.....:-. ...
K.K. SHARMA
The major components of tourism are hotel industry and travel industry. The book has the follow ing chapters in it. I. lntroduction.and Overview Fulfilling the Dream 2. Travel Agents and Travel Agencies.. 3. Corporate Travel Management
4. Tour Operations 5.
Franchisin~
Your ~ream
6. Investment in Tourism
7. The Experts 8. Systems and Controls 9. Personnel 10. Travel Writing 11. Start, Buy or Franchise 12. Starting up 13. The Legal Structure 14. The Physical Structure 15. Staffing the Travel Agency 16. Representatives 17. Training 18. Employees and the Law 19. Professional Tools : The Reference Library and Association Memberships. It is hoped the book will be of much use to
planners, government officials, businessmen and the academicians alike.
Rs.600 Elements sous drot!S d auteur
Tourism and Travel Industry . '
/
Elements sous drot!S d auteur
Tourism and Travel Industry
K.K. Sharma
Sarup & Sons New Delhi-110002
Published by
Sarup & Sons 4740/23, Ansari Road Darya Ganj, New Delhi-110002 Ph. :23281029, 23244664
Tourism and Travel Industry
ISBN: 81-7625-106-2
C Reserved
First edition 2000 Ist Reprint, 2006
Printed in India
.
.
Published by Prabhat Kumar Sharma for Sarup & Sons, Laser Typsesetting at Manas Typesetter and Printed at Roshan Offset Printers
Elements sous drot!S d auteur
Preface The editor is gratefu l to various travel and hotel industry managers for their kind cooperation in giving infdnnations about Indian Tourism. The editor is thankful to the Ministry of Tourism and Ch·il Aviation, Go,·t. oflndia and the Planning Commission Gm1. of India for providing necessary infomtation and data about Indian Tourism. 1l1e editor is thankful to various libraries in Fortworth, Austin and Dallas of USA who have been very helpful in pro,·iding useful material for the present volumes. Research material in India on tourism is Yery much lacking and as such most of the background material for the preparation of these books has been dramt from American sources.
lltc editor is grateful to various other sources who have l1elped very profusely in the preparation of these volumes.
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Cont I. 2. 3. 4.
5. 6 7. 8. !)
I 0. 11. I 2. 13. 14 15. I (i. 17. I X. 19.
!'reface Introduction and o,·en iew Fullilling the Dream Tra,·cl Agents and Trm·cl Agencies Corporate Tra,·cl Management Tour Operations Franchising Your Dream hwestment in Tourism The Experts SYstems and Controls Personnel Tra,·cl Writing Start. Bu,· or Franchise Starting up The Legal Structure The Physical S1nu.:turc Stanim; the Trm·el Agenc,· Rcprcsentati, cs Training Emp)o,·ccs and the Low Professional Tools: The Reference Libraf\ and Association Memberships
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Introduction and Overview Fu1filling the Dream A Dynamlcand Challenging Career Most people dream of working at something that they fmd to be interesting, challenging, and fun-something that they enjoy doing even after work hours arc over. Travel is such an activity. For many travel is a dream of a lifetime and working at a job that makes it possible to travel can be a dream come true. This book is about fulfilling this dream.
But it is first necessary to dispel the illusions. that surround travel careers. A career in travel is condidered very glamorous and adventurous. Once inside the industry, however, some . - people fmd that the reality of hard work, long hours, and low pay dulls the glow. Most people who have not simply fallen into a career in travel seek it because they love to travel. If this is your main reason for entering the business, you are better off staying in some other field where you \ire likely to earn 20 to 40 per cent more in salary and have three or four weeks of paid vacation a year to travel as your wish. For you are not apt totravel as
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2 Tourism and Travel Industry
frequently, as cheaply, or as spontaneously as you might expect in the travel industry-especially now since free and reduced rate travel are becoming more restricte~ and the federal government is hoping to tax free trips as frings benefits. Also, most people in the industry who travel do so for business purposes to the point where traveling can become too much of a good thing, bringing more stress than satisfaction. You should pursue a career in travel because of the business and the producJ itself, namely, travel. Travel and tourism is one of the most dynamic industries any where, offering extraordinary opportunties for mobility, creativity and personal satisfaction Having a role in the betterment of society and contributing to world peace are not just ideals, they are integral to an endeavour that brings disparate peoples and Ideas together. In many ways, the travel industry is a business like any other, with many of the same concerns and problems that arise in selling groceries, making women's shoes, or designing office buildings. There are the same concerns for profit and loss and for accounts receivable and payables; there are the same problems of productivity, market share, and high cost of investment capital that affect most industries. But people who have had an opportunity to experience other occupations fmd something special in the travel industry-energy, creativity, fast pace, diversity, challenge, and growth-that they had not found elsewhere. In fact, so often in this book people refer to their particular part of travel as "fun" and "showtime." And when for one reason or an other, people are forced to leave the industry, many feel a sense of withdrawal. The industry's product-travel-os like no other. Travel becomes addictive; it is for good reason that prople say they have been bitten by the "travel bug." Travel is "a life-chaging, life-enhancing experience." explained travel agent Rechard Dixon. Working in and with "travel" brings an excitement to the job that airline people feel even if they work miles away form the airport and that travel agents feel as they sit for hours on end searching the computer display for schedules and fares. There is a sense of sharing in some marvelous adventure.
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Introduction and Overview 3
Travel is·very much a" people" business. No matter how sophisticated airplanes or computer reservations systems of videotext systems become, there is no getting away from the fact that the business is all about sevicing people. The industry attracts People -people individuals who are energetic and open to new experiences, ideas, and most of all, people. Because people tend to stay in the industry, even if they move from one area of work to another, a dose camaraderie usually develops even among those who work for competitors. In some respects, travel is a service; in others, it is a commodity, just as any item you but. off a shelf if the price is right. Yet, unlike most other commodities, travel-a seat on an alrplane of a room in a hotel-cmnot be stored away. The hight perishability makes for high risk challenging industry professionals to be brilliant forecasters and marketers, to excel at information management and to be efficient operators. On the other hand, the potential for the industry is unlimited, for unlike a VCR, which you might buy once and have for many years, travel is an experience that has to be renewed each time, and each time will be different. Moreove, there are unlimited possibilities in the style of travel. The same customer might take one trip or a dozen trips in a year, traveling for business vacations, and weekends, to visit family and friends or to take part in an event And people travel differently during the course of a lifetime: as a college student backpaking through Europe; a single, young prfessional looking for sun or snow; a newlywed; a professional couple; a family with young children; a chief executve officer on an expense account; the couple whose children have left the •nest"; a retiree; a widow or widower. The customers for travel are not conftned to any particular stratum of society. A passenger on a $6,000 trek of the Himalayas might be a secretary or a mailman as easily as a stockbroker. The travel industry is expanding and changing constantly, and new job titles and specialites arc bing crated all the time. Few industries provide as much opportunity for someone with limited formal education to rise as quickly through the randks
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- 4
Tourism and Travel Industry
to positions of enormous responsibility and prestige; to be an entrepreneur; to work for some of the largest or smallest companies; and to see almost instant results from an innovation. Few industries provides as much mobility-moving up in an organization or to other companies or other fields and even to live and work virtually any where in the world. A Vital and Necessary Service The term tourism may conjure up stereotypical images of paunchy, balding men in Bermuda shorts and blue-haired grannies in tennis shoes, disembarking from a tour bus with instant cameras in hand. In this context, travel and tourism seems frivolous and non-essential. Nothing could be further from the truth. Travel and tourism forms a complex network of vital and necessary sevices that touches virtually every individual and every business in the world. Leisure travelvacations for rest and relaxation, cultural prusuits, adventure, or visits with friends and relatives-is only half of what the travel and tourism industry does, but even these seeming luxuries have become necessities of modem life. Nonetheless, the same airplanes, hotels, car rentals, and trains that are in place to serve the tourist also transport and house the business person negotiating deals, the diplomat,the politician, and the artist, the travel and tourism industry makes commerce, diplomacy, and exchanges of ideas and cultures possible. Faceto-face contacts between people at any distance whatsoever could not take place without the diverse services provided by travel and to urims . "The world is becoming a ·global village," Pope John Paul 11 told a private audience of 7,000 travel professionals in 1985, "in which people of differents continents are made to feel like neighbours. Modern transportation ha-; removed the obstacles of distance, enabling people to appreciate each other, engage in the exchange of ideas and commerce. Tourism can help overcome real prejudices and foster bonds. Tourism can be a real force of world peace." Tr.lVel and tourism play a criiical role in the economies of tiny villages and huge countries. In countries like Mexico,
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Introduction and Overview 5
Jamaica, and Spain, tourism is the linchpin for the economy. For countries lacking valuable resources or heavy industry, tourism represents hope in breaking a spiral of poverty and misery. Closer to home, there are countless examples of communities where tourism is the base for the economy, including Orlando, Atlantic City, and Las Vegas. In a world where so many make theif living by selling people what they' do not want or should not want or could care less about, most travel industry professionals derive tremendous satisfaction from selling people a •good time.• They sense that what they do is important and t11at they are contributing in a real way to the betterment of society through facilitating people-to-people contacts. In short, people feel good about working in the travel industry and promoting tourism. Many are found of saying that travel dates back to Noah or Moses or the Pilgrims. The travel industry, however, is a phenomenon of the Industrial Revolution, with its social revolution of minimum wages and paid vacations, coupled witll the technological revolution that made for buses, jet planes, elevators, and air conditioning. Mass travel and the annual vacation ritual only date from the end of World War 11, witll the jet plane and the packaged tour; in polls, travel ranks just after a home and an insurance policy as a necessary expense. Travel has not only changed from a luxury to a necessity in the American lifestyle, but the trend toward greater affiuence, the effect of mo.-e leisure time, and the maturing of the Baby Boomers into their peak earnings (and travel) years. all prompt forecasters to predict fantastic growth (or the industry in year to come. Indeed, many expect travel and tourism to become tlle single largest industry in the world by the year 2000-and not just in dollars, but in jobs. All of this bodes extremely well for the jobs outlook in the travel and tourism industry, Indeed, despite all the technological ·developments, travel and tourism remains a business of se1ving people, so is people-intensive. Six million Americans already make their living in the industry. Another two million are employed in related fields. The travel and tourism industry has
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6 Tourism and Travel Industry
shown an uncanny ability to generate new jobs even when the rest of the economy is in the doldrums, and the industry is expected to show some of the strongest growth rates in new jobs in the future. lt is not just the quantity of jobs that is appealing, but the quality and diversity. Travel and tourism is so dive:rsified that it entails virtually every kind of activity and employs almost every kind of worker. It is common to think of the industry in tenns of "travel agent," "flight attendant," "airline pilot,'' "tour esd5rt," and •front-desk clerk." People readily recognize airlines, hotels, car rentals, and tour companies as travel and tourism businesses. But the industry is also real estate, ecology, urban planning, architecture, interior design, engineering, computer science, politics, public relations, marketing, personnel, publishing, telecommunications, finance, law, and scores of other fields. Travel and tourism employs archaeologists, sociologists, lawyers, doctors, teachers, computer specialists, artists, writers, marine scientists, actors, musicians, and countless other professionals. Indeed, the industry offers an alternate path to fulfill any number of professional dreams. Moreover, industry leaders express concern about a shortage of workers during this decade. "We will have to b e more flexible in establishing split time and flex time for our employees," said a hotel industry executive, •and exert a recn1iting effort beyond anything we have seen before, because if we can't service that market, we will lose it." Overcoming the Catch-22 Ironically, the tremendous demand for workers will not make getting into the travel business any easier; if anything, getting in will be tougher. Already, t11ere are about 100 applicants for eve•y job. In the travel agency business, newcomers are having such a difficult time that they are o ffering to work for free in exchange for the training ::tnd experience. The demand for new employees is concentr.ued among the experienced, or middle-management layers, while the increased reliance on sophisticated computer systems , the extrao rdinary pace, and the low profit margins havl' m:tdc il difficult for comp::tni<:·" lu
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Introduction and Overview 7 retain their on-the-job training programmes. Helping you get around the Catch-22 of needing experience to get experience is the aim of this book. In the end, it does not matter whether there are thousands of jobs or only a few; all you want is one. Succeeding in getting one requires a strategy. You need to be able to focus in and target your objectives and to convince a potential employer that even if you do not actually have industry experience, you understand the fundamentals and are motivated to learn. There are no sure-fire methods of landing a job. It comes down to personalities and the philosophy of the person doing the hiring. You will get an idea of how varied the career paths can be from the people interviewed in this book. Each of the chapters on an industry segment describes how the industry is structured, what key i~sues it faces, and what the future is likely to hold. The infonnation is intended to give you the fundamentals so that you cart demonstrate to a potential employer some understanding of the business. It will also give you a better handle on whether a fields is right for you. It will show you that there is more than one way of accomplishing your primary goals. This book will also give you a better idea of what employers are looking for so that you can make a more convincing presentation during an interview. Indeed, a career is more than any one job; it is a .series of steps up a ladder, and a joQ is only one rung. In travel, especially, you may start off in the hotel business and wind up in airlines or car rcntals or travel agencies. The travel industry is expanding so rapidly that in most instances the objectives is just to get into a field or a company any way that you can- as a reservationist, a receptionist, a secretary, a clerk, or an accountant. This is particularly true if you are coming from anothe r fie ld to a similar job in travel. You will then be able to more up o r move over extremely rapidly. If there is nne theme that is common to every facet of this fan"lstk~llly frag·n~·mcd industry, it is its growing profcs~ionalism .
