Investing in the right technology solutions is critical if travel agents are to maintain profitability in today’s zero-commission environment; according to a new Amadeus study.
The report conducted in Saudi entitled: How GDS can improve cost efficiency and optimise business for travel agencies found that since 2006 the average cost-per-ticket for Saudi Arabian leisure travel agencies has been reduced by 19.1%. Personnel costs account for 64% of total costs.
When analysing agency costs, core reservation activities represent 47.5% — down 20.1% since 2006 due to improved air reservation systems and greater productivity. Since 2006, EBIT (Earnings before Interest and Taxes) per ticket for leisure agents have increased by US$6.9 to $10 per ticket.
Business travel agencies were also found to have improved profitability, increasing EBIT (Earnings before Interest and Taxes) per ticket by US$5.8 to $13.7. The increased productivity was down to introduction of new and more efficient reservation systems, better agent training and a more streamlined reservation process.
Today, service fees and mark-ups have been introduced. As a result airline commissions now represent 18% of travel agencies’ revenue versus 79% in 2006. Given this shift, effective service fee management is crucial for travel agencies. The report found travel agencies’ service fee management to be rudimentary, relying heavily on one-on-one negotiation between travel agents and clients.
Antoine Medawar, vice president, Amadeus Middle East said: “The region’s travel agency market continues to transform. We opted to identify factors to add value to travel agencies and highlight fundamental methods that should be adopted, which will drive the reinvention of travel agencies and enhance their profitability.”