IN FULL: Arabian Travel News Travel Industry Survey 2014
This year’s survey received the highest number of participants to date, and revealed some alarming concerns from those who work in the industry.
Almasalla,Gate Arab Tourism News-The issues raised mainly centred on overdue debts, a lack of a skilled work force and poor working relations with suppliers. We find out what the region’s travel trade really think of the industry they work in the biggest Travel Industry Survey to date, the region’s travel trade share their biggest worries and thoughts on the areas having the greatest impact on the future of the industry.
From a rise in client payment issues, online competition having a growing impact on service fees, and issues with recruiting skilled employees, we explore the doom and gloom, as well as some rays of light.
LOCATION, LOCATION, LOCATION
Though expected branch openings have moderately decreased when compared to last year’s figures (71.4%), 63.16% of respondents said their company planned to add more branches to its portfolio this year.
AREAS OF OPPORTUNITY
In terms of growth opportunities, the majority of respondents noted that the corporate sector had the best potential (31.48%); this has decreased in its significance since last year where half (51%) of respondents had said the same sector was the most important moving forward.
Online remains an important area of opportunity for the trade taking second place with 27.78%, up by 6.8 percentage points on last year. The topic of online travel presence continues to be not only an area observed for growth potential, but also one that has raised a number of concerns amongst the region, and something the survey goes further into later.
Other areas of opportunity included MICE (12.96%) and luxury travel (11.11%). One agent added student tours to the list of sectors they believed would provide opportunity.
Looking at the next 12 months, a number of agents added their thoughts about what to expect in the months ahead. One supervisor based in UAE noted: “After the holy month of Ramadan many people will start travelling abroad for multiple reasons, and we will try to get maximum customers by providing many offers and promotions, such trips to Sri Lanka or Malaysia et cetera.”
Others commented on the possibilities with inbound growth, as well as the MICE potential, while others noted the drive to target high net worth individuals to drive revenues up.
INFLUENTIAL CONCERNS
Despite the level of optimism shared by our respondents, there were also themes of worry that ran throughout the survey.
When asked what factors have had the biggest impact on business performance in the past year, more than half (52.08%) noted competition from the internet, closely followed by recruiting skilled staff (45.83%) and the rising cost of doing business and price discounting jointly at 41.67%. Looking ahead at the next 3-5 years, these issues remain to be a concern, with 50%, 47.92%, and equally 43.75% respectively agreeing.
As part of the survey, we also asked the travel trade to pin-point what they felt would be the single most difficult challenge impacting their business over the next 12 months. Responses were varied, but below is a snapshot of the major uneasiness highlighted anonymously.
• Availability, competitive rates and innovation in technology
• A lack of pricing control
• Under cutting and difficulty in payment
• Maintaining the company and investing funds to support the slowdown in business
• Unhealthy competition on service charges
• Companies who are willing to discount prices to get business, lack of loyalty amongst our B2B clients
• Mushrooming of online booking agents with no proper focus on customer service
• Challenge of recruiting skilled staff
• Maintaining and increasing the bottom lines due to rising cost of operations
RECRUITING EXCELLENCE
Despite 73.68% noting that their company planned to recruit this year – only a moderate decrease on last year’s 75% – the survey revealed a number of concerns surrounding staffing resources in the industry.
Throughout the survey, a number of agents and operators noted issues surrounding not only attracting the right people, but also in retaining those with adequate skills and knowledge.
Commenting on the factor that has had the biggest impact on business performance in the past year, one respondent said: “Retaining staff that we train/orient over a couple years, only to then find them being ‘poached’ by other/bigger agencies on absurd packages.”
This was an opinion shared by many who, when looking at the biggest challenge over the last 12 months, noted keeping a skilled workforce had been a struggle.
One UAE-based supervisor said that a major challenge his agency had faced this year had been “the staff turnover, as many skilled staff had left the company”.
It wasn’t just skilled staff that companies were having problems with, it was also in regards to attracting nationals into the travel sector.
One Oman–based agent summed it up by saying one of the main challenges in the industry was finding trained nationals, adding: “There is a heavy push from government bodies to employ Omani nationals.”
Recruiting is just one of the concerns when it came to staffing. The survey also looked at job satisfaction, and worryingly there were a sizable number of individuals who were looking to leave the sector.
