Op-ed: Surviving the Potential Challenges of The Upcoming Pent-Up Travel Demand Tsunami

The vaccines are on their way! Could there possibly be two industries more excited and hopeful than the travel industry and the restaurant business? There is little doubt that there is a huge pent-up demand from Covid-19 restricted travelers to escape the Corona Virus tethered restraints on their wanderlust.

After what has been a devastating financial year for the travel and hospitality industry the COVID-19 vaccines will undoubtably be the longed-for passport to travel again. It can’t happen soon enough, likely hitting the shores of the travel agency community in the first or second quarter of 2021. All good! Or is it?

Good trouble. The iconic phrase from the late great civil rights activist John Lewis perfectly describes what this message is all about. There is not a single one of us that doesn’t hope the demand for travel doesn’t explode as soon as possible. That said, it’s always possible to have too much of a good thing, at least temporarily. The following explores challenges that agencies may or may not face if the dam breaks.

Let’s start with the realities of the damage inflicted by COVID-19 in 2020.

1. Nearly all travel companies have lost money in 2020 even with drastically reduced expenses and reductions in levels of employment. Many agency owners of agencies that have survived have exhausted substantial business and personal resources to keep their companies alive. Many companies don’t have substantial reserve resources left.

2. In the face of declining income opportunities, many Advisors and IC’s have left the industry for alternative employment opportunities. Some will come back. Many may not.

Now comes an anticipated flood of travel planning requests resulting in what might be an unprecedented level of demand for agency services. What could possibly be a problem with that?

1. To meet the increase in travel planning demand agencies will have to staff up, so much in fact, that a return to prior full staffing levels, even if possible, might not be nearly enough.

2. Staffing back up to meet the demand means back to full-service means, at the very least, livable wage compensation levels. Given the competitive demand for experienced advisors and fewer available than before, wages are unlikely to be much less than before Covid-19, and likely to be even higher.

3. As a result of #2, employee related expenses may dramatically increase for  many agencies now short of financial resources.

4. Much of the traditional commission revenue for the Tsunami of bookings will not be seen for a period of time, in some cases years.

Potential Problems:

1. Staffing 
If there is the anticipated rapid ramp up in the demand for services agency owners need to be able to find enough qualified staff and  guess when they might be needed before the travel planning and booking tsunami overwhelms them. Too soon puts an additional strain on what already may be taxed financial resources and too late may result in poor service leading to a longer-term loss of customers and reputation.

There is probably no sure method for predicting the demand crunch beyond increased web site and social media activity and comparative information sharing with other agency owners and travel industry suppliers. It’s not too soon to start reaching out to supplier sales reps, many of which you will have to rekindle relationships with or create new relationships for those that have been replaced. Both sources can be your “canary in the coal mine” indicator of rising demand.

In many ways this issue is similar to what hospitals and ICU’s are experiencing as this article is being written. Faced with the possibility of a level of demand that can’t be serviced properly agencies may need to think triage. There are many triage alternatives. For example, you might not accept any new clients, except perhaps, from referrals. Or you might only handle travel requests that generate an acceptable level of revenue for the time spent, either as a result of commissions, fees, or a combination of both. 

Other demand management options to consider are providing assistants to experienced advisors to handle busy work tasks not the best use of an Advisors time and targeted training to take full advantage of technology productivity enhancers including vendor tools.  

Given the lack of business in 2020 there will be a temptation not to turn anything away. If you can handle it all, wonderful. If you can’t handle it all with quality, you need to have a Plan B.

2. Financial Resource Availability
As indicated earlier, the financial lag time between planning, booking and the receipt of traditional agency commission revenue sources can be long and create a negative cash flow problem that has the potential to bankrupt a business overwhelmed with too much business. Years ago, a personal friend of this author, was a partner in and engineering design firm that went bankrupt the year the firm was swamped with new business because the collection of receivables fell behind current expenses. Yes, too much demand can be a problem.

There are several potential remedies for the potential lag between service-related expenses and the receipt of revenues. The first, and long past due, is the implementation of upfront non-refundable planning and management fees, and in the circumstance where client requests’ influence the amount of time spent, such as FIT’s, hourly professional fees. While the size and receipt of these fees might not match deferred commissions, they will help to offset compensation requirements and operational expenses. One client of this consultant collected $5,000 in such fees in only a week  a few weeks ago with a minimum up-front non-refundable fee of $750, all with no client push back or refusal. This industry has never really explored the optimal elasticity of demand point on fees. It’s time. If there ever was a time in the history of this industry to create a bi-modal revenue stream with fees and retainers, this is the time.

A second source of revenue to bridge the service expense revenue receipt gap is for suppliers to modify the traditional agency compensation model to pay a portion of the commissions due upon final payment (or even deposit) and before actual travel. ASTA has been playing an important role in encouraging just such a change in the traditional payment approach. Perhaps unthinkable even two years ago, there are a number of suppliers who have warmed up to considering this practice as they begin to realize how badly they need the agency community to for their own recovery. Globus, to their credit, has already led the way by paying commission on each client payment made. Your support of Globus can encourage others to follow.

And last, and certainly not least, is the widespread implementation of agency cancellation policies and fees when they are not included in non-refundable up-front fees. Be sure to make sure your cancellation policies are consistent with travel insurance companies policies enabling you to sell additional cancellation insurance both supplier and agency fees.

3. Think Investment, Not Expense, When Funding Service Capacity to Service Increased Demand
After a year where almost every agency lost money it is a mistake to think of ramping up employee compensation to service pent up demand as an expense. It’s an investment.

Further tapping into your own personal resources, even if possible, may seem like the last thing you want to do but you might want to step back and view it as an investment opportunity. A client recently commented that in January 2020 his agency was worth $2 million on the market and as of today it is worth almost nothing. As painful and frustrating as it might be, fronting a half million dollars of his personal resources to fund the expected pent-up demand for services that will get his agency back to a $2 million valuation is a pretty good investment decision.

4. Availability of “Travel Product”
In the face of overwhelming pent-up demand it is not inconceivable that certain types of travel and destinations will sell out far in advance as well as increase in price. Agencies and agency consortia should consider negotiating reserved space with key preferred suppliers in order to have availability for scarce travel options.

In conclusion
Anyone who has known this consultant for very long or knows him very well also knows that he always strives to see the road ahead along with the opportunities and challenges along the way. The potential explosion of travel demand as a result of Corona virus vaccine distribution embodies both opportunities and potential challenges. Preparing for such contingencies can be a waste of time and effort if what could happen doesn’t. On the other hand, anticipation and preparation are often the difference between success and failure when what could happen does happen. As a former Boy Scout, our motto was always….

There are few things of greater value than true friends who will take the time to review ones’ work, offer suggestions, and not hesitate to tell you that in places you could have done better. My special thank you to Eric Maryanov, President of Travel Agency Management Solutions, Matthew Upchurch, CEO, Virtuoso and Jennifer Campbell, Managing Director, Product - Network Engagement, Virtuoso for being such good friends.