Thinking big may be overrated
We are all accustomed to thinking big. When I first got into this business, the mantra was “the bigger the better.” I bought into it and grew a small retail location doing about $2 million a year into one with several locations with sales nearing the $15 million mark—all in 4 years. I was actively looking for new clients, doing some crazy (and expensive) advertising, and an acquisition or two. Fast forward to today, and my agency is no longer in a retail storefront and my sales are nowhere near $15 million. But I am more profitable. For me, smaller was better. Look at Royal Caribbean and their new Oasis of the Seas. It is the largest ship afloat—rumor has it that when they finally put it in the water, sea level rose 1 foot worldwide and New Orleans breathed a sigh of relief. From the initial reports, this bigger ship is having some unintended consequences. Other ships in the company’s fleet are feeling the pinch. And with the bigger price on the Oasis, consumers are resistant to opening their wallets. Granted, we are in a recession and time will tell. But this is not about the Oasis or Royal Caribbean; this is about you and me—the small agency owner looking to make a living against all odds.
As many of you know, I do a lot of small to medium sized groups. As we all know, groups can be very profitable and are a good way to grow the bottom line of your travel business. But all groups are not created equal. Just as there are good clients and bad clients; there are good and bad groups. Your job is to pick the correct one! I want to highlight two actual groups we have organized in the past four months.
- Carnival Cruise Lines—7 Night Pride Category 8B—August 2009
We all know about the dreaded Non Commissionable Fees that are never explained, rarely justified and continually eat away at the bottom line. The group priced out for two per cabin (mind you they do nothing for single parents) at $2182. The commission was $261 per cabin. We sold the 10 cabins so the gross commission to the agency was $2610. As with most cruises, this was mostly inclusive and we arranged a few private events with our Group Amenity Points. The clients had an average folio of $645 at the end of the sailing. For those familiar with cruise groups, the lines do not make it easy. There are payment deadlines, penalties, and the general hassles of assigning cabins, arranging the events, and more. To effectively sell this group, I needed to front the $5000 deposit at the time of booking. When all was said and done, we received our commission payment (which was incorrect and required another 2 hours to reconcile) 6 weeks after the group returned.
- Rocking Horse Ranch Resort—3 Night Long Weekend – November 2009
This is a mostly inclusive hotel in Highland, NY. Our trip included all meals, three special events, a waterpark, trail rides and all the amenities that go with the resort. The price for the weekend was $815 per family of two, and they do work with single parent families. The commission per room was $245.10 per room and included a base commission plus a mark-up assigned by the agency. We sold considerably more than ten rooms, but to compare, let’s make the assumption based on ten rooms. The commission to the agency was $2451. Upon checkout the average folio for additional expenses was $79 per room. With the ranch, I dealt with the Reservations Manager and I was not required to submit ANY money until 60 days before we arrived. The balance was due 14 days before arrival. Name changes are not a problem. To sell this group, all I had to do was tell them the date and let them know how many rooms I thought I needed. If they needed to take some back, they would call. If I needed more, I would call. How easy is that? Oh, and we were paid our commission within 7 days. The mark up was retained.
All told, we made $159 more on the cruise, but at what cost? We had to front $5000 on a deposit which was tied up for six months. We probably spent three times as much time making sure the all of the details were being addressed. Carnival I dealt with a res agent, a “partner advocate”, an events person, and of course an accounting person. At the ranch, I dealt with one person. At Carnival, I waited for my money. At the ranch I had it almost immediately. Check out some of these numbers:
|Commission To Agency||$ 2,610.00||$ 2,451.00|
|Daily Commission To Agency||$ 372.86||$ 817.00|
|Cost Per Day To Client||$ 311.71||$ 271.67|
|Additional Expenses To Client||$ 645.00||$ 79.00|
I am not suggesting shying away from large or long groups. But I am suggesting that you take a good long look at the true costs involved with each. An $800 long weekend is a lot more palatable to many more clients than a $2100 week—it should be easier to sell more. And while it is not a very good statistic, look at the daily commission earned. There is a lot more that can go wrong (and cost you money) on a 7 night vacation than a 3 night one. Clients are more forgiving on a three night $800 trip than a seven night $2000 one.
Both of these groups were in a drive market. How many resorts or destinations are within your drive market that you have possibly overlooked? As you prepare for 2010, it might make sense to sniff some out and forge some relationships; because if I had my “druthers” I would take the ranch trip any day of the week.