While 56.1% said they were not considering a new career outside of the travel industry, 9.76% said ‘Yes. I would love to leave’ and a further 34.15% said ‘Maybe, I’m keeping my options open’. Last year less people were uncertain about their careers with 64% saying they had no plans to leave.
FINANCIALS CONTINUE TO RISE
A positive sign is that revenues across the region have increased significantly this year according to those who took part. The average annual turnover in 2013 was reported as being in excess of $206 million ($206.37mn), a 285.98% increase on the previous year (2012) which recorded an average annual turnover of $72.16mn. In 2011 it was reported at $57.4mn.
This year’s high average was brought up by a large number of companies (13.7%) claiming to have recorded an annual turnover of more than $1 billion. However, almost half (47.3%) of companies revealed that their annual turnover was below $5 million.
Optimism for revenue growth this year remained as high as in last year’s survey with 70.69% noting they expected the figure to increase in 2014 (77% noted the same in 2013 and 74% in 2012).
Similarly, only 5.17% predicted a decrease, compared to 7% last year, and 6% the year previous.
TOPPLING DEBTS
Despite the optimism surrounding revenue, the issue surrounding collecting payment from clients appears to be growing. According to the survey, almost half (49%) of those who answered how much money their company is owed by clients said it was in excess of $100,000.
This is more than double on last year, where only 24.14% said they were in the same value of outstanding debt. More worryingly this year, 15.56% said they were owed more than $5 million in total from clients that have not yet paid for services, last year this was only 3.45%.
Talking about dealing with clients, the majority (72.91%) either agreed, or strongly agreed that it was getting more and more difficult to receive payment from corporate clients this year. A further 87.5% agreed, or strongly agreed, with the statement that corporate clients are demanding longer credit periods.
While these numbers have decreased moderately since last year, the anguish over the impact debt is having on the industry has grown significantly. Almost all respondents this year (92.34%) agreed, or strongly agreed, with the statement that ‘outstanding debts from clients have the potential to topple my business’. This is compared to 78% who agreed with the same last year.
The push by the travel trade and credit card companies towards getting corporate clients to pay travel agents by credit cards noted in last year’s survey has continued, however, there still is some scepticism surrounding its success.
While 65.22% claim to have successfully introduced payment by credit or lodge cards, an increase of 8.22 percentage points on last year, more than a third (34.78%) said they have been unsuccessful in doing so.
There has also been an increase in those who said their clients want to retain flexibility over payment and so will not switch to credit or lodge cards, 89.12% compared to 87% who said the same in 2013.
GOING ONLINE
Over the past couple of years, the Middle East region has seen the emergence of global online travel agencies and metasearch sites making their mark, yet there is still a long way to go before the players in the region step up to the mark and establish themselves in the online space.
However, positively, the importance of doing so is increasing. The majority of respondents now have an online booking tool with 65.22% saying so. This is up on last year where only 43.33% said the same. A further 21.74% said that they were currently working on one.
The trend from the consumer to go online is also growing significantly according to the survey with 85.11% agreeing, or strongly agreeing, that customers are booking more online.
When looking at the percentage of agent’s customers who currently book online, over half (52.17%) said it was under 25%, a further 23.91% said they had no online bookings. Yet, 15.22% said they received between 25-50%, and 8.7% said it was above this number. And this is expected to increase over the next five years.
While the majority (84.45%) believe they will receive up to 50% of their bookings online, 15.55% predict that they will receive more than 50% of their bookings online. Even more encouraging is that not one respondent believed they would receive no online bookings.
Investment into an online strategy was more varied amongst the region. Only 6.67% said their company spent nothing, whereas more than half (51.11%) said the investment was up to the value of $50,000.
More interesting was the fact that 6.67% noted they were spending in excess of $5 million. The average spend by companies on their digital space this year was $442,111, a significant increase on last year’s $39,017.
WORKING WITH SUPPLIERS
In terms of supplier services that are most valued by the trade – incentives and commissions remain the most significant with 67.5% noting so.
Educational workshops have increased in importance for our respondents with 35% saying they were most valued, this is compared to the past two years where this was the least favoured service for the trade. This was followed jointly by email updates and online learning programmes (30%) and fam trips (27.5%).
