THE CURRENT EXTERNAL INDUSTRY ENVIRONMENT FOR TRAVEL AGENCY BUSINESS IN NEW ZEALAND Executive summary This report provides an analysis of the current external industry environment for travel agency businesses in New Zealand. The research outlines the important factors for the business environment in terms of P.E.S.T and Porter’s 5 Forces. Under these two types of analyses, P.E.S.T analysis points out that Profitability and Marketing are the two key findings in Economic Factors while Information Communication is more considerable for investors with respect to Technological Factors. Porter’s 5 Forces identifies the competitiveness and a balance of powers among the travel agency business industry (Michael, 2008). The key factors stated above would help investors to have a better understanding about the travel agency businesses in New Zealand. Introduction New Zealand is a vacation paradise attracting a great many travellers from all over the world. Given this great advantage of natural resources, travel agencies are needed to help local and foreign travellers to book flight tickets, arrange accommodations and tours. As travel agencies usually offer discounts and good services to customers, travellers prefer to book tours through agents rather than on their own (TAANZ, 2011). There are many existing successful travel agencies in New Zealand such as Flight Centre, Star Travel, Harvey Travel World and so on. Investors can either choose to by an existing franchise of the travel agencies or establish own business. No matter which way the investors are following, understanding the key information about the external travel agency businesses environment is essential for investors before putting money in the market. Discussion How profitable is it? Being profitable is a key factor for a business to keep competitive advantage in the travel agency industry. Therefore, financial reports of a company or the whole industry are
The current external industry environment for travel agency business in new zealand
the fundamental information for the investors. Travel Agent Association of New Zealand (2003) indicated the profitability in a financial report in which travel agencies in New Zealand have a total proceeds around $2.5 billion per annual. With the boom of New Zealand tourism, the figures would increase significantly in the next few years (TAANZ, 2003). Take Flight Centre as an example, the company estimated the net profit for the year is about $212 million in 2008(Northern Territory News, 2008). To make a comparison, the annual income of Flight Centre in 2008 almost covered the whole industry’s gain in 2003. Obviously, the with a large demand of travellers from New Zealand and other countries, there was and would be a great increase in profit for travel agencies based on the statistical figures (Medcalf, 2005). Therefore, investors could expect to see a great inflow of capital if they invest money to the travel agency industry. However, every agency is selling holiday packages with a low profit margin and they need a large number of customers to gain profits in order to survive in the market (Oppermann, 1999). So retaining customer loyalty is essential to keep profitable for every travel agency (Oppermann, 1999).
The Booming Market & Marketing Strategies Another economic factor need to be considered is Marketing. In a recent report, TAANZ (2011) showed that the total number of New Zealand travellers in 1986 was about 0.5 million and the figure rose up to approximately 2 million in 2011. Therefore, based on the fast development tendency, there will be a large demand in travel agencies in the future. From the perspectives of companies, each agency has its own marketing strategies. For example, House of Travel focuses more on building overseas market. Through the online travel booking system, the agency has expanded the market into other countries like Australia and the U.S. (Medcalf, 2005). Customers do not have to go to...
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