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8 Tourism and Travel Industry
The industry is recognizing the need to prepare for middle management by creating more entry-level training and development programmes. Indeed, it is likely that two distinct career paths to the top will emerge-one from within the ranks and one from vocational and academic programmes. So many people fall into their careers and live with frustration
and"discontentment until they are able to retire. After nearly 20 years as a journalist reporting on the travel industry and now as an executive recruiter for the travel industry, interacting with literally thousands of professionals and watching them rise in their careers, I can honestly say that I have never met so man people who love what they do. A career in travel is competitive, challenging, and frequently beyond control, but it is also fun. There is a certain giddy delight attached to working in travel. This book is written for those who aspire to management or a profession in travel and tourism, for those who seek more than a job, but a career in travel. Let this be your guide to success. Travel and Tourism Industry Overview
It took Marco Polo 12 year to journey from Italy to China, at great peril all along the way. People take for granted the size, scope, and complexity of the international network of facilities and services that make it possible to ·retrace Marco Polo's trek today in a matter of weeks. It is extremely difficult to define precisely what the •travel and tourism" industry is. "[It] has been described, half facetiously, as a collection of diverse products sold by a fragmented industry to segmented markets through a complex distribution chain," noted the U.S. Travel Data Center (USTDC), the Washington, D.C.-based travel research affiliate of the Travel Industry Association of America, in its Ecouomic Review of Travel 1989-90.
"lt comprises the airline terminal in the suburbs, the restaurant in town, the highway motel, the travel agency down the block, and a host of other businesses that do not even recogn ize
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Introduction and Overview 9
their dependence on tourism, since visitors are [often] indistinguishable from local customers." The late futurist Hennan Kahn projected that tour.ism would be the world's largest industry by the year 2000, and his forecast is being realized. Despite advancements in telecommunications-and sometimes because of themphysically traveling has become more iinportant than ever. Indeed, Americans took a total of 1.3 billion person-trips (one person on a trip 100 miles or more from home) in 1990, according to the USTDC. The travel and tourism industry is the third largest retail industry in business receipts after automotive dealers and food stores, according to the USTDC, which measures the economic impact of travel and tourism in the United States. Spending on travel services in the United States totaled about S 350 billion and generated more than $42.8 billion in tax revenue. To put these extraordinary figures into p erspective, Americans spent more on travel than on clothing, accessories, jewellry, and personal care combined or on household utilities, including telephone service, the USTDC noted. Travel spending in this country averaged $959 million each day, $40 million each hour, $660,000 each minute, $11,000 each second. Most of the money goes to airlines, car rentals, bus companies, cruiselines, the reilroad, lodgings, restaurants, tour companies, travel agents, attractions and theme parks, sightseeing companies, and convention centers. The· travel and tourism industry is the country's second largest employer. With each $60 ,000 spent by travelers directly supporting one job, the $350 billion spent on travel in the United States generat~d 5.8 million jobs totaling $73.5 billion in payroll income. In 48 of the 50 states and in thousands of localities, to urism has become the leading employer. In many areas , tourism has brought renewed vitality to communities once dependent on smokestack industries. Over the post decade, travel industry emplo yml'nt has
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10 Tourism and Travel Industry
grown 43 per cent, more than twice the growth r:ate for all industries, the USTDC noted. And, since 1972, payro ll jobs in travel-related businesses have more than doubled, while total U.S. payroll employment increased by less than 50 per cent. Few trave companies appeal to the entire spectrum of travelers; instead they gear their products or services to distinct markets. This is called market segmentation For example, many marketers are looking at the fantastic growth among women business travelers. Many hotel companies have gone so far as to create "women-only" floors to cater to this market. The family market is another growth area, as the Baby Boomers (the huge population bom between 1946 and 1960) become parents themselves. Club Med has responded by opening up "mini dubs" and baby clubs" at some of its resorts; the cruise industry has provided child care centres on board ships. Some companies are targeting the 18-to-25-year old group because they tend to be single and have a lot of discretionary money; others eye the 25-to-34-year-old group of dual-income, childless couples, who have money, if not much time, to travel; still others target senior citizens, who control the biggest chunk of discretionary income and have the time and inclination to travel. The phenomenon of market segmentation is most apparent in the hotel industry, where hotels are being divided by floors according to the services and pricing that would appeal to a particular market. Airlines, of course, have been offering first, business, and tourist classes for years. De regulatior.., Automation and Professionalism
The 500,000 different businesses involved in travel have their special interests and concerns. But virtually evey travel entity and everyone working in travel is affected by three key interrelated developments: ( 1) deregulation, (2) automation, and (3) increased professionalism. These are essential to understanding the dynamics of the travel industry. Degegulation of the airline motorcoach, and travefagency industries· changed the whole ecomonics and structure of the indusuy-the relations) lips of companies to ope another. Though
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Introduction and Overview 11
hotels, tour companies, car rental agencies, cruiselines, and others had alwys been deregulated the deregulation of these key industry segments has enonnous impact on their own businesses. By replacing what had essentially been a franchise with free market competition, companies had to revamp their products, their pricing, and the manner in which they distributed to their customers. The path was open for innovation, new companies, new services, and new ways of doing business. Travel was always and industry of low profit margin, and deregulation put additional pressure on cost controls and maximizing productivity. The plethora of products and services has made computerized information and reservation systems essential. Consider that there are some five million airfares, changing at the rate of 120,000 at week. Though travel is not generally considered "high-tech," the industry is, in fact, on the leading edge of consumer applications of sophisticated computers, connunications, and transportetion modes, in distribution marketing and pruduct sevices. With the greater premium placed on productivity, as well as on the need for capital-intensive technology and expensive marketing a third trend had developed-consolidation. Consolidation is most visilbe among airlines where mergers acquisition, and bankruptcies have whittled down the number to a few major carriers. Consolidation has brought retrenchment by companies ion which whole tiers of middle and upper management have been eliminated. Yet another trend has come about-globalization, the multinational ownership or alliances of airlines, hotels, travel managem~nt companies and the like, in responsed to falling barriers an(J borders and a greater appreciation of the world as a globa, •arket place. These trends-de:regulation consolication automation, :md g1Qbali7.ation-are revloutinizing how the travel business is conducted and changing the professional makeup of the industry.
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12 Tourism and Travel Industry
New opportunities are opening up all the time. There is enonnous demand for marketers, quality control coordinators, computer specialists, yield management experts, reserchers, trainers, and prople with international business and language skills. On the other hand, many entry-level jobs have been eliminated . Regardless of the kind of travel entity, there are categories of activities that are common to almost every one: Product Development Operations Sales and Marketing Public Relations Administration Automation/Management Information Systems (MIS) In the past, success was almost universally of the bottomsup variety-rising up through the ranks. Now, a second career path is emerging, with a new breed of travel professionals coming out of colleges, unciersities, and vocational schools, as well as from other industries. While the outlook for travel and tourism is extremely bright, there is great volatility within the industry, This year's hot spot may be next year's trouble spot. Changes in air fares, currency destinations; weather, natural disasters, or strikes can also destroy a destination or a company. This is not an industry to go into for security; it is an industry to go into for challenge, excitement and responsibility. In the subsequent chapters, we will look at the various entitiles that collectivle make up the travel and tourism industry. Since this book lools at the people that make travel and tourism activity possible, we will not just look at the conventional categories. We will look instead at the entire system, including, for port serviced. For this book is aimed at helping you share in the incomparable experience that working in the travel and tourism industry affords.