GDS suppliers appear to be in favour currently with the majority (66.67%) saying they are reasonably satisfied with their supplier, a further 30.77% said they were very satisfied.
Suppliers that continue to disappoint the trade are the airlines. According to the survey, 70% said that airlines are a divisive force among the region’s travel agents.
One of the main areas of concern when it came to working with airlines was involving transparency. The majority (82.93%) said that airlines are not transparent with their dealings with travel agents. This has increased since last year where only 75% said the same.
Talking about the relationship, there were a number of opinions and voices of uncertainty.
One UAE-based agent who has been working in the industry for more than 10 years said: “They don’t need to rely on travel agents any more. Travel agents have done the groundwork for the past 50 years and created a platform for airlines to use and attract clients direct with corporate deals, online solutions and no commissions to travel agents.”
He was not alone with his thoughts. An agency owner added: “They are not interested in giving incentives or ad–hoc fares, but at the same time use stealth tactics to find out who your corporate clients are. They then target them direct offering discounts and incentives.”
And it appears that the issues concerning ADMs is still causing problems for the region. One agency owner noted that there was “limited or no financial returns for the travel trade from the majority of airlines with an ever increasing workload for travel agents and ‘hazards’ in terms of ADM’s and other charges.”
We asked our respondents to rate which airline carriers they felt were most supportive.
The main players in the region, Emirates, Qatar Airways and Etihad remained in favour, receiving 61.5%, 51.3% and 48.7% of the vote.
Similarly there has been little change when looking at the airlines that were felt to be not supportive of the trade. British Airways topped the rankings with 54.3% (second place last year); Emirates took second with 40% (first place last year); and Saudi Arabian Airlines moved up from fifth position to third with 28.6%.
The main reasoning for naming airlines for being unsupportive centred on them being rigid with policies, pushing their own online products and casting aside agents in dealing directly with clients.
SENTIMENT VS MONEY
Service levels still reign supreme for the industry with 44.68% noting that this was an area they believed clients valued most when it came to booking travel. Low prices came in second with 36.17% of the vote, and good product knowledge rounded up the final 19.15%.
Customer loyalty split opinions on the survey, while 14.89% said this had not changed compared to five years ago, the remaining respondents were equally divided – 44.68% said they were less loyal and 40.43% said they were more so.
Working on value proved to be an area of grave worry for agents and operators with all of respondents agreeing, or strongly agreeing, with the statement ‘customers are shopping around more and I have to work harder for their business’. A further 80.85% agreed, or strongly agreed, that customers are looking for the cheapest deal.
The same percentage of respondents said that consumers were not just looking for promotions, they were also willing to downgrade their travel options in order to spend less.
This growing trend in counting the pennies was having an impact on competition and has seen a growth of agencies willing to compete on service charge fees in order to gain the business, according to our respondents.
As outlined previously, a lack of pricing control, under cutting and unhealthy competition on service charges were highlighted as the single most difficult challenges impacting their business over the next 12 months. In fact, 91.49% either agreed, or strongly agreed, that travel agencies are undercutting each other to secure business.
REGULATION
Less than half of respondents (46.16%) said the travel sector received adequate support from the respective government. A further 80% said that the travel trade needed increased regulation from the government bodies and 92.5% said service charges should be regulated.
Despite these calls for action, the majority of countries in the region have an appropriate trade association to present these concerns to the government, yet they appear to still be lacking the support and backing needed to make any significant impact.
Half of respondents noted that they were not a member of any association. The responses as to why so many did not join such a trade body were varied. Here is a snapshot of the answers shared with us:
• They are not effective leaders and teams
• Not much is known or advertised and offered within the industry
• The law in Oman does not encourage the formation of trade associations
• I did not have the chance to know about these association
More than half (58.98%) said that travel trade associations are not helping to champion agent issues.
One agent summed up the current situation by saying: “Since there is no adequate controls, travel agents keep undercutting each other resulting the client getting deals far beyond industry norms. There is no investment in RD and training resulting in a poor performance from the trade.”
Despite the growing apprehensions the majority of respondents are optimistic about the future of the industry, with 93.62% noting that they were either very or quite optimistic about the next 12 months. Only 6.38% said they were not at all optimistic for the same period.
Source : http://arabiantravelnews.com/
