James A. (Jim) Buckley, CTIE
At some point, perhaps years ago, you decided to enter the travel industry. You might have joined to garner discounted travel or to supplement your income. You may have joined the industry to become a valued and trusted Travel Advisor earning a great income from a well-heeled clientele. We all bring different backgrounds with unique skills and different levels of business experience.
But regardless of the journey, now you find yourself in management and your world has changed, in many cases, dramatically. You now have responsibilities that are more than you had anticipated. Yesterday it was a small conflict between two associates. Perhaps last week you dealt with two situations: a client complaint regarding an employee and a supplier whose policy was misunderstood by someone and you have the responsibility to sort it all out. All of these and many more are simply routine in your life these days. Regardless of your area of specialization, we all have those daily unanticipated challenges that occur. Such conflicts and unforeseen challenges typically take up the most time and energy. However, you cannot overlook these surprises.
Now, how about the anticipated, planned, and necessary tasks that go along with your responsibilities as a manager. These include routine things such as business licenses, myriad insurance policies (workmen’s compensation, liability and do not forget an errors and omissions coverage). Add to those personnel management, marketing, community relations and other administrative tasks. Include personal travel and family issues and there is little time left in the day.
All of this can be overwhelming, but you have a passion and love for the travel industry because of the continuing pleasure you and your team deliver to your clients in the planning and delivery of seamless travel for your companies’ clients. In turn, they also appreciate that when a wheel occasionally comes off the cart, you and your team are there to fix it and keep them moving forward. Perhaps your greatest satisfaction comes from the “thank you” letters, emails or phone calls received when these happy travelers return home. It feels great, but it is exhausting.
All these things keep you busier than you thought you would ever be, and you do not seem to have any spare time anymore. But there is another item of consequence you can easily overlook. And if you do not pay attention you will not continue in your current position much longer. What is so important? Making a profit!
You know how to be a good manager. You probably engage in training that will enhance your opportunity for success. You may be brushing up on resolving conflicts within your organization, understanding the strengths and weaknesses of personnel, coaching an employee to manage their time better. These things will contribute to your success but if you are not profitable as an owner/manager, in charge of a branch operation, etc. you will soon feel the earth shaking beneath your feet and looking for solid ground somewhere else.
So much time is spent with suppliers seeking marketing support, knowing at what level of sales you need to reach, motivating your sales team not only to sell more but to be cognizant of the commission. levels, not overlooking ancillary sales of items such as travel protection plans, transfers, pre- and post-travel extensions and that one category that we/you all fear, charging a fee for our professional services.
“OK”, you may think to yourself “I have covered all these things and I am producing a profit. I am an exceptionally good manager, so I do not need to read further.” It is an easy trap to fall into, and I’ve done so myself, even with my prior corporate business training. I only had one measurement – did I make money?
I was not exceptional because I was not maximizing my profit potential, and frankly I did not know the next steps if I wanted to be my best. I did not know how to measure my agency against an agency of similar size. I did not know where the top was or the steps necessary to get there.
I searched for comparisons, but most smart competitors will not share their confidential business vital signs. Yet these same leaders had similar questions and did not know where to look either.
Here are just a few of the questions to ponder:
1. What is the productivity of my employee travel advisors?
2. Are we paying too much for telephone service?
3. How much of my gross profit should I be spending on marketing?
4. What is my total employee expense as a percentage of gross revenue?
Once I started asking, these new questions never stopped and never got answered. As a result, I lobbied within my consortia to find a solution and it turned out that many managers and owners were asking the same questions for their agencies. But in a competitive market, no one wants to share the most intimate information about their business. I was certainly fearful of doing so. There is already enough competition for travel spend; if other agencies know my business details, they will eat my lunch and I will be in line at the soup kitchen.
WHAT IS THE ANSWER? BENCHMARKING.
It turns out that my consortia were getting the same questions from many owners and managers. In response, they reached out to a professional firm who specialized in confidential data management. In short, someone who knew how to slice it, dice it, and serve it up in an appetizing way without giving away specifics about any one agency.
Everyone knows that the travel industry, at the agency level, has a thin financial margin. Increasing your margin by one percentage point will not be easy but can add significant dollars to the bottom line. Determine your current number and establish a goal. The math is simple. If agency with $8 million in I If An agency with sales of $8 million with a ten percent margin that increases the margin by one percentage point will provide an incremental $80,000 on the bottom line at the end of a year.
Still, I had questions:
• How can I trust the participants are answering truthfully?
• Will they have the same challenges that I have?What will this cost my company?
• How does the privacy process work?
• How long will this program take?
• What will I learn that I did not know?
• If I learn something how will I implement the changes?
• Will this really make a difference?
Here are the answers to those questions and a few more.
In the Benchmarking process the first step is to make sure your moderator has a strong ethical standard and knowledge of the industry. For example, if this is going to be from the management of travel sales versus the supply side the industry knowledge required may be different.
How do I know I can trust the participants?
“Trust but verify” was a famous quote by a former President of the USA. An agreement must be drawn up and signed by all participants regarding the confidentiality of information shared and of the discussions conducted. Any violation must be dealt with immediately and the violating party will be immediately excommunicated. Trust and verify.
Participation must be limited to those who signed the confidentiality agreement. If your group is part of a consortia those members must also be part of the confidentiality agreement.
