This week seemed to be full of good news for the travel industry. ASTA held another very successful trade show. One of our TRO Community members, Bob Malmberg was named as a top African specialist by Travel + Leisure magazine. And to top it off Ben Bernanke said the recession was “likely” over!
Ben’s impressions were also echoed by several leaders in the travel industry who claimed they are seeing upticks in activity. All this bodes very well for the industry as a whole as I am not sure how much longer many could stand a falling economy.
I hate to ruin the illusion with a “but”, but while this is indeed good news we do need to be a bit careful before rejoicing. In the past two weeks, I have read many articles stating that we are now operating in a “new normal” environment. Much like the post 9-11 travel experience (shoes, liquids, laptops, etc) our businesses going forward will be very different.
Over the past 12 to 18 months consumers across all industries have become accustomed to steep, steep discounts. During the holidays, it was not unusual in our local mall to see 90% off sales. Consumers have now become accustomed to asking for a discount or bartering for the cheapest price. And no self respecting business wants to be known as the “cheapest”—at least I don’t.
For years, we have talked about value. People will and do pay for value. Read the next installment of Nolan Burris’s series, The Edge of Excellence to hear a great tale (coming this Wednesday to TRO) of value. For years we have talked about specializing. John Peters discusses this in his column from last week.
With a decided shift in the consumer’s mindset, if we are to survive, we need to once again adapt. Granted, we are good at adapting, but this time around I believe there are not going to be too many options. The way I see it, you will have to either become a true specialist or niche operation, or you are going to have to make your profit on volume—preferably within a niche or with a select few suppliers.
As John Peters said, people are not looking for you to regurgitate information they can find themselves with a little effort. If you can offer them something they can’t find (value) you are worth every penny of their vacation dollar.
This reminds me of a story I heard a while ago. A printing mechanic retired after 50 years with the company. Not a day went by when he did not have the presses running at full capacity. When he retired, they threw him a luncheon and gave him a watch and sent him on his way. The day after his retirement, the presses died and the new mechanic was unable to get them up. The company was losing money by the minute and called in the retired mechanic as a consultant. They said they would pay him whatever he wanted to get the presses up. He agreed and came in to fix the presses. He went up to the press, put his ear up to the side, drew an “X” with a pencil and told the new press mechanic to hit the “X” with a hammer. In three minutes, they were up and running. He submitted an invoice for $100,000. The CEO was furious and refused to pay $100,000 for 3 minutes and a pencil mark. He told the retired mechanic that he needed to itemize the repair. Quite simply, the mechanic scribbled down,
1-“X” marked in pencil $1
1-Knowing where to put the “X” $99,999
This man was paid for his expertise. Sure it was a steep price, but do you think it was ultimately worth it to the CEO who was losing money for each minute the press was down? Define your specialty, bring value, and charge for your expertise.
If you decide to go the volume route, you need to be prepared to conduct the transaction as fast as possible and with as much automation as you can afford to implement. In a volume operation (and they are just as viable and profitable as a niche one) it is about moving product. When someone buys a cruise from you, you had better have an electronic document for them that will answer their EVERY question. Quite simply, if you are not selling, you will be losing money. If you sell a cabin an hour with Carnival at $130 commission per cabin, your income is $1040 per day. Now let’s say a client needs to chat you up for 90 minutes. All of a sudden your income has been reduced by almost 25%. When was the last time you took a 25% pay cut? Can you afford to do it more than once? And remember, this income is gross income and your expenses and overhead need to be subtracted. It is very easy to get in the hole.
And keeping out of the hole is a good thing and one of the best arguments for narrowing your focus to a few suppliers. Sure we all want to sell the Crystal World Cruise and get a $20,000 commission. But can you sell it consistently? Focus on a few suppliers and forge the relationships and really know their product. That way when a client does call to chat you up—you know the answers immediately and can address the concern and move back to selling.
To me, volume is a very dangerous proposition for small to middle sized agencies. If you are large, have many employees, and a decent marketing program, it will likely work. If not, reconsider and specialize.