Demand for international routes has been “surprisingly strong” given the circumstances, says Air Canada, but if Canada doesn’t reciprocate global entry privileges soon, we could see more ...
This story originally ran in the Feb. 28, 2019 issue of Travelweek magazine. To get Travelweek delivered to your agency for free, subscribe here.
TORONTO — For agency owners weighing their options for the future, the decision to sell or not to sell is not only a financial one, but an intensely emotional one as well, and a decision that impacts not just their own future but also the future of their employees.
Adding to all those factors, agency owners of small to mid-size agencies may find themselves grappling with this what-if – what if their agency is too small to catch the attention of would-be buyers?
And for some of those owners, there’s yet another what-if. What if an owner wants to take the burden of running a business off her or his shoulders, but doesn’t want to leave the industry entirely?
Retirement may loom, but it’s not imminent, and many owners are looking to stay in the industry, but with a new business model.
“In some cases the owners would like to retire immediately and others they would like to stay on. We have many cases of both situations within our system. We will always try to accommodate the owner,” says Gary Gaudry, President, Maritime Travel.
As part of a 5-part series, Travelweek spoke to major retail agency players about the options available particularly to owners of small to mid-size agencies with annual sales of up to $3 million or so, who may be looking to sell, or downsize their responsibilities, while remaining in the industry.
In number at least, small agencies are the backbone of the Canadian retail travel industry, and strong sales in the 1970s, 1980s and early 1990s fuelled their success.
The agencies that made it through the airline commission caps and cuts in the mid-1990s, and the turbulent first few years of the OTA and Internet era, have stabilized and even thrived, but for some overall sales growth may have hit a plateau, and finding new business can be a challenge.
An agency owner may be considering retirement, or just looking for a new business model, and might think their only option is to close up shop and sell, and leave the industry.
Flemming Friisdahl, Founder, The Travel Agent Next Door says there are alternatives to selling.
The Travel Agent Next Door, he says, offers a storefront solution “where you still own the business and offload all the back end work to someone else while making more commissions. We are in the middle between joining a consortium and selling your business.”
He adds: “We keep local agencies local and in the communities. Plus there is a lot of travel knowledge in these smaller agencies, when it comes to selling travel. However they don’t have the money to invest on the back end in technology nor in marketing. The more agencies that join together in the back end, the more money will be available to invest into building better programs.”
Host agencies primarily host home-based agents, but not exclusively. Another host with storefront options is Independent by Flight Centre. “An agency owner can have their own storefront with Independent by Flight Centre, although there are restrictions in B.C. under CPBC rules and in Ontario under TICO,” says Independent by Flight Centre’s General Manager, Lee Zanello. “This is a very legitimate option agency owners can seek out.”
TPI’s membership includes storefront locations too, as well as home-based agents. “Our model is great for agency owners looking to wind down, it gives them the freedom to continue doing what they love without the hassles of back office, BSP payments and so on,” says TPI CEO Zeina Gedeon.
Meanwhile small to mid-size agencies are in high demand for larger agencies looking to expand. Major retail players like Vision Travel, Maritime Travel and UNIGLOBE, through its franchisees and partner agencies, are all in acquisition mode.
Consolidation in the travel industry’s retail sector is nothing new but in recent years there have been some new developments, says ACTA President Wendy Paradis.
“The large retail travel agencies are getting larger, and that’s not just in Canada but in places like Europe and Australia too, it’s a worldwide phenomenon,” says Paradis. “Second, mergers and acquisitions where smaller agencies are concerned have been happening for a very long time but they’re definitely ramping up. And third, we’re seeing more foreign interest in Canadian agencies.”
Notable deals from outside Canada in the past few years include Vision’s 2017 merger with Direct Travel in the U.S. (the two went on to join forces with ATPI) and Japan’s H.I.S. Group’s majority stake purchase in Merit Travel in 2016.
While the big agencies keep getting bigger, smaller agencies are still in the majority in Canada, at least in sheer numbers. “About 90% of ACTA members would be considered small, independent travel agencies,” says Paradis. Most are associated with a host or consortium. “And most have less than five employees. The vast majority of travel agencies are small businesses.”
Retirement isn’t on the horizon for every agency owner considering their options, but as the Canadian travel industry matures, it’s a factor for many, adds Paradis. “Some agency owners have been in the business for 20 to 30 years, and they’re thinking of the future. They’re thinking of retirement, or semi-retirement.”
Paradis says ACTA gets “quite a number of calls” from the owners of small, independent travel agencies, wondering what their options are.
ACTA’s advice? “Just like any major decision, do your due diligence. Contact a few travel agencies interested in purchasing other agencies. Know that you’re getting a solution that works for you, and a fair price. We also recommend that agency owners look at ACTA members. And we remind owners that there are a lot of different business models out there, so know your options.”
And there is strength in being a small to mid-size agency. “We made some significant acquisitions over the last 18 months but we are always listening for smaller agencies interested in joining Vision Travel,” says Brian Robertson, President, Vision Travel Solutions.
Like Gaudry, he sees a mix of agency owners who want to stay on post-sale, and others who want to exit the industry entirely. “It is a mix, though more prefer to stay on in a role within Vision Travel. They typically want to focus on the area that they have a passion for – usually related to what got them into the business in the first place.”
UNIGLOBE’s Regional Vice President, Eastern Canada Joel Kopstick sees the challenges too: “Small to mid-size agencies are increasingly finding it difficult to compete with the big boys who have gotten bigger through consolidation.”
More input from these and other growth-mode retail agencies and host agencies, as well as input from agency owners, will be featured in this 5-part series.
There are so many options, says ACTA’s Paradis, and ultimately that’s healthy for the industry. “With the maturation of the travel agent community in Canada, a lot of people are looking at reducing their hours. It’s great that there are so many options. It keeps our industry strong and their clientele are still being taken care of, by travel agents.”
This article, Part 1 in the series, ran in the Feb. 28 issue of Travelweek. Part 2 will appear in the March 7 issue of Travelweek, and on Travelweek.ca and in Travelweek Daily as well