Will they have the same challenges that I have?
Probably not. You will have plenty of commonality, but your strength may be another member weakness, and vice versa. Here, size matters. If your group consists of as few as ten to fifteen members you will find variability in responses. Still, a significant benefit of benchmarking is not only the sharing of data which creates benchmarks but the discussion that leads to potential solutions which translates into improvements.
What will this cost my company?
Your company cost will be a variable. The cost will come in two ways. The first is the cost of the facilitator and the collection, processing, and distribution of data. The second cost is the group’s meeting frequency and location of meetings. My experience indicates twice a year is a good schedule enabling sufficient data available to be reviewed. As part of a consortia, we would meet at various suppliers’ properties. There are three reasons to do so. The first is that members on the supply side appreciated our supporting them as members of the consortia. The second is that it will also provide them a chance to familiarize you with the property hoping that your company will sell more now that you have experienced the quality and service, they provide. The third reason is that over time your travel expense would average out.
How does the process work?
Your company will provide data via an input system and the moderators team will process it and feed it back to you, including the data from your fellow members, for review prior to the meeting. This will provide you an opportunity to prepare questions based on the review and is the beginning of your ability to enhance your company’s performance.
During your meeting, discussions surrounding the questions will provide insight into how you may improve your local situation. Likewise, keep in mind that your insights might benefit another member of the discussion as well. The process requires two way sharing to work.
How long will this program take?
There is no factual answer to this question. Why? Business situations constantly change due to internal or external market situations. Improvements do not typically come overnight but are achieved gradually via the benchmarking process the improvement may be measured. On a personal level I found out rather quickly that while I was aggressive in my local marketing efforts, I was not obtaining sufficient marketing support from my supply side partners. With a better understanding of what was possible I accomplished two things, reduction in consumer event cost and the ability to afford a higher quality event.
What will I learn that I did not know?
Amazingly, there once again is no hard and fast answer. The results of your group’s input will provide you with where your specific numbers relative to the group as an average or a median. The objective is not to necessarily match a number to a fellow member but to learn what is possible to achieve based on your local conditions. You may never have the highest Travel Advisor productivity of all the participating members, but directional improvement matters. If through your participation, discussion, and changes you have made make back at the shop, you have improved the productivity by a few points, you could be creating a significant financial improvement.
Other benefits are softer in nature. You may learn new ideas on how to manage a challenging employee, consider a unique marketing concept that might work in your demographic, or hear about an emerging industry trend that can put you on the crest of the next wave.
If I learn something how will I implement the changes?
A well-planned marketing campaign may not meet your definition of success. Why? With the diversity of your membership, you may learn and take advantage of coaching and successfully implement a new or revised program. During follow up meetings or between meetings, by communicating with the member(s) you can discuss confidentially your progress and take advantage of their knowledge when you are not concerned about a meeting timeline.
You may expect to provide the same coaching to your fellow members as they adopt programs that you have executed well.
Will this really make a difference?
Yes, absolutely. Your participation will help you reinforce actions that you do well, and you will have an opportunity to learn how to improve your profitability. In the final analyses everyone knows that the travel industry, at the agency level, has a thin financial margin. Increasing your margin by one percentage point will not be easy but can add significant dollars to the bottom line. Determine your current number and establish a goal. The math is simple. An agency with sales of $8 million with a ten percent margin that increases the margin by one percentage point will provide an incremental $80,000 on the bottom line at the end of a year.
The difference you realize will be up to you. The opportunity will be there If you choose to take advantage.
In closing let me share just a few of the most impactful benchmarking categories that enabled me to increase profitability.
Revenue per FTE Agency Employee – Anecdotally, I knew who was selling well but I did not know their revenue contributions. This is a critical factor in coaching and managing for success.
Independent Contractors Revenue Measures – Are my IC’s contributing to the profit of the company or are they just having fun with their hobby? Both can be ok in certain situations, but knowing the difference helps me determine how much support they deserve from management or if they should be retained.
Dues and publications, Legal and Consulting, Occupancy, Postage – Are these expenses, which are typically not examined in detail, in line with the rest of the peer group? If not, are any of them within your control? When was the last time you looked at your postage expense? Little things can add up to a big difference.
Interest Earned and Interest Paid – Which credit cards do you have and at what percentage of interest? Has the interest charged by my bank changed? Should I change banks? These are critical items which can be changed quickly and quietly. They require regular monitoring.
A travel agency manager is busy every day doing the hundreds of tasks that must be done to keep the business running and clients happy. We become creatures of habit and assume, too often, that the status quo is OK. But if you are to be an effective manger, you must always look for ways to improve your organization. Daily operations are important, but good fiscal management is the most critical element. So pause a moment and ask yourself how efficiently are you managing your business What can you do to measure your effectiveness, your return on investment? Are you the best manager you can be? There is one great way to answer that.
Look for a benchmarking group. Find the one that is right for you. Before joining, interview some of the members and the moderator to determine if the members businesses could be considered “peers”. Understand the parameters and requirements of membership. Ask the moderator if they think your firm would be a good fit.
Then, when you join, participate enthusiastically. Understand that from time to time you may be a little humbled by what you learn but also be prepared to have a solid and more profitable business as a result.