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Travel Agents and Travel Agencies The Travel Agent: Fulfiller of Drcarms
In the days when travel was a once-in-a-lifetime event the travel agent was quite literally a "fulfiller of dreams" - the one who made such life long amitions of traveling to exotic locales reality. Even today, when travel is more of an annual rite than an extraordinary event, most agents still see thier function as fulfilling dreams for in essence, agents sell an experience in order to satisfy client expectations. To most people, the travel agent personifies the travel industry. The most visible segment of the industry, the agent is actually the last link in an indicate chain of facilities and sevices. To travel suppliers like airlines, hotels, car rental companies, tour operators. and the like, the agent is their retailer-their distribution system- to the public. The travel agency gives the suppliers local contact with the public that they could not afford on their own. Many people confuse the ''travel agent" with the "travel agency." The agent is essentially a counselor who deals directly with the prospective traveler (the client). In contrast, the agency
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14 Tourism and Travel Industry
is an entire business that perfonns various sales and marketing
function and admirustrative tasks. In small agencies, a single person can be the counselor as well as the owner/manager who also handles the business issues; the larger the agency, the more specialization. Some of the largest travel agencies that haneld commercial travel (travel for business purposes) even empty a quality control coordinator, who acts as a liasion between client and agency. The travel agent treads a ftne line between :supplier and client. Whole travel agencies are essentially (and legally) the "agent" acting on behalf of the travel supplier$ (being paid a commission each time they sell a company's service), travel counselors see their role as providing an objective (nonbiased) referral servi<:e for their clients. Thought there are often monetary incentives (in the form of override commissions) to book a certain airline, tour company, car rental't1nn, and so on, their primary concern is to recommend the onl: that will best satisfy their client's price and service wants becasuse, as agents, they depend so much on repeat and referral business. Unlike the real estate agency that sees its client once in five or ten years or a lifetime or the fast-food restarurant that sells a stadardized product, the travel agent services (more than sells) a client once, twice, or perhpas' ten times in a single year. Though today's travelers may be more sophisticated and experienced, there is still a lot of hand-holding by their travel agents, who become trusted professionals muxh like their doctors, lawyers, or accountants. Agents generally feel a tremendous sense of responsibility about making everything go perfectrly, by tying all the myriad details of a trip togerther. "There are times when I am at home at night and I go over in my mind all the details of the trip," said Daniela Kelly, a New York agent. "Sometimes I give rny home number like when one of my clients had a trip with 20 different flights." A mistake like bringing the client back to the wrong airport or timing a conection badely can have disatrous consequences. Even if the agent performs perfectly, he or she is only an intermediary; the tour company or some other supplier can
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Travel Agents and Travel Agencies 15
make a mistake and the client can still hold the agent accountable (and liable). Travel agency work affords an opportunity to become a professional with little or no advanced schooling. The work involves considerable problem-solving ability as well as the ability to deal with details and organize them. People-contact (face-to-face and by telephone) is the essence of the job; in fact, contacts (with both clients and suAPliers) are as important to professioanal success as product knowledge. Having contacts inside travel companies themselves enables the agent lo free up space at a hotel that is "booked solid," upgrade an airline ticket, or get extra or special service for a VIP. Nor is the client contact merely casual, "You have to involve yourself w ith the customer," reflected jaime Patxot, a New York-based agent. "You dig into their perso.nal life in order to come up with appropriate recommendations. We are psychiatrists sometimes." Though personal sevice is still the essence of the business, computers are becoming fundamental to operations. Well over 95 per cent of the more than 32,000 appointed travel agencies are now automated with airline reservations systems. No day is the same; each day presents new challenges. Indeed, deregulation (the lifting of government-imposed rules on business operations among airlines and agencies) has introduced an entirely new element to the business-negotiations with travel suppliers on rates and commissions and even sevices. The travel agency business offers excellent career mobility. Getting into the business is extremely dilTkult because ex-perience is at a premium and the pace, economics of the business, and reliance on computers no longer allow for appre nticeships. But once inside, e\·en after only two years of experience, an individual will find that there is enom1ous opportunity to rise. Mobility is more linited in small agencies, but large agency organi7.a£ions offer all the career paths of any big business. The travel agency industry is still very entrepreneurial. Ambitious agents who reach their heightS :n a small frequemly go out on their own or move imo senior managemem at other agencies.
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16 Tourism and Travel Industry
The smallest agencies generally have one to four people owner manger, counselor and bookkeeper o r clerk; there also may be some commissined outside sales agents. Medium-sized agencies may have a groups specialist, a commercial department, and counselores who apecialize in destinations (such as the Caribean, or Europe) or in cruises. The largest agencies are organized much like other big businesses, with personnel, operations, and marketing and sales department:; there also may be a sophisticated mailing department, a resident computer specialist, and training and development experts. The largest agencies may have several different businesses, including retail travel, corporated travel incentive travel, convention and meeting planning group tours, sholesale travel, travel school, and even package express, and thus require many more clerical secretarial and other support · people. Indeed, one "mega agency" lists 130 different job tiitles. The pace of work is usually hectic, sometimes frantic. "There are certain days when you have the feeling of 'burnout,' when you get ten people in a row rushing in asking for a 'deal' to Florida. It gets to you," reflected Kelly. The daily rush is intensified whenever there is an airline strike, a natural disaster, or some other event that would necessitate changing travel arrangements. While the travel agent primarily services a client the agent also must be a salesperson; the sales inventor is represented by the brochures on the rack . 'Eighty per cent of the people who come in here already know wha~ they want," commented Patxot. "You are just servicing them. But the rest, you do sell. "Agents have to learn vaious techniques of discerining the clients's true wants and needs in order to narrow down what part of the world and what type of trip to recmmend. I show the client the world; he buys one piece of it," he said. '!here is increasing emphasis on sales ted1niques, particularly on how to close ~l sale (get the customer to commit to the trip and put down a deposit) becauses there is so much shopping around by consumers. Agent are also frequently encouraged by manageme nt to "sell up" to higher-priced programmes or
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Travel Agents and Travel Agencies 17
to push "preferred" suppliers because they pay higher commissions to the agency. Agents also act as salespeople by drawing new clients to an agency but frequntly agencies employ outside salespeople who work solely on commission to perfom1 this function . Not too long ago, agents knew the airlines and fares to popular ·destinations by heart because there were relatively few airlines and rates changed at specified tinles after being approved by the govemmenL But with deregulation, the airlines serving and airport can change overnight, and there are literally tens of thoushand of new fares daily, Sheer growth of the industry on the one hand, and defegulation. on the other, have . made it impossible for any agent to keep track of all the fastchanging products, preices and rules necessary to properly advise clients and book their travel. Increasingly the travel agent functions as an infom1aion provider, drawing to some extent on personal familiarity and experience with places, facilities, and companies, but relying increasingly on powerful computers, we ightey references, and even video brochures. Travellng is not So Free
Most people who become travel agents do so mainly because they expect to travel extensively for :·· ~·e. "You d on't travel that much, and you don't make any muney at all," quiped one 20-year veteran. Familiarization trips, or "fams" as they are called, which agents take in order to get to know destinations and facilitiew are only occasionally free. Usually, they cost the agents something. A working agem is generally entitled to reducedrate travel on many airlines, but airlines are becoming more restrictive on the p asses. The JRS now is looking, to tax the trips as fringes benefits. Also, employes extablish policy on whether fams are to be taken as vacation time and whether the agent pays for the trip out of this or her own pocket. Moreover, time on these trips is generally taken up with seminars and hotel inspections leaving little free time. Still, it is true that most travel agents travel considerbly more than the :werage person. "Being a travel agent gi,·e~ me
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the opportunity to live a lifestyle I couldn't othewise afford," said Richard Dbcon, owner/manager of The Travel Spot, Cranford, NJ. "I've been around the world six times. There's. no place I · haven't been."
Salaries Are Improving Travel agencies have traditionally been very low paying. The glamour attached to travel and the opportun ity to travel at reduced cost were considered benefits. The fact that the job is frequently a second income in a household (since most agents were women returning to work after raising their families), and the fact that not much educational or prior work experience is required also tended to keep wages down. While it is possible to make a fairly good income (even six figures for the most ambitious commissioned sales agents with an elite follwoing or for a vice president of a large, multibranch agency), salaries are about 20 to 40 per cent lower than in comparable positions in other industires. According to a 1989 "Salary . & Benefits Survey" by the American Society of Travel Agents (ASTA), an Alexandria, VAbased trade asssociation, the average income for full-time inside sales agents is $15,610. Agents' earnings start at $11,000 for the entry-level sales agent; with o ne to two years, the agent earns $13,095; three to five years, $16,195; six to ten years, $19,035; and ten or more years, $21,655. Agencies with a business-travel sales orientation generally pay more than those focused around leisure travel. The average income for a full-time corporate agent is S16,870-more than $2,000 over what a leisure agent cams. Salaries are linked to agency volume: The average income earned by full-time inside sales agents in fim1S doing less than $1million is $13,495, compared with more than $17,500 for agenLs employed in tr:wel agencies doing more than SS million in volume. About two-thirds of all gencies comp ensate inside sales agents on a salary-only basis. Nearly one -fourth use a combination of salary ;~nd commission.
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The average income for agnecy managers, according to the 1989 ASTA sutvey, is $22,270. Those with less than one year of experience earn $17,370; with one to !tWo years of experience, they earn $18,510; three to five years, $20,595; six to ten years, $22,735, and more than ten years, $26.015. Again, agencies with a business travel orientation pay managers more -an aerage of $24,300, or 15 per cent more-than leisure agendes. Agency sales volume is also a factor: Managers of agencies doing less than $1 million earn an average of $18,200, or 31 per cent less than managers of agencies doing more than $5 million in sales, who earn an average of $26,500. Most managers (72.1 per cent) are compensated by salary only, but nearly one- fourth receive both salary and commission. About one third of the agency sales force is on some sort of commission structure either exclusively (22 per cent) or partly. However, there is a category of outside sales agents (as distinguished from inside sales agents, who tend to work on salyary), who almost always work exclusibly on commission, which generally is a percentage of the net commission earned on the business they bring in. Most outside sales agents who do al their own work (sales as well as ticketing and documentation) earn 41 to 50 pe r cent of the net commission; outside sales agents who rely on assistance from agency staff typically make 21 to 40 per cent of the commission (net commission is about 10 per cent of the sale). A commissioned sales agent may make only $2,500, in the first year, but an agent with many years of experience can earn $35,000, $50,000, and even more. How much a commissioned agent makes depends largely upon the type of clients that the agent brings in corporate clients, independent leisure clients, or groups. Salaries are generally a function of sales volume, number of staff managed, and size of the company. Large agencies have more specialization and more positions with management responsibility and thus pay considerably more than the typical travel agency. For example, an executive vice pr,esident of a S I 50-million regional company earns over $90.000; a regional vice president earns a base of $ 85,000; the president and chief execut ive officer of a large regional agency earns S
no .ooo.
