International Travel Agency Business Plan

ATI plans to focus its initial efforts on the adventure travel market in the greater Woodville area. Adventure travel falls primarily under the leisure travel category. Revenues from leisure travel earned by U.S. travel agencies exceed $50 billion annually. Adventure travel is a sub-category of leisure travel and can be further broken down into hard and soft adventure travel. Annual expenditures in the U.S. market are estimated to be approximately $40-50 million for soft and $12-15 for hard adventure travelers.

4.1 Market Segmentation

ATI’s target customers are health-conscious couples and individuals, with median household incomes of approximately $50,000. They are interested in popular adventure activities such as skiing, whitewater sports, and mountain biking and major purchasers are located in urban areas within these states:

1. California
2. Florida
3. New York
4. Texas
5. Illinois
6. Nevada
7. Hawaii
8. New Jersey
9. Pennsylvania
10. Georgia

Adventure travelers are slightly more likely to be men between the ages of 18-34. However an increasing number of hard adventure travelers are women (some statistics suggest that women comprise 49% of the adventure market). Men on average spend more than women on their adventure travels. ATI’s primary customers, however, are married couples, ages 25-35, with children and household incomes over $50,000.

4.2 Target Market Segment Strategy

ATI is located in the heart of the Pacific Northwest. The natural beauty and abundance of outdoor activities attract many fitness oriented individuals. Per capita, the area has more people than any other in the nation who actively participate in mountain and water sports such as skiing, climbing, kayaking, whitewater rafting, mountain biking, etc. These are the people in ATI’s target market. ATI will focus on the sale and promotion of adventure travel primarily to individuals, but also to corporate clients in the Woodville area.

4.2.1 Market Trends

One notable trend in the travel industry is increased deregulation. Deregulation has increased the need for differentiation and has, in many cases, lowered the prices of airfare and other travel related services. Additional trends include caps on agency commissions by many of the larger airlines, increases in adventure travel, and reduction of profit margins. More than 50% of the U.S. adult traveling population, or 147 million people, have taken an adventure trip in their lifetime, 98 million in the past five years. Approximately 31 million adults have engaged in hard adventure activities like whitewater rafting, scuba diving, and mountain biking. An additional 25 million engaged in both a hard and soft adventure activity. Activities most commonly participated in during adventure vacations: camping (85%), hiking (74%), skiing (51%), snorkeling or scuba diving (30%), sailing (26%), kayaking or whitewater rafting (24%), and biking trips (24%). Customers tend to be young and affluent, ages 18-34, and one fourth are from households with annual incomes of $75,000 or more.

4.2.2 Market Growth

The travel industry is growing. Reasons for this growth include a healthy domestic economy and the devaluation of currency in other regions which has made travel less expensive for U.S. residents. Leisure travel has increased by 3.2% in 1997 and is predicted to grow 2.0% in 1998. The healthy economy has increased business which in turn boosted domestic business travel 4.8% in 1997 with an estimated increase of 3.6% in 1998. Adventure travel, which is growing 10% annually, is one of the fastest growing segments of the travel industry. Statistics show that 8,000 U.S. companies offered adventure packages that generated $7 billion in 1997. There also has been a 66% increase in executive participation in adventure travel between 1992 and 1996.

4.2.3 Market Needs

Many potential customers are unsure of the location they wish to reach. Part of the value associated with travel agencies is the knowledge they possess about destinations. Customers look to the agency to provide them with sound advice for a competitive price. ATI is confident in its ability to do so. Time is a precious commodity. ATI can save the customer time and money, and help to ensure that they are satisfied with their vacation.

4.3 Service Business Analysis

The U.S. travel and tourism industry is the nation’s third largest retail industry, and the U.S. Department of Commerce says that it will be number one by the year 2000. Revenues from travel have increased approximately 100% in the last decade. U.S. travel agencies produce over $100 billion in revenues each year. The market is separated into two main categories, business and leisure travel. Each contribute about 45% to total revenues. The remainder of revenues are generated from combined business/leisure trips. The market is further separated into domestic and international travel. Domestic travel accounts for approximately 70% of industry revenues. Business travel can be divided into two categories, the medium to large corporate account and the small independent businessman. Leisure travelers are classified according to the types of trips they take, income, or age.

The four primary leisure travel groups are:

1. Adventure, Special-Interest, R&R, Honeymoons, and Sightseeing Trips.
2. High-Income Travelers.
3. Budget-Conscious Travelers.
4. Families, Students and Seniors.

4.3.1 Competition and Buying Patterns

There are many activities and types of travel available to people contemplating an adventure vacation. These substitute products and services are one type of competition. Theme parks, motorhome trips, and cruises are just a few. Other substitutes include less expensive, self-planned, or trips geared towards more traditional types of vacations. In addition, potential customers do not have to vacation. Instead, they may elect to spend elsewhere, or invest the money they would have otherwise spent on a vacation. Direct competition can come from virtually any agency, and there are several agencies who specialize in adventure travel in the United States. Lifestyle, age, and disposable income influence the decision to travel and in which type of travel to participate. Adventure travelers make purchase decisions based upon their desire to combine athletic interests with vacation time. The average adventure traveler engages in one adventure travel vacation every 12-18 months.

4.3.2 Main Competitors

1. Rollins & Hayes: Based on the east coast, Rollins & Hayes are the most well known and respected adventure travel agency in the world. They have been providing adventure travel packages for over twenty years. Rollins & Hayes have successfully integrated travel agency services and adventure travel activities. This offers them complete control over the entire vacation. They have the advantage of an established reputation, high-quality trips, economies of scale, and strategic alliances. However, their packages are expensive and appeal primarily to a high-income clientele.
2. Sundance Travel: Based in Colorado, Sundance is a traditional agency and has been in business for 10 years. They have gradually made the move towards adventure travel specialists and are now recognized as such. Their strengths are experience, reputation, and financial solvency. Weaknesses may include high personnel and management turnover and the lack of a clear plan for future growth.
3. Global Adventure Travel: Global was established in 1995 and they have successfully established themselves as adventure travel specialists. They are based in the Los Angeles area. Global has done a good job positioning themselves through successful marketing communications and management. The Los Angeles area contains a large adventure travel market. It is, however, a very competitive area.

4.3.3 Business Participants

The travel industry is similar to many others. There are large national chains, small home-based businesses, consolidators on the Internet, etc. Membership numbers in some of the travel related associations give some indication of the number of participants in this market. The American Society of Travel Agents (ASTA) reports 25,000 members in 135 countries, most of whom are small businesses. The Association of Retail Travel Agencies (ARTA) has another 3,000 members. In addition, there are many agencies not affiliated with these associations but with one or more of the approximately 35 travel industry organizations in the country. ATI has approximately 30 immediate competitors in the greater Woodville area, including two agencies that are branches of national travel agency chains.

4.3.4 Distributing a Service

The primary distribution pattern in the travel industry is from supplier to agent to consumer. Distribution between supplier and agency is regulated by a conference system. The two conferences through which agencies gain access to air travel providers are the Airline Reporting Corporation (ARC) and the International Airlines Travel Agents Network (IATAN). These suppliers can be contacted through Computerized Reservation System (CRS). Travel agencies receive a supply of blank airline ticket vouchers from the ARC. The agency is responsible for proper storage of and collecting payments for the vouchers. One notable change in the distribution channel has occurred. Wholesale houses have started buying large quantities of airline tickets and selling online for reduced prices.