New Business Models for Travel Agencies

New Business Models for Travel Agencies

Innovative travel agencies are forming new business models to better cater to clients By: Diane Merlino
Olivia Travel used the fan base of its record company to develop a travel business specializing in charter cruises and resort vacations for lesbian...
Olivia Travel used the fan base of its record company to develop a travel business specializing in charter cruises and resort vacations for lesbian travelers. // © 2014 The Olivia Companies, LLC.

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Creativity is alive and well in the travel agency world. Business models are evolving to adapt to emerging consumer markets, changing values and technological advances, resulting in an explosion of new ways for travel  agencies to do business. In this issue we profile four travel agencies in the west that have created unique and successful business models for selling travel.

Agency co-owners Tracy Michaels, CTC, and Ann Macker bought Flying Dutchman in 1997. Back then, it was a traditional agency that focused on selling a single tour operator, reaching between $10 and $14 million in annual gross sales — until the tour operator shut down in 2004.

Michaels and Macker then began buying travel agencies in their geographic area. Then when the economic recession took hold in 2009, they shifted the focus of the business to selling groups on cruises. They became interested in selling full-ship charters, and a relationship with a local radio station opened the door to their current model.

The agency sold its first full-ship charter cruise in 2010, featuring smooth jazz luminary Dave Koz. In the last four years, Flying Dutchman has booked 30,000 passengers on 14 charters with various cruise lines. Charters in 2014 generated $35 million in gross sales, according to Michaels. Five full-ship charters are in place for 2015.

Business model: “We have almost totally converted ourselves into a charter cruise agency,” Michaels said. “We are really more in the music and entertainment business now — at least 90 percent of our business comes from entertainment charters. We have all the departments of a traditional agency, so we can bring in all of the pieces we need for air and hotel and so on, and we’re very big on selling travel insurance. But our core business — what makes the wheels turn — is producing music cruises.”

To date, entertainment on Flying Dutchmen charter cruises has featured smooth jazz, country, classical, reggae, Celtic rock and classical rock. Each cruise includes performances by a headline artist, up-and-coming artists who are getting significant radio airplay and relatively unknown musicians, all from the same genre. Artists are secured through talent agencies. Co-owner Macker creates a unique website for each cruise that captures the spirit of the music and the artists and includes a booking engine.

Photos & Videos
The Departure Lounge combines four different businesses in one venue. // © 2014 The Departure Lounge

The Departure Lounge combines four different businesses in one venue. // © 2014 The Departure Lounge

Chad Clark displays the certificate for his agency’s own certification program. // © 2014 Chad Clark Travel Ventures

Chad Clark displays the certificate for his agency’s own certification program. // © 2014 Chad Clark Travel Ventures

Olivia Travel used the fan base of its record company to develop a travel business specializing in charter cruises and resort vacations for lesbian travelers. // © 2014 The Olivia Companies, LLC.

Olivia Travel used the fan base of its record company to develop a travel business specializing in charter cruises and resort vacations for lesbian travelers. // © 2014 The Olivia Companies, LLC.

Client base: “Our client base is driven by the artists,” Michaels said. “We don’t expect the artists to do all the marketing, but we do expect them to announce the cruise and talk about it to their fan base. Some artists do more marketing than others, so in some cases we have to promote.”

Perspectives: “Selling cruise charters is the best,” Michaels said. “It’s exhilarating and expensive and risky and electrifying. That said, the pressure and the stress are amazing. You own the ship and if you don’t sell it, you still own it.”

While Departure Lounge is new on the travel scene (it opened in 2013), founder and director Keith Waldon is not. He’s been in the travel business for close to 30 years, including 17 years with Virtuoso. Over those three decades, Waldon watched many travel agencies abandon businesses located in the heart of their local communities.

“In an effort to keep costs down, agencies have moved to mostly invisible spaces and utilize advisors who work from home,” Waldon said. “If you ask anyone 40 years old and younger to tell you what a travel advisor is and where to find one in their local community, most can’t answer either question.”

That trend concerned Waldon and formed the foundation for Departure Lounge’s business model. The agency is a member of Virtuoso.

Business model: Waldon describes his business model as a new take on inspiring and selling travel in a prominent way within a community. Departure Lounge combines four businesses — a coffee house, a wine bar, an event space and a travel agency — in a single venue sporting an upscale design, visual technology and destination-focused foods and beverages.

Departure Lounge is located in a section of downtown Austin close to large, upscale office buildings and 7,000 residential units, with more in the works. Before opening the business, Waldon used his educational background in statistics and research to determine the qualities local residents wanted in a travel company as well as to create touchscreen applications for visual surveys.

One such visual survey, Travel Persona, determines the travel profile of new clients who answer a series of questions by touching images on a screen.  

“In that fun, interactive process, a detailed travel profile is developed about the client,” Waldon said. “We have a similar visual survey called Wine Persona that helps bar patrons determine what wines they will enjoy based on flavor preferences.”