1
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Other examples are as follows; account executive , $30,000 to $ 35,000; corporate sales manager, $30,000 to $60,000; brnnch manager, $25,000 to $40,000; genernl manager of a high-volume corporate agency, $60,000; corpornte agent with five years of experience, $27,000; regional sales director, $35,000; director of MIS, $50,000 to $60,000; senior meeting planner, $35,000 to $40,ooo. Salaries for agents are improving as well. Because of the complexity and share quantity of travel products and offerings and the computerized systems necessary for day-to-day functions, travel agents are just beginning to be appreciated as true profesionals. Supply/ demand balance has also shifted drnmatically. There are presently about 150,000 trnvel agents; by the year 2000, forecasts call for between 204,000 and 235,000 according to the Department of Labor, which lists travel agents as one of the fastest-growing professions for the decade. In all, industry experts estimate that there will be a need for 24,000 new travel agents each year throughout the decade to cover growth and attrition. An experienced agent skilled in using an airline computerized reservations system is in enormous demand. Moreover, agency
locations had been prolifernting at the rate of 5 to 10 per cent a year, making new owners desperate to hire agents with two years of ticketing experience to meet the Airlines Reporting Corporation appointment requirements. All of t11ese factors are helping to improve salaries. Increasingly, trnvel agencies are attempting to improve compensation tl1rough more use of incentive programs, whereby agents earn a base salary plus commission. At Rosenbluth Travel, a Philadelphia-based mega agency with an innovative incentive programme, agents were able to increase their compensation by 27 per cent. Benefits Vary
Most agencies view travel as their employee·s primary.benefit, but policies on travel vary markedly. Generally. agencies offer
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four to six days of familiarization trips depending on experience plus another eight to fourteen vacation days. According to ASTA's 1989 "Agency Salary and Benefits Survey", most agencies provide at least some type of paid familiarization trip annually but some require the agent to pay for all or part. Most agencies provide free or reduced rate travel as well as career-related educational benefits. However, agencies tend to be weak in providing most other benefits. Only one-third of all agencies pay the full cost of employee hospitalization and major medical insurance; 40 per cent provide no such insurance at all (a legacy form the time when most agents were mature women whose husbands' jobs provided health coverage). Only 10 per cent of all agencies oiTer a retirement plan; a sligh~ majority of agencies provide
employee bonuses; nearly half of all agencies provide five .or more days of paid sick leave. Less common beneflt.s are den~l insurance, disability insurance, life insurance, and maternity/ paternity leave. Who Becomes an Agent?
In a business where experience is becoming increasingly improtant, a sizable proportion of the work force consists of newcomers, which largely reflects the astronomical growth of the field since 1978.According to a survey by the Travel Education Centre (TEC), a Cambridge, MA-based travel school affiliated with Thomas Cook/Crimson, some 12.9 per cent of agency employees have been working less than one year; only 32 per cent have been in the business more than five years. Even owners are new; 16 per cent have been in the business less than three years. While we tend to think of "entry-level" workers as people who are just statting out in their careers, the travel agency industry has traditionally been a popular one for people who are changing careers, starting over after raising a family, or retiring from something else. This is convenient, too, because many agencies openly admit that starting salaries would be indadequate for someone who depended solely on the one salary.
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Increasingly., though, people who are becoming travel agents are coming from burnout professions like teaching and nursing, which are higher-paying fields. While these people are content to take lower pay initially, they are still forcing new standards and expectations. "People who are changing careers don't care so much about money." said Zoe Wakefield, an administrator, wtih TEC. "They want an atomosphere that they are comfortable with." "A lot had well-paying jobs, but are willing to take less because of job satisfaction," added Paula Wagner, president of the Colorado School of Travel, Lakewood, Co. Sharon caldwell, for example, was a teacher for seven years and then a nurse before becoming a travel agenL "As a nurse, you deal with patients, families, life and death. It takes a lot of energy on a consistent basis. Travel agency work is relaxing in comparison. As an agent, you're dealing with people and dealing with problems, but these are happy problms. I like trravel; I like selling it. I love to travel and I do. "I had wanted to be an agent for a long time, but stayed away because of the salary." said caldwell, who had also tried real estate sales and, though a full-time travel agent now, continues to work as a nurse every other weekend. Though more men are coming into the field than befor, men stll account for only about 15 per cent of new agentsmainly because of the low pay. "They can't live with it, even in the short tertn," said Wagner. The low pay is the major reason, however, why few who are becoming travel agents today intend to stay on the from line forever. They have amibitons of becoming manager, an owner, or even an outside salesperson. Part of the American dream is to be a manager or owner, " G>bserved Martin Me Art.hur, placement director for the Southeastem Academy, Kissimmce, FL. "Most come in realizing that salaries are low, but they co me in with an eye to the future. They see being a travel agent as 'paying their dues,' ;1 stcppingstone. A far
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higher proportion [than in the past) want to go into management." One reason why more people are coming into travel agem:y work is that "travel agent" is becoming a more recognized and highly visible profession. Kate, on the 1V show "Kate and Allie, was a travel agent, and, in a revival of the "Gidget" sitcom the grown up Gidagei was a travel agent. "Young people are thinking abot beocming a travel agent," said Doris Davidoff, vice president of Belair Travel, Bowie, MD. "Fifteen Years ago, the averge k id coming out of high school or college hadn't even heard of a travel agent . It wasn't even listed in the Labor Department's list of careers. People didn't think of it until after they had traveled, and then tended to stay hoem until their kids were grown. They could t
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better pay and benefits. Many, in order to keep valued employees, are allowing new mothers to work from home via computer or are offering flexible and reduced work schedules. A few, like vrs Trvel, Montvale, NJ have even opened an onsite day-care center. "We are limited in our growth because of the difficulty in hiring people," noted Maryles Casto, chairman of Casto Travel Inc. a five office group headquartered in Palo Alto. CA . At Casto's agency, the work and family problem is acute: out o 140 emplyees, 80 per cent are women and 60 per cent of those are in childberaring years. "We have four to five pregnancies a year, and more and more women are not coming back after having their babies," she said, Casto offers many options to retain and attract emplyees such as a three-month maternity leave with an option to extend, liberal part-time and flex-time options and job sharing Casto is also looking into the possibility of subsidizing the cost of child care and allowing new mothers to work from home via computer. Getting In Getting into the travel agency business is trough. One of the ironies of the industry is that entry-level jobs are so scarce when the industry is expanding so dramatically. In the past, the travel agency industry afforded enormous opprotunity at the entry level. The Industyr's version of an apprenticeship was a clerk working for minimum wage but able to look over a more experienced shoulder and ultimately move into a consultant's spot. Many agents started while they were high school students working-part time and summers. Today, the situation has completely reversed. Computers have virtually eliminated the need for clerks v.;hile vastly increasing the complexity and technical knowleged required to do even the most basic functions. The incredibly fast pace of work means that there is no time to train, and the vety low profit margins make training a costlry exercise. What is more many mangeras fear can cost the agen<..)' a client, or worse, a lawsuit .
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Jobs for neophytes are scarce, while jobs for agents with only minimal experience (knowing how to operate the airline reservations computer) abound. On the other hand, tens of thousands of people are hungry to get into the travel agency business. Drawn by the glamour and opportunity to travel, mariy are so desperate to get in that they are willing to work for no pay: they just want the chance to gain the necessary experience for a paying job. Some agencies have taken advantage of this situation, hiring people on a commission basis. One young woman who now owns her owns agency recalled her experience of getting into the travel agency business with bitterness. She enrolled in a travel school operated by a prominent agency but realized that "no one would give me a job when I had no experience. "She found a Long Island agency that offered to pay her commission on sales she brought in. She worked Monday through Firday form 9.30 A.M. to 5.30 P.M. Saturday from 10 A.M. to 5 P.M. and Sunday from 1 to 5 P.M. After four months, she had earned $ 4.52 in commission "on a one way ticket to Florida for my boyfriend. I was a gofer She was eventually "promoted" and shown how to write tickets and invoices. Finally, she landed a group ~ccount. "Exploited? I felt then I was getting what I wantedtraning and experience," she declared. Another young woman also volunteered to work for nothing for six monts in order to gain the requisite experience. "I felt cheated; there was no time to train me as they said." Moreover, many agency owners or managers do not recognize free work as valid experience. Still, many of these work-in-exchange-for-training prorams can lead to jobs, and some managers even insist on "growing their own'' through an established in-house training programme. Many agency mangaers have had to abandon their own training programmes because the work environment simply does not allow the luxury. They are being forced out of desperation to draw upon the graduates of vocatibnal and ac:tdemic travel training programmes despite lingering skepticism th~n such programms do not adequately prepare people .
