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Major Travel Agencies Are on a Consolidation and Expansion Fast Track

Maria Lenhart, Skift

February 4th, 2020 at 10:00 AM EST

Travel agencies are poised for expansion, but the major challenge is finding travel advisors to fill new positions. Acquiring agencies and enticing newcomers to join the industry are ways around it.

Sparked by record sales and demographic trends, travel agency consolidation and expansion is happening at a fast pace.

Just within the last few weeks, mergers between large and midsize agencies include Frosch International Travel ‘s acquisition of Luxe Travel , Direct Travel ‘s acquisition of Professional Travel, and Coastline Travel Group ‘s acquisition of World Travel Bureau .

Other agencies, among them Protravel , Ovation Travel , and Avoya Travel are expanding by opening new locations and/or beefing up efforts to increase their networks of independent travel advisors.

“It’s a huge time for agency growth, especially through acquisition,” said travel agency management consultant Robert Joselyn of Joselyn Consulting Group , adding that the number of agencies seeking counsel on expansion plans has skyrocketed in recent months.

The agencies involved are privately held, and they didn’t disclose terms of the deals.

What’s behind it? According to Joselyn, the expansion through acquisition trend is not only a result of prosperity, but the growing challenge of finding seasoned travel advisors to staff new offices.

“A lot of travel agencies have the financial means and desire to expand, but the difficulty they face is a declining pool of experienced travel advisors to draw on,” he said. “The quickest way to get around this is to acquire existing agencies that already have advisors.”

At the same time, the number of travel agencies for sale is also rising, Joselyn added.

“The aging of the travel advisor population means an increasing number of travel agency owners are planning to retire,” he said. “They’re looking for a succession plan and strategy for their business. So there are opportunities out there to buy agencies.”

What is motivating travel agencies to expand and why should they do it? Joselyn said economies of scale and gaining increased clout with suppliers are two of the main reasons.

“With expansion, you can spread out things like accounting, marketing, and tech support to cover greater volume without changing your fixed costs,” he said. “Increased scale also brings in stronger relationships with suppliers, so you get better commissions and overrides.”

Expansion these days may be a matter of survival, said Jay Johnson, CEO of Coastline Travel Group, a Virtuoso member based in Garden Grove, California, which is among agencies growing at a rapid rate.

“There’s so much consolidation happening right now that either you’re going to play or get left behind,” he said.

A Cautionary Note

Joselyn, however, also cautioned that expansion through acquisition is not without its pitfalls. Among the biggest ones are merging the agencies’ different cultures and employee policies on things like compensation and vacation time, he said, adding that buyers and sellers have a responsibility to assess these differences beforehand.

Johnson agreed. “What I do first is look at the company culture of the agency we are looking to purchase,” he said. “If I don’t think it’s a good fit, I pass, and I have passed on several.”

Joselyn recommends that new owners phase in changes gradually, perhaps even asking the previous owner to stay on for a short period to help ease the transition.

“I’ve seen cases where new owners make changes right away — and they lose people as a result,” he said. “There’s got to be conversations and rapport building along the way.”

Other major challenges arise when there are different consortium affiliations or global distribution systems (GDS) involved, Joselyn added.

“In particular, problems arise when there’s a different GDS to convert to — that’s a huge change for employees,” he said. “In those cases, I recommend offering a change bonus, perhaps $1,000, to people in recognition.”

Coastline’s Spending Spree

Coastline Travel Group ‘s recent acquisitions include World Travel Bureau , which has five offices in Southern California, as well as Hager’s Journeys in Scottsdale, Arizona, Alpine Travel in Saratoga, California, and Lecoeur Travel in Monaco. Coastline also recently opened two storefront agencies with an innovative lounge design, Tafari Travel in New York City and Denver.

“We’ve been on a spending spree growth process for the past few years, with acquisitions the biggest part of that,” Johnson said, adding that the acquisition of World Travel Bureau brings Coastline’s annual sales close to $100 million.

The opportunity to purchase World Travel Bureau arose when owner Tom Jackson contacted Johnson and said he was retiring, and looking for someone “like-minded” to take over his business.

“Tom has been in travel since the 1960s and has been a friend and mentor to me,” Johnson said. “It seemed like a great fit. We sell similar products, plus they have great air contracts that we didn’t have.”

While Coastline is actively scouting for new locations, particularly in places that are magnets for retiring baby boomers, Johnson said future expansion is more likely to happen by acquiring existing agencies rather than opening new offices.

“Finding travel advisors who know the industry and have good connections is the biggest challenge of opening a new office,” he said. “The first thing we look at when considering a new location is if it offers talent we can obtain. We’ve pulled back from opening in some very good markets because it wasn’t there.”

With its recent expansion, Coastline is poised for even further growth because its increased clout with suppliers and ability to invest in technology is enabling it to attract more independent contractors, Johnson said.

“We’re able to strengthen the host agency side of our business by offering better commissions and tech tools to support independent contractors,” he said. “We’ve also been able to invest in more technology for our group department, allowing us to up our game with incentive travel and corporate off-sites.”

ProTravel and Ovation

Two large New York-based luxury agencies, Protravel and Ovation Travel, are in a growth mode as well. ProTravel last year opened its first office in San Francisco, coming on the heels of new locations in Austin, Texas, and Orange County, California.

Ovation Travel recently announced plans to open a new regional headquarters office in the Los Angeles area headed by Aanchal Gandhi in the newly created position of vice president of leisure and independent advisors, West Coast.

The new office will enable the agency to further grow its burgeoning entertainment travel business, which was kickstarted by Ovation’s acquisition of London-based Chartwell Travel in 2018, said Gina Gabbard, senior vice president of Ovation Travel.

Gina Gabbard, senior vice president of Ovation Travel. Photo: Ovation Travel

“The London location is heavy into travel for the entertainment industry, and it’s brought in new clients in this field, many of whom would like to work with our independent travel advisors in Los Angeles,” she said. “So it made sense for us to have a location there.”

Another purpose of the new regional office is to provide more support for Ovation’s home-based independent travel advisors based in Southern California and encourage further growth among their ranks. Ovation has already been making strides in adding independents, with 40 new advisors joining its host network in 2019, bringing the total to slightly more than 200, according to Gabbard.

“Our headquarters office in New York offers a lot of support for independents, including office space for them to use if they wish,” she said. “We will be doing the same in Los Angeles.”

Expanding Network

Avoya Travel Network, which over the years has morphed from a traditional storefront travel agency to a major host network serving 1,350 independent travel advisors, is also on a growth track, although not from agency acquisitions or new offices.

Through referrals and an extensive online marketing campaign, Avoya added 500 travel advisors to its network in 2019, most of whom are home-based, said Jeff Anderson, co-president.

“We launched an initiative a few years ago aimed at attracting newcomers to the travel industry, particularly from business categories similar to travel such as real estate, hospitality, and retail,” he said. “There’s huge growth potential for travel, particularly among young entrepreneurs who want flexible hours and the ability to work from anywhere on their mobile devices.”

With the intent of fueling future growth, Avoya recently opened the Avoya Innovation Center in San Diego, a space for developing new technology platforms that also offers facilities for video chats and live-stream meetings between Avoya employees, suppliers, and independent travel advisors.

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Tags: mergers and acquisitions , travel agents

Photo credit: The Atrium Cafe in Avoya Travel's new innovation center. Avoya Travel added about 500 travel advisors in 2019. Avoya Travel