenue per transaction is $52.43.

The findings were based on 1999 business of 26 agencies nationwide, with a mix of large and small agencies and in areas with different labour costs.

The average gross sales per Carlson agent at the agencies studied was US$576.014, which reflects the fact that most agencies studied had a focus on leisure sales and not corporate travel, which typically has higher gross sales per agent.

One thing all agencies is that they expected their 2000 revenue figures to show an even greater dependence on service fees, Engert said.

As it is, 25 of the 26 agencies studied implemented services fees, most in the $10 to $20 range.

There were a few that charge less than $10 per transaction, but they are the smaller agencies with less than $5 million in volume.

"The larger agencies seem to feel more comfortable charging higher fees," Engert said.

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