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"I've never yet met a graduate of any travel school who was ready to be a travel agent right after graduatlon,"said the owner of a North Kansas City, MO, agency , who n onetheless hired two. Indeed, agencies are becoming much more accustomed to going to the placement offices of schools to hire new graduates. So, while you should not confuse a diploma with a ticket into an agency job, some knd of schooling is becoming more and more necessary to break into the field. Even the most skeptical agency managers appreciate the value of the schools for screening out those individuls who are interested in travle agency work only for tl_le fun and fams. Graduates of such programmes are regarded as more serious, more· committed and more realistic about what the business is all about. This is irnportnat because agncies make a great Investment when they take on a novice. Fewer than 20 schools were dedicated to travel agency training a decade ago. The numbers have since swelled to more than 1,200 . Today, with better copperation between the travel schools and the industry, more and more schools are becoming recrutment centers for the entire industry, (There is more about travel schools in Chapter 17). Both the American Society of Travel Agents CASTA) Scholarship Foundation (P.O. Box 23992, Washington, D.C 20026, tel. 703-739-2781) as well a-; the National Tour Foundation, a subsidiary of the National Tour Association (546 E. Main St., Lexington, KY 40508, tel. 800-682-8886), publish directories of schools. Significantly, some of the large-agency groups, like Thomas Cook/Crimson (which operates the Travel Education Center, Cambridge , MA) and Carlson Travel Network (Carlson Travel Academies} plus scores of smaller agencies, have established their own schools, primarily to meet their own recruitment needs. Probably the most well-respected educational institution in the industry is the Institute of Certified Travel Agents (ICfA), whit:\1 be~tows on working professionals a coveted Certified
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Travel counselor (CI'C) title upon completion of a rigorous programme. ICfA has introduced a beginners' progamme that is glared to agents who have just entered the industry but that can be taken by people who want to get in. (For further information about programmes, contact Institute of Certified Travel Agents, 148 Linden St., P.O. Box 82-56, Wellesley, MA 02181, tel. 617-237-0280.) Before you enroll in any programme, review the curriculum closely, Hiring agencies are looking for geography, reservations computer training, courses in agency operations and the travel industry in general, and some sales training. Also check that the school is licensed with the state and accredited by appropriate agencies, that instructors have worked or currently work in the industry, and that there is placement assistance (check the track record). Talk with graduates of the programme. You may also want to check the school's reputation with local agencies (particularly with an agency that you feel you want to work at), as well as with the Better Business Bureau. ASTA publishes a brochure entitled "Choosing the Right Travel school." It is not absolutely necessary to go to a school. Indeed, many managers are fum about taking on new talent and trainng them their own way. The task is to find these people. The best way to start is to network contact everyone, starting with the agency you or your company uses, your friends, relatives, neighbors. Walk into a local agency and ask whether some entry-level job is available. If you already have work experience, you mady be surprised at how applicable it may be, paticularly if it is secretarial, sales, or tclemarketing. Think about waht you can bring to the agency. While a desire to travel and even vast experience traveling are helpful, what an agency really wants is contacts for new business. If you are comming from antoher industry, you may be in a position to bring in new commericial business to the agency. AST A also offers a home study course on b ecoming ~~ travel agent. Working on Straight Cutwtlission The easiest (and the most prevalent) way to get in willtu ut
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prior travel agency experience is as an outside salesperson, working on stright commission. This minimizes the risk for the agency, but be aware: you are unlikely to earn more than a few thousand dollars in the fust year and perhaps only $5,000 in the second. Outside sales agents do not necessarily always work outside the agency, but their function is to bring in business fro'm outside. "You're your own boss". said Bonnie Kogos, a commissioned sales agent for moe than a decade with Zenith Travel in New York City. "You have your own clientele. When you change agencies, you generally keep your own clients." "It is not glamorous at all. You have to slog through each individual booking. You are only as good as your last ticket. You might handle 30 clients at once, do a conference, a vacaion, handle connercial clients. I hae 40 people going to Bermuda." · The newer agents, she commented, are •computer whizzes but have never been anywhere. TI1e older ones, over 35-years old with ten years in business, are more Renaissance people. I've been to 82 countries and love to look at hotel rooms. You've got many different breeds of cat in the business,• said kogos, who also publishes her own newsletter for agency clients. A commissioned agent, like any agent, gets better and better with experience; with more knowledge of destin~tions, facilities, and airfares; and with more contacts at travel companies. The hardest part is getting in «Jike acting," she says. At age 32, she worked for $3 an hour in an agency. After two years, she went off on her own as a commissioned salesperson. "You have to love the business . If I have a conference, I may work 8 A.M. to 8 P.M. sometimes I wake in there middle of the night, remembering some detail I had overlooked There are lots of little details. It pervades life. I don't go on vacation : i go on inspection tours. You are always learning." A commissioned sales agent should negotiate with the boss first. Items to negotiate include the amount of the
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commJSston split (half of the 10 per cent commission for a fairly experienced agent who does his or her own ticketing, but the amou~t can go higher; 25 per cent for an inexperienced agent who does not do the paper-work); when it will be paid (at the time of booking, when the client pays, or after the trip); and what the agent pays for (use of computer, telephone supplies, or nothing). You should get promises of a higher pay rate or a future salaried position in writing. Read the contract presented to you carefully, and see what it says about whose clients you clients are (whether you can take them with yo u if you leave the agency). Selecting an Agency If you use reasonable care in selecting a travel agency, take any job with it, even at minimum wage, just to get a foot in the door. If you are interested and a bit aggressive, you will learn by being exposed to various tasks and can create your own positon or slip into a vacancy. Once inside, it is easy to move up or to move over to a better postion at another agency. If you are in a position to choose among agencies to work for, there are several matters to consider. Agencies manifest the styles and character of the owner or manager. The clientele and sales volume of an agnecy (and therfore yuour own revenue) are further determined by the location, siz:e, facilities such as computers, advertising and promotion budget, and even numbers of counselors or outside salespeople. You can tell a great deal about an agency, for example, by whether it is a storefront on Main Street or in a small or is an upper floor in an office building; by how many copmputer terminals there arc; buy the brochures that are displayed and how they are displayed; and by the general apperance of the office. Most agencies have a mixture of leisure and commercial business, though the bvalance may vary (usually 60:40). Some agencies specialize almost e ntirely in one or the other , and there are gigantic differences in temlS of working environments. The leisure agency is generally friendier; counselors are accustomed to spending a lot of time with clients because they
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may have to prepare special itineraries. In the commerial agency, speed and efficiency are everything: the agent does not desal with the traveler as much as with a secretary or corporate travel department ; there is little co.nsultation since the traveler will likely have specific requests. Creativity comes in obtaining the lowest fares and best rates. Also, agents in commercial departments do not have the same opportunity to travel since they are not in a positon to influence decisions regarding destination and product. Commerical agencies also tend to be larger and more heavily computerized. On the other hand, commercial agents tend to make higher salaries. There are advantages and disadvantages to starting out in a small operation rather than in a large organizaiton. The largest agencies probably offer more etry-level positions, better training programme, substantially better mobility, and benefits. But they are also highly specialized; you may be required to do reservations for a commercial account (which some compare to a postion on an assembly line ) for some time. On the other hand, a small agency may also present entry-level opportunities and the training, while not as fonnatted, can be excellent, with an opportunity to take on a wide varity of tasks. The rise to a senior position may be more rapeid in a small organization ,but since there are very few management tiers, fewer senior positions are available. A samll agency, though, may offer a homier atmosphere and more opportunity to be creative in travel planning. The number of personnel agencies specializing in full-time and temporary travel agency personnel is growing. Check the trade publications and the Yellow Pages. Telecommuting
Telecommuting - working from home via computer makes it possible for both salaried and commissioned agents to successfully combine work and family life. Me Geuigan Corporate Planning Services, Philadelphia, has allowed some of its valued employees to telecommute. "From an employer's point of view , it is so difficult to find skilled
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people that this was cost-effective for us," commented Mimi McGettigan, vice president. Kathryn Davis, a Texas travel agent, gave up a job as an office m:!nager and bookkeeper because she was "tired of staring at the same four walls. • Instead, she established a relationship with a local agency and, in effect, works on her own, doing FITs (customized itineraries), gr~ups, and corporate travel. "If I choose to let my family take priority, that's my choice," said Davis, who has been working from her home for five years, linked to a sponsoring agency by computer. "I would never o back to an office settin. I would quit completely first. I like the freedom." One of the advantages of telecommuting is that agents can coordinate their schedule around their f-amilies. "What doesn't get done in the day, I can do after hours." said Me Gettigan's Tina Mclaughlin. Mega-Agencles
More Specialization, New Career Paths
The emergence of mega-agencies billion-dollar companies with huhndreds of outlets nationally and internationally-like American Express, Carlson Travel, Thomas Cook, and Rosenblutl1 has added the dimension of Big Business to travel agency careers, opened new paths for entry and advan cement, and, in all, helped shape travel agency work into a profession. Small family-run operations the socalled Mom and Pop shops-may be an excellent training ground for novices, but they o ffer limited mobility. At a certain point the only move for an ambitious agent is to go to a larger agency or to open his or h er own. L1rger agencies (which generally prefer to be known as "travel management !>ervices companies• and tend to derive more than 70 per cent of their business from corporate travel sales) have more specialization of function and many more management opportunities. for example, positio n may include: quality co ntrol coordinators and customer.service representatives, account executives, area managers, commercial sales managers,
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human resources specialists, trammg and development professionals, MIS specialists, accountats, product development managers, fare analysts and negotiatiors, public relations professionals, and marketing managers. Indeed, Thomas Cook, one of the nation's largetst agencies, lists 130 different job titles among its three divisions (up from 110 in 1986) with most of the new positions ·in product development, vendor relations, automation, and quality control. Among the job titles are the followoing : document control specialist data specialist, Disney sales administrator, branche liaison coordiantor, cruose specialist promotions coordinator, inventory control coordinator, training coordinator, and senior hotel desk agent. Because these companies have hundreds of locations nationwide and even global presence, they offer more opportunities to relocate (an advantage if you want to live in different places, but a disadvantage when the company says you have to relocate to Minneapolis or Phoenix or leave). The mega-agencies also generally offer better salaries and benefits and have superior training and development programs. Travel agencies generating more than a billion dollars' worth of business include the following: AAA Travel Agency Services, Orlando, FL, an affiliation of 154 clubs American Express Travel-Related Services, New York Carlson Travel Network, Minneapolis Lifeco Travel Service Corporation, Houston Rosenbluth Travel, Inc., Philadelphia Thomas Cook Travel, Inc., Cambridge, MA Liniglobe Travel International, Vancouver, BC., a franchise organization. US Travel Systems, Inc., Rockville, MD Other giants include: IVl Travel, Northbrook, lL
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Scheduled Airlines Traffic Offices, Inc (Sato) Arlington, VA,
Owned by 13 airline companies. Wagon-Lits Travel USA, Dayton, OH
An Example: Rosenblutb Travel One of the oldest travel agencies in the United States, Rosenbluth Travel was founded in 1892 as a steamship ticket office by marcus Rosenbluth, a man who spoke nine languages and would be entrusted to take a few dollars at a time until his client could accumulate the $50 to send to Europe to bring a relative over to America. The agency, now one of the largest in the country, epitomizes the evolution of the travel agency industry: lt is a family shop turned mega and, in many ways, still straddles both worlds. In just 10 years, Rosenbluth went from regional travel agency with 8 agencies and 250 employees generating $150 million in sales (a substantial amount for the time ) to a national company with global links and more than 400 offices and 2,600 associates (as its employees are called) generating $ 1.3 milion annually in sales. · Headed up by the fourth generation of Rosenbluths Harold F., the presiderit and cheif executive officer, and Lee, the executive vice president and chief operating officer, the company has grown and prospered buecause of its focus on technolgy, innovation and people. The company has been able to preserve the essential qualities of a closely held family company particularly in its attitude to ward its "associate" ("People work witb me, not for me," said Lee Rosenbluth), While wielding the power and influence of r. megaagency The company has the clout to negotiate high override commissions and the resources to invest millions of dollars in state-of-the-art technology to provide value added setvices for diets as we ll as ::chieve high productivity. Rosenbluth has applied considerable innovation to itS work fore. for example, a "Pay for Quality" incentive programme Elements sous drot!S d auteur
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for resetvationists produce a 27 pr cent increase in salreies. T;,e company also places emphasis on quality control and customer service programme, employing specialists in these areas, as well as on training and development of 20. It rect!ntly set up a special reservations office designed to be staffed by people who have been disabled. One of its California outlets employs a blind associate who uses a special machine that converts information on the computer screen to Br.t ille. The company even opened a· special data processing ccntcr in Linton, ND; in order to create jobs for struggling fanners. Rosenbluth has also been innovative in its products and services. lt mpped into the emerging market of consumers who shop via personal computer by linJ..ing up w ith Prodigy, a joint venture of IBM and Sears (subscrib.ers seeking to book travel wsith Rosenbluth are actually hookd up to a Roscnbluth agent who works from hove so that she can be with her uaby). Other innovations include a Family Vacation Station, a !
