Travel businesses are urged not to stop innovating even if there is a downturn. Lee Hayhurst reports
Growth in the number of travel agency businesses in the UK is being fuelled by microbusinesses employing between one and nine people, government figures show.
Office for National Statistics (ONS) data obtained by Travel Weekly sister publication Travolution shows only travel agencies in the smallest-sized band are growing in number.
The figures reveal there were 4,250 firms registered as travel agencies in the UK in 2018 and that number is predicted to rise to 4,415 this year.
For 2019, growth is predicted only for agencies employing one to nine people (3,810 to 3,980), while those with 100-999 staff are predicted to fall from 60 to 55.
The overall rise in the number of firms is in contrast to travel agency employee numbers, which fell from 60,668 in 2017 to 60,105 in 2018.
In 2019, it is predicted travel agent employee numbers will drop again, below 60,000 for the first time since 2013, to 59,809.
The ONS data also reveals agents’ average salaries have been rising steadily since 2009, when they were under £20,000.
However, in 2018 they fell to £26,884 from £27,820 in 2017.
The average salary in the UK is £28,677 for full-time employees.
The average salary for the travel sector, including tour operators, hotels and firms in the water transport and air transport sectors, was £23,712 in 2018.
ONS salary data is taken from weekly pay employee surveys and includes 320,000 responses, including a representative sample of 5,000 from the travel sector.
The number of employees in the tour operating sector, which is around a third of the size of travel agents, fell last year to 21,434, but is predicted to increase this year to 22,838.
The number of tour operators operating in the UK is also predicted to rise to 1,930 having fallen to 1,810 last year from 1,920 in 2017.
Operators of all sizes are predicted to increase: those with one to nine employees from 1,440 to 1,535; 10-49 from 270 to 285; 50-99 from 60 to 65; and 100-plus from 40 to 45.
The ONS data shows average salaries in the tour operating sector are traditionally higher than for travel agents although this sector has seen more dramatic annual fluctuations.
In 2017, they dropped below travel agents’ salary to £24,804 but recovered last year to be marginally higher on £27,664.
Despite the fluctuations in employee and enterprise numbers among travel agents and tour operators, combined revenue for the two sectors continues on an upward trend.
Having slumped to a 10-year low of £21.3 billion in 2010, the sector has seen a run of eight consecutive years of growth.
Last year, revenue growth was just 1.1%, taking combined revenue to £35.9 billion, but this followed a four-year period in which annual growth averaged just under 8%.
In 2013, travel agent and tour operator turnover in the UK stood at £26.3 billion; by 2017, that figure had risen to £35.5 billion.
‘Cut IT spend and you risk playing catch-up’
Growth in spend on technology by UK travel firms beat expectations last year but budgets are forecast to be cut back in 2019
The latest annual analysis of Office for National Statistics data by Travel Weekly sister publication Travolution found spending on technology by travel firms grew by 5% last year to £1.79 billion – one percentage point more than the 2018 report had predicted.
For 2019, growth in IT spending is forecast to be flat, in contrast to 6% growth across all UK industries, down from 9% last year. The slowing trend for IT spend in travel comes as the sector faces continued uncertainty due to the economic outlook and concerns about the impact of Brexit.
But industry experts warned that firms that cut back on investment in innovation and digital transformation could be left behind by competitors whichcontinued to invest.
Travel technology consultant Ian Richardson, chief executive of TheICEway, said: “If travel companies pull the plug on investment and innovation completely and make it through the downturn, they will be two to three years behind when things pick up.
Companies need to be more data-driven and more digitalised. If they suddenly stop in their tracks and do not keep moving forward, they could be setting themselves up for a fall. It’s a question of reprioritisation while still moving towards some kind of long-term digital vision.
Claire Osborne, Travelport’s solutions sales director for northern Europe, said for firms to continue to be innovative in a softening market they would need to focus on finding ways to increase automation.
“I would be looking at ways to grow my business without having to invest in high-cost areas such as people, and using technology to make the people I have more productive and efficient”, she said.
“It’s not necessarily about replacing people, because that can be very difficult. It’s about investing in technologies, systems or services that make people more productive.”
Ian Leonard, IBM head of sales, travel and transport, agreed, saying the tech giant describes this approach as “augmented intelligence”, or using technology to enhance human abilities.
You have got to make your staff who engage with customers more efficient and able to service customers better, rather than service the business. It’s all about changing the consumer experience.”
Chris Roe, AccorHotels’ sales, distribution and loyalty vicepresident, said to succeed in a tough market, firms must keep on top of changing customer expectations.
And he said if there is a downturn this year, he expected to see more innovation, not less, as well as some consolidation.
“I think back to the last recession when it got harder,” Roe said. Are you giving the customer the right product? It’s pointless forcing a product they don’t want down their throats.
And it’s about user experience – how to make booking your product easier and simpler and understanding your customer better.
“Their behaviour is not necessarily going to be determined by what they’ve done historically.
Requirements change. Use data analytics to understand customer behaviour.
“The holiday is no longer seen as a luxury. For travel companies today, it’s all about capturing people’s imaginations at the right time with the right product at the right price point.
“Flexibility and speed to market are key. People who respond quickest to changes in the market will benefit the most.”