Customers can access both surveys on 46-inch touchscreens located throughout Departure Lounge and on the business’ website.

Client base: “Because we are a coffee house and a wine bar, more than 60 percent of our travel business is driven by walk-ins who visited us first to enjoy the bar and then engaged us for help with travel,” Waldon said. “More than 90 percent of our clients have never used a travel advisor before, so I spend a lot of my time explaining why and how to use a travel advisor.”

Perspectives: “We now have generations of people who don’t know we exist or how or why to utilize us, so I think you’ll see more travel companies create business models that make themselves more visible and engaging,” Waldon said. “Making major shifts or changes is difficult, so you’ll see a lot of innovation from newcomers and younger entrepreneurs. Most of that will be powered by some of the same technology that threatened to replace us these past 20 years.”

OLIVIA TRAVEL, San Francisco
Four decades ago, Judy Dlugacz was part of a collective that founded Olivia Records to record and market women’s music. The label produced about 40 albums and sold more than a million records, tapes and CDs.

“We recorded music by female artists who spoke to the lesbian community, a community that had never been spoken to before,” said Dlugacz, president and founder of Olivia Travel.

The company shifted its focus to travel 25 years ago, selling charter cruises and resort and adventure vacations primarily to the lesbian market. Olivia Travel’s first trip was a four-night, full-ship charter to the Bahamas on a 600-passenger ship. To promote the cruise, Dlugacz sent a letter to the record company’s mailing list. It sold out and was immediately followed by a 1,200-passenger charter cruise.

Since its inception, Olivia Travel has taken more than 200,000 women on charter trips throughout the world.

Business model: “We are a charter travel company,” Dlugacz said. “We rent the ship or the resort, and we create the product. We completely redesign the experience so that it’s specific to the women who are coming.

Dulgacz acknowledges that their agency serves a particular audience.

“Our model is very specific and very successful,” she added. “It was created for the lesbian community to be able to travel in freedom and security, and to have a great time. We’re not that different from other niche companies, but we are a little different because there is freedom involved. When you travel with us, you are the majority for the first time in your life.”

Full-ship and resort charters from Olivia Travel have featured an array of well-known artists including Maya Angelou, Whoopi Goldberg, Bonnie Raitt and Olivia Newton-John.

Client base: “Thanks to having a fan base of hundreds of thousands of people we were able to morph into a travel company,” Dlugacz said. “The fans of the music label became the first clients of the travel company. When we moved into travel, we already had a trusted brand, and we were experts in the market we served because we had developed the market.”

Olivia Travel’s current client base is close to 500,000 people worldwide.

Perspectives: “One of the most important things about the LGBT community, particularly lesbians, is visibility,” Dlugacz said. “Visibility is freedom for this community. So, it’s really important that this group is embraced by the people who want to sell them travel.”

Twenty years ago, Chad Clark had a very different business life, selling advertising for a regional sports network in Los Angeles. Eventually, Clark decided to quit that job and pursue his dream of traveling around the world.

“During that year-and-a-half, I experienced how life-transforming travel is, and when I returned, I was motivated to help others have the same kind of experiences,” said Clark, a principal of Chad Clark Travel Ventures, an affiliate of Camelback Travel and a Virtuoso member. “When I made the decision to get into this business, I wanted to take that attitude of getting under the skin of a particular area or county or city and really focus on the experience.”

Four years ago — one year after he returned from his around-the-world trip — Clark started his travel business. Clark and a team of two others work out of an office location in Phoenix.

Business model: “Our philosophy is that we are in charge of our clients’ most valuable asset — their personal time,” Clark said. “So we’ve developed a business model very similar to other asset managers in the legal, financial and medical fields, or any other service industry.”

Clark doesn’t consider his business a travel agency.

“I would call it a firm, because we don’t want to be typical,” Clark said. “We tout ourselves as ‘experience junkies.’”

Trip management fees are fundamental to Clark’s business. The firm charges a $10,000 annual partnership fee for more frequent travelers and a trip management fee for clients who are planning a single trip with a complex itinerary. For those trips, the firm charges a percentage of the total spend, similar to fee structures for an interior designer or an architect.

“These allow us to work with clients who appreciate the kind of travel we design,” Clark said. “We are not a churn-and-burn type of shop. We are looking for long-term relationships with the ability to design fully detailed itineraries for one week to five weeks, or more.”

About 60 percent of the firm’s clients pay the annual partnership fee and 40 percent pay trip-by-trip, according to Clark.

Client base: The firm’s upscale clients include CEOs, celebrities, athletes and entrepreneurs. Leisure travel and small-group specialty travel are the firm’s focus, and all new clients come from referrals.

Perspectives: “Frankly, I think travel advisors are underpaid. Time once lost to someone can never be brought back. What we do is serious, so why shouldn’t we be compensated like other high-profile service industry professionals?”