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(there are about 60 programmes); and product development people (who negotiatee rates with airlines, h otels, and other suppliers). Lee Rosenbluth's management philosophies, which emphasize open communication and respect, were shaped largely by having come up through the ranks of the company and also by his having worked outside the company. "Most summers, I worked in our company, • he recalled. "I started stamping brochures, then bookkeping, then as an agent I worked in every phase because I knew I would eventually be in a position to oversee. So I know what the job is like, and I also know how I wanted to be treated." But Lee, who also has a law degree, applied this background working for a congressman and a district auomey. MThis gave me the perspective not to be an owner, but to be on staff." "Law school taught me I had a greater capacity than I r.hought l had. Law professors pushed my capacity, forced me to do more. But I knew, even going through law school, that l would be in the travel industry," he said. The Travel Agency Industry The travel agency is a relatively new phenomenon. lts origins go back a little over 100 years to the heyday of railroads and steam ship lines, when agencies sold tickets on these carriers. With the emergence of arilines as the main common carrier of the twentieth century, travel agencies have become an extension of the airlines. Although they are, in effect, a department store for all forms of tours and travel, the airlines, which account for 65 to 80 per cent of an agency's revenues, for the most part dictate the rules and regulations for agency appointments and operations. The appointing bodies are the Airlines Reporting Corporation (ARC), the dome.stic airline conference, or the International Airlines Travel Aet Network (IATAN), the international conference, a not-for-profit subsidiary of the International Air Transport Association. In the early days of travel agencies, the clientele was typically affluent, but more efficient and less expensive jet service brought a new era of mass travel. The trend was
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further hastened by tour packages that combined the airfare and ground arrangements so that the total cost was cheaper than the regular airfare alone. In the 1960s, the predominant low-cost package was the GIT (group inclusive tour); the 1970s saw the liberalization of charter rules and the mushrooming of this new fonn of package. A new generation of so-called "jetsetters" was born. Travel agencies flourished, although they dealt almost exclusively with leisure travel vacation and pleasure trips that are considered "discretionary" because people can choose to take the trips or not. The airlines used low commissions and difficult rules to effectively keep most agencies out of nondiscretionary business travel. The airlines felt that agents wre entitled to commission only on business that was incremental above what the airlines would have had on their own. Moreover, the carriers knew that the leisure traveler takes much more time and personal attention than the business traveler, whose requirements are dictated by the purpose of the trip. Often, the difference is between minutes and hours. In the mid-1970s, the airlines made a complete reversal in policy. They realized that their overhead for reservationists and city ticket offices was much more expensive than the amount they paid in tr.tvel agents conunissions on actual ticketed sales and began to ease agents' way into the commercial arena. At the same time, new computerized reservations systems were introduced, giving travel agents direct access to the airlines inventory of seats. The result was dramatic· growth in numbers, sales and proportion of airline sales by travel agencies. In 1974, only 11 ,400 agency locations were appointed by the Ariline Traffic Conference (now called the Airlines Reporting Corporation), and these generated only 40 per cent of domestic airline sales. By 1984, the number of agencies had more than doubled, and the agencies share of domestic airline sales jumped to 65 per cent. A decade after deregulation went into effect, dollers volume jumped 231 rer cent, but the number of agency locations also
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doubled, to 29,584. In 1989, agency sales from all sources totaled $79.4 milion, according to the 1990 Travel Weekly Louis Harris Survey. Currently, agents generate 95 per cent of all cruise reservations, 90 per cent of tours, 85 per cmt of international tours, 80 per cent of intmaional airline sales, 70 per cent of domestic airline reservations, 50 per cent of car rentals, 37 per cent of rail fares, and 25 per cent of domestic-hotel bookings, according to the Travel Industry Yearbook: 7be Big Picture, 1990. Deregulation: Boon and Bane Greater reliance on the travel agency community by suppliers and the computer systems that gave agents unprecedented access to information partly explain the growth in agency numbers and sales. But deregulation meant that commission rates were no longer standardized and regulated; once they wree opened, the profitability of agencies improved considerably and scores of new entrepreneurs rushed into the field. Deregulation also unleashed chaos on the public in the form of changing schedules, fares, and even airlines. Sheer confusion drove countless new customers into agencies for t11e first time, while outrageously low fares, pushed down by bloody battles for market share by upstart carriers, also generated new airline travelers. Agencies obtain virtually all their revenue from commissions earned on booking arrangements with airlines, hotels, tour companies, car rental fll1llS, and the like; only a few charge sevice fees. Commissions average 9.9 per cent on airline fares (up from about 8 per cent a decade ago); 10 per cent on hotel arrangements; and 10 to 22 per cent on tours and car rentals. So, a medium-sized agency, doing some SS million in sales, actually earns about $500,000 in commissions. The $500,000 is the agency's operating· revenue for paying employees, utilities, advertising expenses, interest on lonans, and so on. According to a survey of financial statements submitted to bank loan officers, agencies clear only 2.9 per cent in profit before taxes. A financial study by A5TA Agency Mr111agemeuJ magazine
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disclosed that the average one or two-outlet agency generates total commission income of $155,245 and has expenses of $122,416, leaving a net profit (before payment to principals) of only $32,829. Reasonable levels of return occur only above the $2-million (grossdollar) volume level, when the level of return is $80,211. Travel agencies in 1987 generated $64:2 million in total !ravel sales-about 20 per cent of the total U.S. travel expenditures domestically and abroad. Of this amount, agents generated $37 million in ariline sales, $10.3 million on cruises, $7.1 million on hotels and other accommodations, $5.2 millon in car rentals, $1.9 million in rail travel, and $1.9 million in miscellaneous services such as sightseeing, according to the 1988 Travel Weekly Louis Harris Survey. A decade ago, an agency that generated $3 million would have been considered large; most agencies generated under $1 million in total volume and were able to keep only about 8 per cent of it to cover all expenses and profits. The average agency might have consisted of two or three people a husband and wife and an extra agent-a-so-called Mom and Pop operation. Today, according to a Louis Harris study, the avaerage agencies does about $2.5 million a year; a large agency, on the order or $25 million and up; and mega-agencies and chains, such as Carlson Travel Network and American Express, from $500 million to $1 million in business. Because agencies are now free to negotiate commissions based on volume, bigness and consequently consolidation is be coming an advantage. The biggest agencies not only have the clout to negotiate favorable rates, but they also benefit from certian economies of scale the abiltiy to purchase sophisticated computers and software, to advertise, to pay higher salaries to attract top people, and to afford training and development programme. Though the industry is still very diverse, with 65 per cent of all agencies still generating under $2 millio n in revenue, these generate o nly 32 per cent of all sales. The largest agencies, those gen rating $5 million or more in reve nues. tho ,ugh only 9 Elements sous aro1t< a auteur
Travel Agents and Travel Agencies 39
per cent of the total generate 33 per cent of the sales. Some travel agencies attempt to provide the full spectrum of services, from corporate to leisure. Others operate more like "boutiques"; they are small and specialized, with a emphasis on servie. Some specialize in the "carriage trade" the affluent travelers who prefer customized itineraries. Others specialize in some special interest,·such as adventure travel. About 1,000 travel agencies specialize in serviceing government accoutns a $15 million business or in handling the military (SATOTravel, a $900-million travel agency network, is owned by 13 airlines). And then, there are thousands of "cruise-only" agencies that do nothing but sell cruises.
An Example: The Travel Spot Being a travel agent, said Richard Dixon, the owner-manager of The Travel Spot, Cranford, NJ, is the "most difficult job in the world. Customers are often irrational. You have to sift throuhg what they think they want and figure what they really want, then choose among 9,000 potential travel p roducts for the right one. "In 1965, when I entered the business after leaving Pan Am, this was a regulated business (fares had to be approved by a govem1ent agency and were the same for everyone). Yesterday, we spent the day cutting discount coupons from the newspaper in order to give our customers the best deal. "It's enormously frustrating. But it's the greatest business in the world. Something is always new." Dixon, a former fine arts major who found his way into trave, epitomizes the new wave travel agent who dips coupons, keeps on top of the best deals, and uses innovative marketing programme and good business practices. For example, seeing a weal.,>eni~tg in the economy of Cranford, a town of 30,000 people, Dixon joined forces with other local merchants to create a "Home Town Advantage ·· promotion to stave ofl competition from surro unding s uburlJ:
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certificate to its customers toward the next vacation booked at The Travel Spot; the local bookstore sponsored a murder mystery weekend at The Sagamore on Lake George, NY, booked by the agency; a local restaurant donated a dinner that the travel agency used as a prize in conjunction with its promotion with the bookstore. A townwide treasure hunt was also planned The agency has also been successful in turning individual travelers into groups thus multiplying sales and at the same time, building brand loyalty through its own travel club. dub members pay into an interest bearing escrow account, with the funds earmarked for some speical amenity or activity on the tour. The agency offers six or seven special tours a year for club members. "We discovered a long time ago that unless people are made to feel special, they will shop price," said Dixon. Dixon himself helps promote the agency's and his own credibility as a travel expert through a weekly column he writes for the local paper. Dixon also knows the improtance of keeping tight controls on cash flow and scrutinizes corporate accounts (which represent 30 per cent of the agency's volume). "Unless they can convert to a seven-day billing [paying as frequently as the agency has to pay the airlines] or a credit card, we say we can't afford to handle them. I have told clients we think they would be happier in a different environment." The Travel Spot, which does over $3 million in business (70 per cent of it in leisure travel), employs 11 agents, all of whom are specialists in some facet of travel. One agent has a great following among senior citizens; Di.xon specialzes in the United Kingdom and cruises. (The Travel Spot has a sister agency, Camelot, which handles cruises exclusively and employs 9 people). "When I hire," commented Dixon, "I only hire from tour and travel programme because I find these people understand the language and have an interest in travel. As an employer, I will refine the interest."
