Explain the importance of links and relationships within the retail travel environment
Retail travel agents must have links and relationships with other travel organisations to be successful.
Accommodation providers: Travel agents have links with accommodation providers, whether it is with: hotels, self-catering accommodation and holiday centres. The better the link is between the accommodation provider and the travel agent, the more likely they are to have a higher chance of getting the better rooms and more chance of getting an incentive (if they sell 100 hotel rooms they may get an extra £100). Travel agents have these links (which build up over time and business served) with accommodation providers. The link is important because if there is a really strong link, the accommodation provider (example a hotel chain) is more likely to sell and give rooms to preferred agents as they have a good and high business link and their rooms are sold faster by one retail agency compared to another one which may even be in the same location. If the link is weak, both accommodation provider and retail agency lose out of money and competitive advantage.
Tour operators: Travel agents have links with tour operators, these tour operators could be mass market (Thomson), specialist, domestic or inbound. The better the link between them to, the higher the commission rate will be. The current commission rate is 10% when package holidays are sold. When there is a strong link between tour operators and retail travel agencies, the agencies are more likely to get the best deals, offers and new products before other retail agencies. When the tour operator will keep getting business from a certain travel agency, the agents are more likely to get a higher commission rate than other agencies or incentives, example: for every ten package holidays sold in a month, there will be an extra £100. When there is a weak link, it will mainly affect the travel agency as the tour operator may stop letting the agency sell their products and services, meaning other agencies in the same or nearby location will gain the customers who want a specific tour
operator meaning there will be competitive advantage.
Transport providers: Travel agents have links with transport providers, together they can offer customers the best deals whether it be on car hire or coach transfers. The main company’s travel agents work with for car hire is: Avis and Herts, having links with these two companies may allow the agent to sell Avis/Herts product for a discounted price. Travel agents may have links with some coach companies as well in case there is a big group booking or the customer wants to go on the free transfer included in the package holiday. When there is a strong link between transport provider and retail travel agency, customers will benefit as they will get transfers/ car hire for a discounted price/ lower price compared to other agencies. However, when there is a weak link, the travel agency may not have any good deals to offer or unable to match deals. The other downside of having a weak link is there may be not good transport providers left or the products are not to a high standard.
Ancillary Providers: Travel agents have links with many companies that offer ancillary services, the main companies they do deals with are: travel/holiday insurance, extra luggage for customers, foreign exchange, tour guiding and theatre tickets. If the travel agent and the ancillary service provider have a strong link, they may have better offers for customers and good bonuses/incentives for the agent. When there is a strong link between an ancillary provider and travel agency. In the example the ancillary provider will be a travel insurance organisation; they will offer the agency a lower price to sell the insurance to the customers once they have booked a holiday. When the travel agency keeps on using the same insurance company, they may be bonuses/more commission and higher incentives available. For example: for every certain amount of insurance policies sold in a month, there will be an extra £100 or vouchers to spend on the high street.
Vertical and Horizontal integration: Integration occurs when organisations owns or controls a number of different linked business enterprises.
Vertical integration occurs in the retail travel industry when a company controls more than one level of the distribution chain for products and services, in order to gain a competitive advantage over other retail travel organisations. Example, each of the ‘big two ‘multiple travel agency companies are part of much larger travel group. Thomas Cook retail agencies are part of Thomas Cook PLC and Thomson holiday shops are owned and operated by Thomson/TUI.
Horizontal integration is when a company owns or controls other businesses at the same level of the distribution chain. The importance of the relationship is to avoid having competitive advantage with other organisations. The positive of being horizontally integrated is that if there is any competition on the same level of the distribution chain, the competition
can be brought out.
Agency agreements: These agreements are conducted by travel agents on behalf of principals and are strictly controlled by individual agency agreements, as they may be selling different products for the same tour operator but there will be an agency agreement on each product. The importance of agency agreements is to make sure retail travel agents are selling the products and services correctly and in a professional manner. There are also there as evidence that they can sell the products as they have been approved.
Preferred agents: travel agents may have a preferred agent they try to sell their products to the customers. Classic Travel in Loughton has three preferred agents: Club med, Sandals and Kuoni. These three have many booking from classic travel so they have put feature walls in the retail store in order to get more customers. The agents will also get higher commission levels if the holidays are sold a lot. Preferred agents are important because it means there will be more business for the preferred and more likely to get repeat business and customers.
Commission levels: Travel agents get commission on products/services sold: 10% on package holidays and coach holidays, 0-9% on airline tickets, 9% on ferry bookings, 1% on travellers cheques, 25-40% on travel insurance and 9-15% on cruises. This is a rough guide and depends on the agreement. Commission levels are important as low sales may affect travel agents if most of their wages are commission based. Nowadays there is a minimum salary they can earn and the commission is on top.