Corporate travel agencies are the key driver of growth in the retail travel industry, significantly outpacing their leisure counterparts in terms of sales and new hires.
While only 7% of all U.S. travel agencies are corporate, their sales account for three-quarters of the total travel agency market. Having rebounded quickly from the recession, the vast majority of corporate agencies are bringing new agents on board.
Corporate travel rebounded first
These are among the findings of PhoCusWright’s new study The Once and Future Agent, PhoCusWright’s Travel Agency Distribution Landscape 2009-2013, which noted that TMCs are enjoying increased demand from corporate clients for managed travel.
“When Americans and American corporations realized by the second half of 2009 that the sky wasn’t falling, things started coming back to normal,” Douglas Quinby, co-author of the study, told Travel Market Report.
“Corporations rebounded first. We have seen that corporate travel and corporate agencies continue to outpace leisure growth and we project that outpace trajectory will continue at least through 2013.”
Corporate sector has big clout
Almost two-thirds of corporate agencies report annual sales of more than $5 million. That stands in sharp contract to the leisure sector, where more than three-quarters of agencies report less than $5 million in annual sales.
Corporate sales will account for a growing share of all agency sales in the coming years, as agency corporate business grows and the leisure side contracts, Quinby predicted.
Corporate agencies are also likely to be the primary driver of travel agency employment. Nearly 80% of corporate agencies have hired agents within the past two years or are planning to hire.
Two-thirds of corporate agencies say profitability has improved after the recession.
Big contrast to leisure side
The leisure sector is almost the mirror opposite. More than half of leisure agencies say profitability is worse than it was before the recession and only a third are hiring.
Many leisure agencies are looking for an exit strategy. Fully 20% of leisure agency owners are considering selling the agency and moving to a home-based model. Another 10% are planning to close a location.
Can leisure agencies cash in?
Some leisure agencies may be able to cash in on the growth in corporate travel by shifting their market mix toward the corporate side.
It can be a tough transition, Quinby cautioned, noting that corporate and leisure travel require different skill sets.
“But we see a lot of small to mid-sized agencies that do a very good job with corporate travel, especially for local and small business that may not want or need the full travel management consulting capabilities of a tier one TMC,” he said.
“We see agencies that have focused on leisure in the past shifting to become more full-service operations offering air, car and hotel.”