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Starting salaries at The Travel Spot ar $22,000 for someone with an education. "The more travel and service-related background you have , the better. Sure, someone who wants to be a travel agent should love to travel, love people. But you also need a sense of service, and be detail oriented." And being a travel agent, Dbcon noted , does give you the opportunity to travel: "Travel is a life-changing experience. You don't come back the same, or your heart ·is dead." Opening Your Own Travel Agency
In spite of the emergence of mega-agencies, the travel agency industrY is still overwhelmingly small business and entrepreneurial. It is still a relatively inexpensive busines to start-sup-pliers even provide your inventory,· in the form of brochures. All you do need is an office accessible to the public (which does not prevent you from opening an agency in your home), a telephone, and a manger with two years of ticketing experience (who may be the owner). An agency must post a bond or letter of credit of $20,000 and be open a certian number of hours. (Some airlines also impose a rule that no more than 20 per cent of your business can be d one with yourself in order to prevent corporations from setting up their own travel agency to save commissions). It is increasingly necessary to have an airline computerized reservations system which probably will add about $1,000 per month to operating expenses. Still, you can open an agency wjth only about $75,000 to $100,000 in operating capital. While there is no federal licensing, some states may require a licens·c. The Airlines Reporting Corporation (ARC) and to a lesser degree the International Airlines Travel Agent !\!etwork (I ATAN) set out the rules and regulations for appointments and operations. Donna Conklin , fom1erly assistant director of ARC, now has a service to assist people in obtaining ARC appointments (Conklin & Associated, 4216 Evergreen Lane, Stc. 11 5, Annanch1le, VA 22003, tel 703-941- 5486). "Virtually everyone gets ~• pp roved, 'she noted. The fee, including application f('e . is about S425 and takes about 30 to 35 days (compared with 90 days if you
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do it yourseiO. The more daunting obstacles to opeining your own agency are likely to be the lease on office space (typically. three years) and an automation contract (typically five years, which can amount to $60,000). You will be liable for both if you have to close. Travel agencies used to be opened typically by doctors' wives and divorcees or were used as tax write -offs or for the purpose of obtaining free travel for the owners., That is, they were used for a UlX loss and not for profit; consequently, nearly half were operated at a loss. However, the steady increases in commission levels have made the travel agency business, if not lucrative, at least profitable. In 1990, domestic commission rates (before override) averaged 9.8 per cent, and international commission rates averaged 12.8 per cent, with agents netting $4.9 million in all. Still, after expenses, travel agencies typically clear 1 to 2.5 per cent, a dismal profit margin compared with most other retail industries. None the less, the industry now attracts serious professionals-often people retiring from other businesses. Travel agencies had been opening at the rate of 9 to 10 per cent a year (about 3,.000 new outlets) to the point where there seemed to be travel agencies literally on every corner. In recent years, the rate has slowed down ; in 1990, the number of retail locations grew by only 2 per cent to 32,077 . However there has been an explosion in STP (satellite ticket printer) locations actually adevice located in the office of a large corporate client which grew by 49 per cent in 1990 to 5, 730 locations. To open an agency, you have to choose a locauion, which means evaluating potential customers, the competition, and the overhead costs (rent , utilities). Doug Thornpson, in h is book How to Open Your Own Trawl Agency (Dendrobium Books, 76 Cough St., San Francisco, CA, 94102), recommends telephoning agencies whithin a fivemile radius of your proposed locatio n as tho ugh you were a potential customer to find out ~tbot their hours, specialties,
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policies on ticket delivery, staff, special services, and brochure offerings. Then you shou ld go through the process o f booking a trip in person to see how the competition operates. 'fhompson . now sells two different start up programmes for new agencies as well. ASTA also offers a manual on how to start a travel agency. The ease of opeining an agency dupes many people, particularly those who have been successful in other businesses, into believing that the business is also easy. Operating a successful travel agency is deceptively difficult; there are nuances to the business that have tripped up some of the mightiest companies, including ABC Network, which thought it could make a go of it and then failed. Consequently, instead of starting from scratch, many newcomers buy an existing agency or purchase a franchise, There are advantages and disadvantages to buying an existing agency. You may, in fact , be buying an agency with a poor reput.1.tion or poor business methods. Look for one where the owner is retiring after a successful career, and retain his or her services on a consultant basis. FrancWses and Consortiums Travel agency franchises sell for S 10,000 to S32,500 and are not of the same value as real estate or fast-food franchises. Unlike the hamburger, which can be standardized fromrestaurant to restaurant, or the home you buy once in five or ten years or a lifetime, travel is a servise purchased frequently. Success depends on p ersonal relationships between the agent and the customer. When you franchise, you get assistance with site selection , training, help in hiring a manger with the necessary experience for the agency to become appointed, and promises of advertising. Usually, there is also a programme for obtaining override (bonus) cotllmL<;sions from preferred suppliers. But the franchiser may also take a royalty of sales plus annual fees . Since the travel industry has not had an especially good track record \Yith i'ranchising , yuou should scrutini7.e the companv et re fully , do backgroud checks, and interview
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franchises Check to see whether there are legal actions against the franchise compay. Among the more successful franchise operations are the following: American Express, New York, NY Carlson Travel Network Associate~ . Van Nuys, CA Empress Travel, New York, NY International Tours, Tulsa, OK Uniglobe, Richmond, British Coulmbia, Canada Travel Agents International, Seminole, FL Check the Franchise Annual Published by Info Franchise News, Inc., Lewiston, NY. In the travel agency business, many of the services performed by Franchise organisations are available through cooperatives and consortiums, which enable the agency to preserve its independence but have the purchasing power and clout of a group. Indeed, membersJ:lip in some sort of network or association has become increasingly essential, both to earn higher override commissions from suppliers and to provide clients (particularly conm1ercial account) wtih the wide-reaching services they require. In addition to the value they offer a new agency, management of these multiagency groups has become a career path in itself. Among them are: Action 6, Lowell, MA Gem, Inc.., Massapequa, NY Giants, New York Hickory, Saddle Brook, NJ Time (Travel Industry Marketing Enterprises), Massapequa,
NY Travelsavers, Manhasset, NY Travel Trust International Washington , D.C. Woodside, Boston Rent-A-Desk
A new concept and an alternative to o pening your own
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agency is "rent -a- desk." This concept affords the best of both owning your own agency and working for someone else in the form of independence and an opportunity to retain 100 per cent of the commissions on travel bookings, but with lower overhead and reduced risk (and stress). Instead, agents pay a monthly rental and, in exchange, have access to computer reservations systems and the use of an appointed outlet. One of the first to be successful at the concept is The Travel Society, Denver, founded in 1987 by two travel industry veterans, one from the travel agency side and the other from the airlines. Bill O'Connor, the cofounder, quickly noted that the concept is more akin to a "co-operative" than to "rent-a-desk." In effect, the individual "associates", who pay a fiXed fee (S1,600 a month), are set up as if they were branch offices. They keep 100 per cnet of the commission on the trravel they book plus a majority of overrides and, in exchange, are provided with delivery service, accounting, and automation. The agency negotiates override with preferred suppliers; commissions are sent to the agency and then distributed on a pro rata basis. "It's really more like a microfranchise, or an executive suite or a cooperative, "said O'Connor. As such, the arrangement frees up the associate to concentrate on being a travel arranger rather than a financier or an accountant . Agents are provided income statements, balance sheets, commissions tracking (so they know which suppliers are paying what), accounts payable and receivable , endoe analysis, and corporate reports. So far, the company operates two offices in Denver, with a total of 27 associates, who have generated a total of S15 million in sales, or about $650,000 each. If the associates were working as employees, they would likely eam aboud $20,000 a year; as associates, they net 540,000 on average. The programme works best when an agent comes with his or her own following rather than when someone just enters the field, O'Connor advised. Other outlets are planned in new markets. (For more information, contact The Travel Society Ste.100, GOO South Cherry St Denver, CO 80222 tel. 303-321-
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I
I
0900). A variation on the theme is an enterprise that sets agents up in home-based businesses (cottage agencies ) linked by computer to an appointed agency. Pacifica Plaza Travel, Culver City, CA, is one of these businesses. Future Trends The travel agency industry is evolving in response to changin~ market conditions. The past few years have been a p eriod of transition and shakeout., of consolidation and retrenchment The industry is still very new to discount pricing, and, frequently , agencies do not know the true cost 6f handling ::m account whe1; they make a bid that includes a rebate to a client. Negotiating :"'ltes and marketing services :a re still new (.u::-:epts. Airlines are actively introducing technology that gives commercial and leisure custcmers direct access to thei: schedules and fares on personal comp~.>~ers. They are also moving to a "ticketless ticket" which could m..:~e it easier still for passengers to book arir tickets directly with airi:•1es. ' Travel agents, meanwhile, are moving into several new areas. They are working with banks to ~et up retail travel agencies; beginning to sell their services through personal computers; installing satellite printers o~;~tside the agencies; establishing travel clubs, promotional programme and frequent uaveler clubs, and generally becoming much mo re marketing and sales oriented. Many are establishing travel schools not only as a source of new staff but also for the substantial profits the schools generate. The radical changes unfolding in the industry are producing more jobs, more specializaion, and more professionalism. The industry is becoming much more marketing and sales oreiemed as well as much more computer oriented. New methods of retailing (or merchandisin) travel have been introd uced, and aents are beginning to take advantage or them. Negotiations sk ills, forecasting, and preplanning are becoming an increasing part of travel agency operatios and will result in new kinds of jobs. The cmeregence of massive travel agency o rganizations,
I
I l
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may with global links, will result in new tiers of managemet new specialties, and greater opportunities for graduates of four-year and business administration programme. •y ou get satisfaction in making someone's dreams come true, of doing things for people they can't do as well for themseleves,• concluded Joseph Hallissey, presidient of Hallissey Travel, a founder of Conlin Hallissey Travel Schools and a former chairman and chief executive officer of the American Society of Travel Agents. Added Hallissey, who entered the travel business in 1968 after being a social worker for 18 years, "We are dream makers, still." Contacts and Sources Leading trade associations that can provide information about the industry and contacts include: American Society of Travel Agents (ASTA), PO Box 23992, Wash ington, D.C. 20026, tel. 703-739-2782. Association of Ret.'lil Travel Agents (ARTA), 1745 Jefferson Davis Highway, Ste. 300, Arlington, VA 22202 tet 703-5537777. Airlines Reporting Corporation (ARC), 1709 New York Ave. r-.rw, Washington, DC 20006, tel 202-626-4076. lntemaitonal Airlines Travel Agent Network (IATAN), 300 Garden City Plaza, Ste. 418, Garden City, NY 11530, tel. 516747-4716. Institute of Certified Travel Agents, 148 Linden St., PO Box 82-56, Wellesley, MA 92181 , tel. 617-237-0280. Society of Travel Agents in Government: 6935 Wisconsin Ave NW (#200), Washington, D.C. 20815, tel. 301-654-8595. Leading travel industry publications include. Travel Agent Magazi1w Travel \'(leekly Tour & Trcwel News T1-avel Mangement Daily
n·avellife .tlSTA A£<mcy Mc111gement
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•
Corporate Travel Management A Career in Its Own Rights
