Profit is a financial gain, the difference between the amount earned and the amount spent in buying, operating, or producing something.
There is an old saying that ‘turnover is vanity but profit is sanity’ and it is very true. Too often, people focus on closing a sale at any cost and either spend to much time and effort in chasing an enquiry that delivers very little margin at the end of the day or end up discounting out of that margin in order to capture an elusive booking — rationalizing that any sale is better than no sale at all. All travel agencies represent a team effort where every single member of staff needs to be mindful at all times how their actions (or inactions) impact on overall profitability as they are all stakeholders in the business. Here are some reminders of things that agents can do to help maximise their profitability.
- Increase your use of/ dependence on preferred suppliers
Earn more commission by supporting those suppliers who value your business and have agreed to pay you more for the bookings that you put their way. Typically, you can expect to earn anywhere from 10% to 50% more commission by simply moving such discretionary sales to preferred suppliers without even having to grow your own turnover. The added benefit that you get when you support preferred suppliers is that they’re much more likely to ‘bend the rules’ if mistakes or errors occur as you are seen as a commercially important customer to them. This ‘VIP’ treatment presumes of course that your figures are both healthy and regular and that you don’t have a record of regularly causing errors/mistakes.
- Focus on margin
Focus more on margin and less on turnover. Margin is the key in our industry and with so many overheads having increased in recent years; the standard 10% commission is no longer sufficient in order to generate profit for a travel agency and so must be increased at every available opportunity.
- Incentivise staff
The one common denominator that seems to single out more successful businesses is that there is a clear focus on growing sales through the use of both regular (i.e. weekly or monthly) sales targets and staff incentives. Incentives work.
- Reduce costly errors
Prevention is always better than cure and nowhere is this more relevant than where mistakes are concerned. Given the nature of the business that we are in, mistakes invariably cost money and in some instances — lots of money — whether that be by way of ADM’s on incorrectly issued tickets; compensation paid to clients because of mis-advice or nuisance money paid to complaining clients in order to diffuse certain situations before they escalate into litigation. Mistakes cannot, of course, ever be eliminated 100% as that is an impossibility given the fallibility of human nature but they can be greatly minimised through a combination of proper training and instruction; well documented internal procedures; adequately qualified people undertaking the right tasks and an overarching philosophy of checking and double-checking everything before ending the transaction. Ninety to ninety-five percent of all mistakes are avoidable.
- Cut costs
As is explored in more considerable detail in the companion article entitled ’Top cost-cutting tips’, the single most effective way of maximising your agency’s profitability is by cutting your costs as every €1 saved is roughly equivalent to you generating €100 in gross sales value. Costs can be cut by changing your energy and telecom providers; your credit card acquirer and numerous other initiatives.
- Use email rather than phone
Although the cost of phone calls and telecommunications in general have plummeted in recent years the volume of calls made by travel agents is still significant enough that the annual cost of same is still likely to be a considerable four-figure sum, particularly with the percentage of calls that now have to be made to mobile phones, rather than land lines. Try acquiring clients email details whenever possible and communicate with them via that medium whenever possible as the cost of email is effectively zero. The other major benefit of communicating via email is that you will always have a written record of who said what to whom and when — extremely valuable if/when anything gets disputed down the line.
- Improve productivity
The single biggest overhead of any travel agency is the staff cost, so this is an area that agency owners, managers and supervisors need to look at critically. The more productive all members of staff are, the lower the staff ratio to income level is and thus, the greater the likelihood of operational profitably. Productivity can always be enhanced through a combination of internal operational procedure, office layout, proper investment in and use of technology; relevant and regular training and staff motivation.
Good effective selling is all about product/destination knowledge and that can only come about in one of two ways — actual experience and training. One of the most time and cost effective forms of training nowadays are the weekly webinars that Travel Centres conducts every Tuesday morning at 09.30. Each session takes just 45 minutes and can be enjoyed from the comfort of your desk. In the event that you cannot personally attend a given webinar due to being on a day off or away on holidays, each session is recorded and can be shared with upon request.
- Sell ancillary products/services
Focus on margin – overall sales margins can be enhanced by two or three percent by also selling ancillary products/services such as transfers, car hire, attractions, excursions etc.