Any company serious about its business is likely to keep a beady eye on its costs, even more so if the industry in which it works is notorious for its thin margins. Travel fits this bill exactly.
So the white paper from Amadeus, Understanding Travel Agency Cost Drivers and Ways to Optimise Business in the UK and Ireland serves the purpose of helping travel management companies to see where some at least of its costs go.
Amadeus made an "in-depth assessment of travel agencies' business processes" including interviews employees in order to help understand their main activities and the resources used.
Eight companies of varying sizes and including both travel management companies (TMCs) and consolidators were chosen.
The main finding was that it costs a TMC £32.6 to issue a ticket and £23.1 for a consolidator, a considerable difference of 29%. Part of the reason for such a difference is that the consolidators are usually specialist in air tickets for limited locations whereas a TMC has a far broader sweep of services.
However that is moderated by Amadeus' finding that TMCs mainly issue air tickets: 100 for every 25 hotels reservations and two car rental bookings.
Neither Paul Tilstone, executive director of the UK and Ireland Institute of Travel Management nor Paul Allan, chairman of Ian Allan Travel, one of the bigger UK independent TMCs and also of the Guild of Travel Management Companies (GTMC) were surprised by the figure for issuing a ticket.
But Mr Allan added: "I have not done our cost analysis but that figure is probably high. But again you don't know what they have weighed into it. It's an average.
"We don't find out at all what these TMCs are charging as fees. There is a huge difference between Carlson Wagonlit and Ian Allan Travel. One has got a billion pound turnover and the other is smaller so their cost basis is going to be completely different."
Amadeus found that in productivity terms, the consolidators also outstripped the TMCs. They issued 1,410 per full time employee (FTE) while the TMCs issued 1,172. This 20% difference can be partly explained by process.
The consolidators' strategic partners – the agencies they work with – often book directly through the consolidators' booking tools or internet portals which saves both time and money.
There is also the point that when a consolidator does pick up a phone or e-mail, it is likely to be for a specific request. For a TMC, a travel request could involve not just an air ticket but also hotel and car reservations.
Perhaps surprisingly, the study found that the net margins per FTE for consolidators was only 9% higher than for TMCs: £45,348/FTE compared to £41,663/FTE.
More crucially for companies looking to analyse or control costs, the study did a breakdown of how or where that £32.6 or £23.1 was spent. See chart 4 below.
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