I have heard more complaining from retailers about the grind of having to compete with their suppliers. Some cruise lines have been poaching clients online, onboard and offline in any way possible. Nice “partners in travel”. Direct bookings to all suppliers’ websites are growing. The 9 largest airlines all made money last quarter while managing to irritate travelers more & more with all of their $50 and $75 fees at every step. It is almost enough to get you to throw in the towel Well, maybe not yet!
What’s Hot?
We are often asked, “What’s hot in travel?” Here are six areas we have identified as “hot” or growing in the coming years. Could one of them fit in for you?
- Medical Tourism
- Space Tourism
- Faith/Mission Travel
- Government Travel
- Corporate Travel
- Educational Travel
GDS contracts are still very lucrative! And in fact, are a major portion of corporate agencies’ income.
Generalists serving the mid-grade leisure travelers are in the toughest spot in the distribution chain and will remain so until housing & employment prosper again. Specialty agencies and niche tour operators continue to thrive as do the top tier of deluxe and luxury travel sellers. The recovery is slowly coming around again. 2011 should be up 10% from 2010 levels barring any major negative events. Pricing is certainly rising…owners need to be sure to button up any contracts and define the roles for independent contractors versus employee status as this is a key tax collect initiative.
Price and Business Valuations
But businesses are changing hands and the second most popular query we get is “how much is it worth?” Here is an idea for you.
Sales Price =2X Seller’s Discretionary Cash (which is defined as Total Perks + Benefits + Salary or Total Owner’s Takeout)
This formula can be used to determine the fair price for a small business with a couple of employees and no hard assets…unless barrier to entry is high.
Larger companies, that are profitable, are priced at 3 to 5X EBITDA.
An October 14, 2010 article printed in The Wall Street Journal entitled, ‘Businesses Put Up for Sale Smack Into Harsh Reality’, pointed out this statistic…
Small business owners who had listed their company at the median listing price of $245K ended up selling for $140K.
It’s better to price it at $154K orginally, or at approximately 10% above reality, which allows the owner to save time & headaches, and still have a completed sale.
Sellers, do not limit yourself to only speaking with one buyer, which is a common error. Two buyers are always better—always!
Always use a travel-tourism industry specific attorney. They understand the intricacies of the industry—ARC, business under deposit but travel has not yet taken place at the time of closing, accounts receivable, and accounts payable treatments, etc..
Why Sell?
People get out of a business for many different reasons. Here are the most common ones we hear:
- I am in my mid-60s…its time.
- Tired of the day-to-day battles.
- Surviving downswings is getting too tough.
- I will simplify my life by selling.
- Business continues to be more difficult, so I made the move to the exit now.
- Selling will insure my employees and clients can continue working together.
And remember, most buyers want the seller to hang around for a little bit to ease the transition. Typically the agreement is based on the seller’s terms.
Need to know the current value of your business? Give us a call.
Innovative Travel Acquisitions, Inc. president Bob Sweeney and staff have completed 514 acquisitions of tour and travel related businesses since their inception in 1991. He is a proud member of ASTA,IBBA, NTA and many other known industry affiliations. Known as “the Matchmakers for the Travel and Tour Industry” they are available to answer any questions you may have by contacting them via phone 800-619-0185 or by sending an e-mail to admin@tvlacq.com.