Study Reveals Unexplored Potential for Sales Generation in Agencies
According to research carried out by Hermes on behalf of Amadeus, travel agencies making full use of technology could increase their productivity by US$ 9,700
Amadeus, a global leader in technology for the travel and tourism market, and Hermes Management Consulting, a leading business consultancy in Latin America, have released the results of an unpublished study entitled "Value Analysis of Brazilian travel agencies". The aim of this study was to provide a better understanding of the structure of operational costs in the sector, to identify pockets of inefficiency that lead to daily waste of resources, and to explore opportunities to optimize sales for travel agencies.
The study included an exhaustive analysis of activities from a sample of 15 leading agencies in various sectors (leisure, corporate, tour operators, and consolidators; small, medium, and large; both clients and nonclients of Amadeus). The main conclusion was that although the Global Distribution Systems (GDS) could facilitate almost all the services offered by an agency, its full potential was not being utilized, as it is mainly seen as a tool for selling airline tickets. This represents a challenge for the industry as airline commissions are decreasing.
Personnel costs represent around 61% of total agency expenses, the largest cost in all sectors analyzed by the study. For tour operators, marketing costs reached 16%, far higher than in the other sectors due to investments made in promoting and advertising travel packages.
The study showed that there was room to reduce costs by improving and automating administrative processes. In a similar vein, business models used in each sector showed that there were many unexplored opportunities for agencies to provide added value. The areas showing the greatest potential for optimization were: hotels, services for groups, marketing trip packages, training staff, back-office solutions, point of sale consultancy, negotiation processes, organizational structure, and Management Information Systems.
To quantify the potential gains and time saved by a more intensive use of technology in daily agency operations, the study compared the performance of Amadeus solutions with the use of telephones, fax, and the Internet for reservations. The improvements in efficiency were significant. The use of the Amadeus Vista sales platform reduced the time required for car rental reservations by 77% (8.3 minutes) and by 56% (4.7 minutes) for hotel reservations. Likewise, transactions involving travel insurance and assistance were completed, on average, 4.5 minutes (56%) faster when compared with the time spent by agents on the Internet.
By using Amadeus solutions, a travel agency could increase its productivity by up to US$ 9,700 per year. Correspondingly, an increase in productivity can also be expressed in terms of cost reduction. Depending on the solutions used, a travel agency could make yearly savings of US$ 4,000 (calculated as the sum of savings in personnel, infrastructure and communications). In addition, a clear improvement in levels of customer service was noted as the average response time could be reduced significantly.
"As the main technology provider for the industry, we are convinced that, to help our customers reach their goals (reduction of costs, increased efficiency in work flows, and increased profits), we must go beyond a simple offering of products. To this end, we have launched a program called “Show Me The Value,” to understand these factors better in relation to travel agency operations,” noted Marcos Torres, President of Amadeus Brazil. “The more we work together, the better we can understand, anticipate, and meet the needs of agencies, offering specific and valuable solutions that have a direct impact on their business volume,” he added.
According to Hernán Goyanes, partner at Hermes Management Consulting, this study demonstrates that in Brazil, agencies are not making full use of the technology they have at hand, as a good part of their cost structure is spent in administrative areas. "There are technological tools that allow a large reduction in terms of time and money with this type of activity, and the use of these technologies will become increasingly important as profits from airline commissions continue to decrease."
The methodology of the Show Me The Value study was applied in markets such as Argentina, Mexico, Colombia, Germany, United Kingdom, and United States. Future research is planned for the Czech Republic, France, Belgium, and Scandinavia. Based on this unique source of knowledge, Amadeus will have a broad perspective on agency profitability, to be used for Research and Development and in services offered. The details of this study can be accessed online at: www.amadeus.com/showmethevalue
About Amadeus
Amadeus has been present in Brazil since 1994 and is a leader in technology for the travel and tourism industries in the country. In 1999, NMC (National Marketing Company) Amadeus Brazil was created, representing the country’s largest global distribution system for travel and tourism. In 2004, Amadeus Global became majority shareholder and assumed administrative control of Amadeus Brazil, beginning a process of renovation in the portfolio of solutions it offered in the country. Brazil is one of the 10 largest markets for Amadeus amongst the 215 in which the company operates. Constant investments in Brazilian operations have allowed the company to speed up its growth in the country, as well as throughout Latin America, where Amadeus is also a leader. In all, Amadeus Brazil has 10 offices in the country.
About Hermes Management Consulting
Hermes Management Consulting (Hermes) is a Latin American consultancy firm specializing in organizational strategies, operations, and company evaluations. Hermes was founded in late 1994 by Osvaldo Gallo and Hernán Goyanes, former executives at McKinsey & Company, who brought significant experience in consulting for leading companies in Europe and Latin America.
Hermes has been very active in sector analyses, company valuations, mergers, corporate strategy and business plan development, as well as the identification and implementation of operational improvements. These projects have focused on the payment systems, supermarket, retail, consumer goods, health care, energy, logistics, apparel, telecommunications, tourism, entertainment and real estate sectors. Not only does Hermes have extensive experience in these sectors, it has also helped assess a variety of acquisition opportunities in numerous other industries.
Hermes has carried out projects in Argentina, Brazil, Colombia, Costa Rica, Chile, Ecuador, Spain, United States, France, Guatemala, Mexico, Paraguay, Peru, Dominican Republic, Uruguay, and Venezuela.
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