Features Your Travel Agency

Are You Going to Participate in the Recession?


It’s going to happen but how will YOU navigate the upcoming recession and it’s effects?


“participate in the recession as a Travel agent”

Written By: Tom Ogg, Co-Founder and Co-Owner – Travel Professional NEWS


Oh man! Gas prices through the roof. Inflation that will not go away. travel industry suppliers going bankrupt right and left, Interest rates heading straight up and the Fed seems hell bent on killing the economy.


1981 Was indeed one crazy year. In fact, the last of the 1970s and early 1980s saw just about every tour operator in Hawaii go out of business. MacKenzie Tours, Aloha Hawaii, Island Holidays, Tradewinds Tours and so on all went out of business. Seeing an opportunity, Joanie and I started Windansea Vacations, a Hawaii FIT tour operator on April 1st, 1981.


The venture proved quite successful however, because we had launched our business with a financial formula that was good for both our suppliers and us. At a time when tour operator defaults were a weekly event, we offered our suppliers prepayment from a trust account that eliminated the need to maintain an open account, which they did for virtually all of their tour operators. This increase in cash flow came at a time when they dearly needed it and it allowed us to gain the best FIT operator rates, allowing us to be very competitive in the agent marketplace.  Every recession brings its own unique opportunities and the coming recession does as well.


Unfortunately, when you read the first paragraph you probably thought I was talking about today. In fact, the similarity between the recession in the late 1970s and early 1980s and now is uncanny. It appears that the interest rates will continue to be increased and the stated objective of the fed is to slow the economy by increasing the unemployment rate and cost of money. While no one knows how this is going to turn out, it is becoming more and more obvious that a recession may well be on the way. However there are things that you can do right now that will make a difference when and if it happens.


Things You Can Do Right Now




Preserve Cash

Recessions have a way of removing the wealth effect caused by inflation and the tightening of the economy. As is happening now, many people will increase their credit card debt while losing equity in their homes and investments. Cash is the equalizer in this scenario and you should take action to maximize your cash position immediately.


Analyze Your Business and Marketing Plans

Make sure that your business and marketing expenses are generating revenues now. As an example, if you spend $500 to sponsor a local sporting team, you may want to reconsider it until the recession passes. Make sure every dollar you are spending is generating revenue and if it is not, stop the activity.


Sell Third Party Travel Insurance

Depending on how bad a recession might get, you should start selling third party travel insurance right now. Explain to your client that should a recession occur that having third party travel insurance will protect their investment in case something should happen to the supplier. And, if a third party insurance company will not write a policy for a supplier they know something that you don’t and tell your client that your advice is not to book with that supplier.


Use Agency Disclosure Agreements

Having clients sign your agency disclosure agreement will be extremely valuable should a supplier fail. By using Agency Disclosure Agreements you can avoid litigation in a number of areas and it only makes sense to do so when preparing for a potential recession.


Focus on the Opportunities

Here are the areas to look at for travel professionals to retain profitability.




Secure Your Relationships

More than ever, travel agents offer their clients a unique value proposition that will allow them to maximize their vacation dollars.  Now is the time to market the benefits of making the most of their vacation dollars by letting a travel professional sift through the plethora of discount travel offerings that are likely to be available in a weak economy. Financially stressed companies will resort to deep discounts to motivate consumers to buy their products and services and it will take a travel professional to sort through the offerings to find the meaningful value propositions. It is quite likely that prices for commodity type vacations will tumble and be very volatile as demand expands and contracts. Market your expertise as a client advocate to obtain the very best value proposition on their behalf.


Empower Your Clients

Move from short term sales into a longer selling cycle. Offer clients the opportunity to make payments towards a future vacation. While there are likely to be deeply discounted last-minute travel opportunities, focus on packaging further into the future to allow your clients the time to plan and fund their vacation.


Focus on Viable Markets

Domestic travel, home port cruises, condominium vacations and adjoining country visits (Canada and Mexico) will see expanding  demand, as will those countries with currencies in parity with the U.S. such as Mexico, Central and South American countries, South East Asian countries, Indonesia and  parts of Africa. Also, focus on niche markets within these destinations. While people are not going to stop traveling, they will want value for the money they allocate for their vacations.   Family travel will likely refocus on longer condominium stays to defray overall vacation costs. Sell U.S. based cruises to Europe and other destinations where the dollar has been strong to give your clients the best value for the money spent.


Focus on Inbound Markets

As the dollar declines in value, inbound visitors from countries with stronger currencies will increase to the U.S. thereby amplify opportunities for agents offering these visitors unique travel experiences.  Inbound tourism is likely to increase dramatically making this segment a huge opportunity for agents.


Focus on Unaffected Markets

While the downturn in the economy will affect everyone, some will be more affected than others.  Luxury travel, river and niche cruises and resorts, faith based travel and other similar markets are probably not going to be as dramatically affected as the mass-market travel products. Selling in these markets promises to be more rewarding than ever in a bad economy.


Focus on Profitability

If you are selling products with low internal yields, focus on changing to suppliers that offer higher commissions. Get out of the low-yield mass-market staple itinerary products and move into a more complex leisure travel transaction that ensures higher yields. Focus on niche cruise and resort product where knowledge is more important and price may not undercut your ability to compete. Most of all, stay committed to not participating in the recession.