Why Sell Groups?
By Doris and Phil Davidoff
This is the first in a series of six articles providing in-depth analysis and practical information for travel agents on the importance of group sales and how to find potential groups, develop programs to meet their needs and operate group trips effectively and profitably.
Future articles will focus on where to find groups, packaging and pricing groups, promoting groups, group operations — handling bookings and operating group tours and cruises, and selling unique groups.
Together, the articles serve as a primer for agents with little or no group sales experience, and also reinforce current skills of experienced agents while providing some new ideas.
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Generating profits in the travel agency industry has become more and more difficult with each passing year. Travel agents are caught between heavy pressures from suppliers who want to control their costs (our commissions) and clients seeking the lowest possible prices.
It has been more than 12 years since airlines instituted commission cuts that have led to the elimination of most air commissions.
As a result, most small and medium-size travel agencies and virtually all Home Based travel agents are focusing their efforts on leisure travel — cruises, tours and resort vacations.
Travel agents who focus their marketing efforts on the vacation needs of specific target market segments have been able to maintain profitability in the face of pricing pressures from suppliers that are limiting profits. For example, non-commissionable fees (NCFs) of $20 per day or more are now a standard part of cruise pricing.
It’s Hard To Make Money on Ones and Twos
The well-managed leisure-oriented travel agent focuses on cruises and tours. However, a large volume of transactions is necessary to produce profits, unless the agent is selling primarily deluxe cruises and tours at $5,000 to $10,000 or more per couple.
With agency costs constantly increasing while income per transaction is not, it is difficult to make a profit on ones and twos.
For example, a couple purchases a one-week cruise on a contemporary (mass market) cruise ship. They pay a cruise fare of $680 per person and NCFs and taxes of $175 per person. Because of NCFs of $350, travel agent commission is based on the cruise fare of $1,360.
If the agency sells a sufficient number of cruises or meets a specific yearly dollar volume of sales, it will earn 15% of $1,360 — or $204 for selling this cruise. If the agency was only an occasional seller of the cruise line, it would only earn a 10% commission ($136).
Because of the $175 per person NCF charge, the client paid $855 per person ($1,710 total), so the $204 is actually 11.9%, not 15% and the $136 is less than 8% instead of 10%.
If over time, the travel agency sells 15 separate cruises on the same cruise line at the 15% level, total commission is $3,060. To earn this, agents must spend time with 15 couples and process 15 transactions.
Many readers will remember at least hearing about Willie Sutton, one of the most notorious bank robbers of the mid-20th century. After he was arrested, a newspaper reporter asked him, “Why do you rob banks?” His answer was a simple one: “Because that’s where the money is!”
Where the Money Is
Ask experienced group sales agents why they sell groups and they will give you the same answer: “Because that’s where the money is.”
Selling groups will increase agency income. If the same 15 cabins the agency sold individually are sold as a group (15 cabins on the same ship on the same date), the agency earns substantially more than the same $3,060 base commission.
Most cruise lines and many escorted tour operations provide one free cabin or room for every 15 sold. The value in this case is the base fare of $1,360.
Cruise lines offer amenity points that can be used for a variety of extra benefits for group passengers or income for the travel agency. Points can be used, for example, for complimentary cocktail parties, photographs, wine and logo items. They can also be used for bonus commissions, onboard credit, cabin upgrades and reduced free cabin ratios — for example, one free for 10 instead on one free for 15. Higher point levels are provided for low and shoulder season sailings.
If the cruise line provides a $50 bonus per cabin, this will add $750 to your income. Adding this bonus, plus the $1,360 value of the free cabins adds $2,110 to the original $3,060. The actual commission level on the sale is now a healthy 20% on the $25,650 paid by the 15 couples.
Other Benefits to Agents
Increasing agency profit is the major reason for focusing on groups, but there are several other important advantages as well.
Traveling in a group with common interests is a growing trend, especially among baby boomers. Like-minded people like to travel with like-minded people, especially to places of common interest.
The market is huge and growing larger every day. Groups are everywhere and many don’t yet know that they are potential travel groups. They are just waiting for an enthusiastic, innovative agent to get them moving.
Groups rarely “price-shop” a trip after they agree to promote a program with you. Individuals who want to travel with others who have booked your program have no choice. They must book your program to travel with the group. There may be some shopping before agreeing to your program, but there will be little or none once the group “signs” with you, especially if there are cancellation penalties.
An Efficient Sale
Selling groups is a time saver. While it will take more time to develop a group trip for an organization than to work with one client, once the program is accepted, very little time is spent with a single participant. The booking and transaction processing can be accomplished very efficiently.
Groups often travel together every year. Once you have sold a group tour or cruise and operated it successfully, the group will look forward to working with you on their next trip. Since you have already earned their trust, your time invested per participant will be even less on future programs.
Suppliers provide higher levels of service to travel agents who produce groups. Many supplier sales representatives receive significantly higher incentives for group sales than for an equivalent amount of individual sales. Suppliers often provide more support because of the larger amount of business represented by a group.
In general, group sales provide a higher level of professional satisfaction to agents than individual travel sales, and your clients will enjoy themselves traveling with other people who share common interests.
Doris and Phil Davidoff, veteran travel agents, are specialists in groups and have developed GroupTrac, a computer database for processing and controlling all aspects of group travel arrangements. The Davidoffs operate a Home Based niche agency, Fan Club Cruises, and formerly were the co-owners of Belair Travel Consultants in Maryland since 1969. Phil Davidoff is a past president of ASTA.
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