Unlike other retail businesses, air travel is not pre-sold in ‘bulk’, and suppliers do not keep an inventory or stock. Trips are not purchased from airlines until the customer is ready to book a specific flight.
This section takes a bit of a closer look at how the various players fit into the airfare sales channels. Fortunately, this part of the industry is pretty straightforward.
An air carrier is usually just another word for airline. While technically there is a slight difference between a carrier and an airline, you do not need to concern yourself with the details.
Travel Agencies / Travel Agents
Travel Agencies are agents on behalf of travel suppliers or vendors – such as airlines, hotels, and cruise lines – and they sell various travel and tourism related services to the public. Larger travel firms are commonly referred to as travel agencies. Individual agents who work for the agency, or sometimes even independently, are known as travel agents.
Tip from the Pros: The terms vendor and supplier mean the same thing, and are used interchangeably across the industry (and across this training too for that matter).
Some agencies focus on leisure air travel (as in your overdue vacation to Rome). Others only deal with business travel (such as getting corporate executives to important meetings or conferences). And then there are those that do both. There are also agencies that are tour operators and organize scheduled tours with all the amenities from A-Z. As you will learn in chapter five, the airlines treat leisure and corporate travel very differently.
In the USA, there are five different categories of agencies:
- Independent – Agencies that operate independently. Typically, they cater to a specific geographical area or a niche market. Examples would be your local storefront or home-based travel agency, or a niche agency that specializes in travel for sports teams.
- Franchise – Just like in other industries, travel agents can join a travel franchise. They will be bound by all the corporate rules and brand guidelines of the franchise, but the tradeoff is that they have a huge support system in place. Dream Vacations and Cruise Planners are examples of franchises.
- Consortium – A travel consortium is an organization made up of independent travel agents or agencies. They negotiate with airlines, hotels, cruise lines, and other suppliers on behalf of their members. Signature, Virtuoso, Travel Leaders Network, are some of the big ones.
- Host – Host agencies are large associations that allow smaller agencies to tap into their buying power and booking infrastructure as an independent contractor. Unlike a franchise, host agencies do not force travel agencies to operate under their brand. Most home-based travel agents work with at least one host agency. OASIS and Travel Planners International (TPI) are examples of host agencies. Virtually all host agencies also belong to a consortium.
- Mega agencies – As the name implies, these are the big boys. Typically, these agencies do more than $100 million in annual sales. AMEX ($5.1 billion in 2016) and AAA ($3.8 billion in 2016) are among the biggest.
Online Travel Agency (OTA)
OTAs are travel agencies that allow clients to book all their travel needs (e.g. flights, hotels, cars, vacation packages, etc.) online via an automated booking engine. Some of the most popular are Expedia, Travelocity, Kayak and Priceline. Technically, an OTA is basically like a traditional travel agency, except that they operate online and in real-time. (Are they better? More on that later…)
Travel Management Companies (TMC)
Corporate travel is the term used to describe the travel needs of corporations that fly their executives often, and is a world unto its own. Airlines even have different pricing models for business travelers. Larger companies do huge volumes of travel – often even more than a big traditional travel agency. While many larger companies elect to manage their own travel, and have their own Corporate Travel Management department, others outsource their corporate travel needs to Travel Management Companies – or TMCs.
A TMC functions in a similar manner to a regular travel agency, but it only deals with corporate clients. A large TMC may serve many hundreds of business. Smaller TMCs will serve a few select businesses, or sometimes they service just one large client.
A TMC manages all the travel needs of a company, such as: Airfare, ground transportation, hotels, visas, passports and events.
Just as in many industries, the airline industry also has wholesale distributors or brokers. These are known as consolidators.
Consolidators have contracts with major carriers to sell airfare to leisure travel agencies at reduced prices. The airlines benefit since consolidators can reach niche markets they themselves are not close to. The benefit to agencies is that fares through consolidators will be lower than published rates available from the airlines themselves. As mentioned before, consolidators normally do not buy the seats in advance for resale. They sell available seats at special rates that they have in their contract with the airlines. Airlines normally preset the retail selling rates for these fares, thereby ensuring that the fares are not undercut on the market.
Not all travel consolidation is the same.
Domestic consolidation: Airlines offer very small savings to consolidators on domestic routes in the United States. Therefore it is not very much in demand.
International consolidation: Airlines offer much larger savings to consolidators on international routes, making it very much in demand from travel agencies.
Tip from the Pros: Keep in mind, that the biggest chunk of the savings are passed on to the agencies. This means that consolidators work on very small margins. As a result, consolidators have unfortunately become known for their lack of service. There are but a few exceptional consolidators who have gone against this trend, and carved out a name for themselves for their stellar white-glove service.
In order to buy wholesale airfare, a consolidator, agency or TMC will have a contract with the airline. There are different types of contracts, such as leisure and corporate. The contract will determine the pricing, and is discussed in more detail in Chapter 5.
Smaller leisure agencies typically rely on the contracts of their host agency or a consolidator. Corporate travel managers may have direct contracts.
Almost everybody knows that JFK is Kennedy Airport in New York, and LAX is Los Angeles International Airport. All airports are identified by a three letter code, and those codes are set by IATA (more on IATA later).
For your convenience, here is a short list of just a few of the main ones you’ll definitely want to familiarize yourself with:
There’s no need to memorize them all. You can always easily find all the info you need with a simple Google search.
Chapter 1 Takeaways…
- Five categories of travel agencies: Independent, franchise, consortium, host, mega agencies
- A TMC deals exclusively with corporate travel
- Travel consolidators are like wholesalers
- International consolidation is the most lucrative