Travel Weekly - July 27, 2009

Trade groups renegotiating and revising goals amid downturn

By Nadine Godwin

The ripple effects of the recession are making themselves felt among travel agency consortia and franchise groups, several of which have been renegotiating their sales targets with preferred suppliers because of weak demand and price discounting.

Travelsavers even reported that its head counts are up. Among groups that would discuss the matter, most have revisited supplier contracts and obtained added flexibility.

At Ensemble, for example, sales on the group’s preferred suppliers have been off this year, on average, by percentages in the mid- to upper teens, said Jack Mannix, the group’s president and CEO.

Nicole Mazza, chief marketing officer for Travelsavers, attributed her group’s improved head counts to “the aggressiveness of our agents in their marketing strategies.”

She said the group has seen a “slight uptick” in sales for premium cruise lines. She said that Travelsavers has seen this kind of “stepping up” to all premium products as prices have fallen to a range more travelers can manage.

Nicole Mazza

Chief Marketing
Officer
Travelsavers

For some suppliers, the shortfalls are in the single digits, but for others, they range up to 30% to 35%, he said.

Mannix said the first quarter was “deadly,” particularly in comparison with “a great first quarter 2008.”

Given that the third and fourth quarters last year were “lousy,” the results for the second half of 2009 will look better, although comparing results with bad times is a “pathetic” way to find good news, Mannix said.

On the corporate side, the view is different. Business travelers may benefit from lower prices at all levels but are still going for more savings by downgrading hotel and air services, said Andrew Henry, vice president of U.S. operations and industry relations for Uniglobe Travel.

Nevertheless, he said, Ensemble is “doing the right stuff … training, marketing … and keeping an eye on the long term.”

As with leisure retailers, Uniglobe agencies, with a specialty in midsize corporate sales, have seen “some reduction” in sales volume.

The right stuff also included renegotiating terms with all suppliers earlier this year. Mannix said the group went back to the bargaining table with some suppliers several times to successfully reset some goals.

Most are unwilling to negotiate further, he added.

But, in another it-could-have-been-worse example, Henry said

Uniglobe has anecdotal information suggesting that while many major corporations are “slashing their travel expenditures, comparatively, the midsize corporate market is undertaking a much less dramatic reduction in travel spend.”

Mike Fitzgerald, manager of finance and ad-ministra-

Even with renegotiated sales goals, 2009 ‘won’t be a cakewalk,’ said Ensemble CEO Jack Mannix.

Even with new terms, he said, 2009 “won’t be a cakewalk.” The group will be able to make some targets but still may not even hit first-tier goals in other cases. Nevertheless, he said, while it is too late for a full recovery this year, Ensemble has seen “a slight strengthening of our numbers.”

tion for the Midwest trade group MAST Travel Network, said sales for MAST suppliers were down 10% to 15% this year, but “we thought it would be worse.”

Ensemble’s experiences are comparable to the experiences of other trade groups, though details may differ.

He said things are not worse because its members are becoming better at marketing. Also, he said, there is a trend toward more inclusives, and sales remain strong for wedding groups and family get-togethers.

Business is off everywhere, but the losses are worse for some segments than for others. Mannix’s counterparts echoed his sentiments in describing their results as “less awful” than they had expected.

He said terms for the group’s supplier programs weren’t finalized until the end of January, and seeing the handwriting on the wall, MAST renegotiated less aggressive sales goals late last year and into January.

Client head counts haven’t fallen as much as sales volume, and

Vacation.com has won readjustments for many contracts, some as late as earlier this month,

said John Lovell, vice president of industry relations. In addition, he said, many initial contract sign-ings were delayed until late in the first quarter “to ensure a better read on the industry, and goals were set accordingly.”

As to which segments are doing better than others, he said premium cruising and river cruising were the success stories.

The recession is the main problem, Lovell said, but business has also been hurt by corporate concerns about perceptions when choosing meeting sites or even conducting meetings, and H1N1 swine flu drove a high percentage of cancellations and undercut early-summer bookings.

Signature agencies also noted losses from swine flu, with cancellations to a variety of overseas destinations as well as to Mexico, said Filomena Andre, vice president of sales and marketing.

John Lovell

Vice President,
Industry Relations
Vacation.com

On the positive side, Andre said the first quarter was better than expected, meaning in this case,

the organization’s feared cancel-
lations did not materialize; the
second quarter saw a spike in late
bookings, she added.
Cruises and inclu-
sives are faring better
than other products,
Andre said, with luxury
cruises and river cruises
doing particularly well.
Results vary widely
among destinations,
with the winners in-
cluding Cost Rica,
Egypt, Ireland, South

Africa and South America, Andre reported.

Nevertheless, even with a fair amount of activity, yields are so low that “being busy does not translate into being profitable,” she said.

Mike Estill, general manager of the Westa regional cooperative, said he was happy people are traveling, and they are doing so in numbers that have exceeded

Westa’s expectations. Sales are down, but the head count this year is close to where it was last year, he said.

His main concern is “we’ve shifted land passengers to cheap cruises,” and it’s “scary” that the cruise lines have enough beds that their pricing policies have ripple effects through all other travel segments.

As for supplier dealings, he said Westa was going into negotiations now “and will look at options for tweaking things, but there won’t be changes to the core programs.”

He said the loss of overrides in a bad year, when based on beating the previous year’s production, was a “self-righting situation” because the next year agencies are starting from a much lower base.

There comes a point, he said, when it doesn’t help suppliers much if they increase commissions: “I’d rather this malaise ends earlier with suppliers putting money into marketing.”

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