Analysis of Tourism Industry

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  • Topic: Travel agency, Travel agencies, Travel website
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Travel Agency & Services Industry Analysis Report

Introductory Paragraph engulfing entire summary of paper
The Travel Agency and Services Industry comprises of businesses that are primarily engaged in acting as agents in selling travel, tour, and accommodation services to the general public and commercial clients. The products and services that are primarily sold in this industry are travel accommodations such as domestic and international airline, railroad, vehicle, and cruise reservation; packaged tour experiences and activities; and lodging reservations in hotels and various types of resorts.[i] The first travel agency was established in 1758, with the first modern agency that packaged tours and had relationships with the individual companies appearing in the second half of the 19th century[ii]

This industry is estimated to generate approximately 11 billion dollars of revenue during 2010, which would be the first positive growth year since 2007 (see exhibit). Like many other industries, the travel industry has been affected by the recent economic and financial downturn. After the recession in 2008, there had been a steady decline in the amount of revenue and products and services that are available in the travel network; but from the projected revenue numbers you can see that they are predicting a turnaround this year due to more people traveling for work and pleasure. This industry is very volatile because the product that they are selling is highly elastic; as people have less and less disposable income, their frequency of travel decreases as well.

It is estimated that about 87% of the total revenue for the industry is derived through the reservation services that are provided to clients; with the main areas being in order: domestic airline reservations, international airline travel reservations, cruises, packaged tours and lodging reservations (see exhibit). There has been a shift towards airline travel over the past few years following a huge decline after the September 11th attacks when people were frightened to travel due to terrorism. Around 60% of the sales are for leisure travel and vacationing and 40% are for corporate travel and relations. The major market segments for traveling have a breakdown of 61% being for domestic travel and 39% for international travel. The highest rates of travel occur during the months of July and August, with the months of May, June and December also being popular travel times.[iii]

Travel agents can be divided into three types: shop-front agencies, online agencies, or direct providers. The major player analysis portion of this paper will be focused on the online agencies; however, the others will be discussed briefly also. Over the past years, the amount of industry players has decreased about 1 – 4% each year. The declining amount of available income, frequency of travel, and increased use of technology has created a very tough environment for any company to compete and survive in. Many companies are failing, being bought out or merging with various others to try and stay alive and profitable. Almost all shop-front agencies have ceased to exist because people are looking for the convenience and amount of options that internet provides. The main thing that is keeping the agencies with physical locations, or shop-front agencies, open is that there are a lot of travelers who are frustrated by online services and want to deal with an actual person. There are more outlets for a customer to buy their travel accommodations and services directly from the provider now due to information technology and the internet. It is estimated that in 2007, there were sales of 94 billion dollars for US online leisure and unmanaged business travel; however, the amount of revenue that the travel agencies saw in that year was only 12 billion dollars. The available amount of revenue that people are going to be spending on the travel accommodations and services is believed to be...
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