Corporate travel management, a career path aod ~ steppingstone for commercial tra\•Cl agents, is emerging as a career in its own right. "Corporate travel management is the growth i.ndustry for the decade," declared Mary Kay Dauria, director, Worldwide Travel Services, American International Group (AIG), New York. "The field is just Coming into its own." Currently, the responsiblity of overseeing corporate travel is ususlly left to the company's purchasing or personnel departmem or put under the controller's office or, sometimes, under the purview of a secretary (who often emerges as the corporate travel manager). Only a little more than half of the Foutune 500 compaines have travel managers at all . Though in the past the corporate travel manager's position in the corporation had little clout, the spiraling increase in travel expenses and the recognition the travel i~ the third g reatest controllable expense (after personnel :md data processing) have catapulted the job to higher st:nus
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"Corporations recognize the need for the position when they start realizing how big the travel expenditure is and that they have an ability to impact on that expenditure," said Ed Rathke, corporate travel manager for Aetna Insurance Company, Hartford, er, and a former president of the National Business Travel Association (NBTA), the Alexandria, VA-based trade association for corporate travel manager. "The larger the company, the more the emphasis, and the higher the position." No longer Just a service for the employees, corporate travel management is becoming appreciated as a means for a company to achieve its business goals, help other departments reduce their costs, and, increasingly, serve as a profit centre. Moreover, following the Persian Gulf War, corporate travel manager were recognized as critical advisers on safety and security concerns. Staffing
Members of a company's corporate travel depam1ent are generally employed by the company itself and receive comparable salaries and the same benefits as other employees. They are responsible for arranging travel for the company's employees, arranging meeting and conventions, and managing travel budgets that can amount to millions of dollars. Companines may employ a single individual to be reponsible for setting·up a travel budget, establishing policies for employees to follow (such as who can trael first-class), and acting as the liaison with an outside travel agency that actully handles the arrangements. Or, an entire staff may be organized.to function much like a commerical travel agency. Sometimes, an outside travel agency establishes an "inplant" on the company's premises, which operates like a branch oiTice of the travel agency to handle the company's travel ammgements exclusively but is staffed by the company, the agency, or a combination of both. This arrangement enables the company to recover some of the travel expense. Corporate agents do not have the reduced-rate travel privileges of agency pers(mal, but their salaries and employees benefits are the higher, better one:-; of a big business. On the
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other hand, the corporate travel department (because it is typically perceived as a service and not as a profit centre) is one of the fii'St to be pruned during business downturns. Moreover, mobility can be limited (but~ improving considerably): Within the department, there are generally few senior positions and only one corporate travel manager. Agents tend to move up to a higher position by transferring to the corporate travel department of another company. Broad Responsibilities The responsibilities of corporate travel management go well beyond booking airlines and hotels for executives. When they are part of the personnel department, the responsibilities may also include personnel relocation and coordination of training programmes. They may involve meeting and convention planning. Many corporate travel departments also administrate corporate aircraft, car pools, and possibly group recreational trips or vacations for employees. The manager may also negotiate barter deals and discounts with travel suppliers. A strong business backgorund is desirable for a corporate travel manager (who may also be called a travel administrator or a transportation specialist). The manager has to oversee staff and forecast budgets; handle accounting and reconciliation; choose preferred vendors; negotiate contracts for lower rates on airlines, hotels, and car rentals; establish travel policy; select a travel agency through a bidding process; and help implement complex management information systems (MIS). "You have to follow and understand travel jargon, read the trade press, keep up with industry trends and forecasts which change daily," advised Dauria. For example, you have to be alert to an impending airlines strike or new service or a change in oil prices that could affect fares, as well as who is buying aircraft and who is paying bills on time. You also have to be the neutral arbitrator standing between the company and the travel agency :tnd othe vendors. "Sometimes I am accused of being on the payroll of the travel agency, but you can't automatically assume that the agencey is wrong, " said Daruia, whose company generates S 100 million
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in travel. AlG is one of the largest international insurance companies, with 130 offices (125 in the United States) and more than 500 locations of travel. Dauria is working on a pilot project to globalize and consolidate travel as was done in the United States. The 125 different U.S. locations that worked with 100 different travel agencies now work with one. Dauria is working next to bring in the foreign locations. But corporate travel mangement is very much a service business. "you have to be someone who gets self-gratification and not live for pats on the back," observed Dauria. "You don't hear form people except when there is a mistake. "You need to be a self-starter, someone who is hardworking but likes changes." "You can work for months on somellhing, and then something changes. "You need excellent communications skills, a "calm spirit," and diplomacy. While companies used to promote people from other departmets into travel managemet positions, this is becoming less and less possible as corporate travel managemet is increasingly becoming a specialized profession. "Corporate travel tests your business acumen. It is a fastmoving, changing specially area of business. It is fun because the people are fun." said Dauria. who started out in urban planning and moved into corporate travel management more than 12 years ago. "People in the industry have open minds; they are well-treveled. They help each other, even if they don't know somebody. Its is a tight network." Advantanges and Disadvantages The disadvantages for someone in Dauria's position is that 80 per cent of the time is spent on the road. "It is not fun. It is not a vacation. When I am on the road, I am working from 8 A.M. to 8 P.M. It is a minsunderstood industry-and you have to be able to explain it'' and continually fight the perception that you are out sightseeing when traveling. On the positive side, there is tremendous growth opportunity ahead because so many companies have yet to designate a curpo rnte l!~IVel man:tget· and bee~ use other avenues for mobility
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are opening up. "You have access to every department and access to the highest offices. There is high visibility, great contacts," Dauria noted. Other career paths are into consulting, into large corporate travel agencies, or into vendor companies like airlines. Also, there are more and more training programmes, particularly through NBTA. Salaries Salaries for in-house reservationists range from $15,000 to $40,000 managers, directors, and vice presidents can make between $20,000 and $100,000. Dauria took a $10,000 cut in salary when she moved to corporate travel from an airline, but she tripled her salary in a 1:ix-year period. Corporate travel management has been an excellant field for women. According to a survey by NBTA, 56 per cent of coporate travel managers are woman. Also, while 57 per cent have a four-year collage degree, 31 per cent have only a high school diploma. Salary medians, according to the survey, are as follows: Low
Higb
Average
West $82,500 $32,500 $52,000 Midwest 21,000 1,10,000 47,500 South 27,000 82,500 47,000 47,000 Northeast 21,000 82,500 An Example: Aetna Insurance Company Aetna Insurance Company its corporate travel function into three areas: ex~cutive travel (which handles the tqp 50 executives in the conutry, scheduling corporate aircraft and ground transportation); conference services (which handles the company's v:~st meeting and convention planning and speci:ll f~unctions and administers the Aetna Institute, an apartment complex for the company's trainess in what amounts to a 300-room hotel); and corporate travel (which arranges travel for employees at headquarters as well as hundreds o f fields offices throughout the country). Thc r corporate travel department is a 540-million operation induding 530 million in airline sales (booking 4,000 tick cL~ a
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month) . The department, which utilizes Thomas Cook as its agency, has a staff o f 40 Cook employees plus 9 Aetna
management people at the headquarters and a regional office in Dallas.
Aetna
hires its reservationists directly from commerical,
trave l agencies. A minimun of two years of experience is required, but seven years · of experience is more typical. A starting reservationist (with Sabre experience) earns $19,000 in Hartford (more in New York City). A reservationist ca.n make
up to $27,000 in Hartford (more in New York City). In the past, those who tended to move into corporate
travel management at Aetna were agents (usually women) who had been working for ten years or so and were no longer entranced by the travel benefits but were lured by the better salaries, security, and retirement benefits afforded in a coporate environment. This distinction has blurred somewhat
since the mega-agencies and large, regional travel agencies that specialize in corporate travel have come much closer in
salaries and benefits. Contacts and Sources Trade associations for corporate travel managers that can
provide information include: National Business Travel Association (NBTA), 1650 King
St., Alexandria, VA 22314, tel. 703-684-0836; offers a Certified Corporate Travel Executive programme as well as education programs. Association of corporate Tr.avel Executives (ACTE), P.O. · Box 5394, Parsippany, MJ 07054, tel 800-ACTE-NOW (201-379-6444); h:1s instituted an executive recruitment service through The 111:1nagemcnt Network, inc., Millbum, NJ. Leading trade journ:1ls for corpot~tte travel indude: Business TraiX!I News
Corporate T1'Cn et Trend \\'leekly 7i'CIIX!l A,gl'ut
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Tour Operations Dream Makers or Merchants
Whale-watching in Baja, California; ballooning across the chateaux country of France; riding a wagon train through the Bad Lands of South Dakota; climbing the Himalayas; or camping in a Mongolian yurt-these are no-longer wild fantasies. Nor are the Pyramides of Egypt, the Great Wall of China, the lncan city of Machu Picchu, the North Pole, or even outer space beyond the reach of ordinary people. The dream makers who turn these fantasies ihnto realities are tour operators- a small, highly specialized segment of $350-billion travel and tourism industry. Typically, tour operators are people who have been smitten by the lr'.Jvel bug themselves. Possessed by an insatible desire to see and experience new places, ne w cultures, and new ideas, they being their entrepreneurial talents, creativity, "gamesmanship," and love of travel together in the business of d esigning, producing , and marketing trips for other people. Tour operators put together all the elements Qf a triptmnspo ttation , accommodations, meals sightseeing and the like. They work with o th er segments of the industry-hotel comp~m ies, a ir lines, c:n rental firms , bus companies, cru iselines, local
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Tour Operations 55 ground operators, and government tourist offices.They gegotiate rates and block space, coordinating all the intricate details of an itinerary so that every moment of tinle can b e accounted for. Then they "package" the product (the tour) in a brochure for sale through retail travel agents to the public. Tour operators (who create as well as market the package) or wholesalers (who do not operate the programme but rather dis'tribute it ) then market the product, generating awarencess and brandname identification among retail agents and the public.
Foreign and Domestic Tours Much more common in Eurpe, tours have never gained truly wide acceptance in the United States. According to the U.S. Travel Data Centre, packaged tours account for about 22 per cent of all person-trips of five nights or more duration, and foreign tour packages account for 20 per cent of all U.S. foreign travel. The industry is still evolving. Tour companies developed in an era of the Grand Tour of Europe and there has always been a core of deluxe tour companies. But the packaged tour business really took off in the jet age. Opcrmors devised the GIT (group inclusive tour) as a device to obtain a low fare, and the mass travel business was bo rn. Sometimes, the land package was only an excuse to qualify for the low fare-a "throwaway" and the acconunodations provided might have been at some isolated inn for ten nights. When the airlines introduced low fates that did not require a tour package, the price-oriented operators had to come up with packages that people really wanted to use. "The idea of a package tour evokes a mental picture of a group of geriatric doddereres in rimless glasses and cast-iron pem1anent getting on and off a tour bus," quipped one tour operator. Another popular image arose when a trip to Europe was considered a once-in-a-lifetime event and travclers sought to cram as much into a sangle trip as possible. Tour-goers were Lrealed to what seemed to be seven countries in eight days, giving rise to the express ion , "If it's Tu esd::~y , it must be Belgium."
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But tour products have changed considerably since then. "Tour operators don't do 'packages' anymore'" asserted Raymond M. Cortell, who grew up in his father's tour company and who now heads RM Cortell & Associates, New York. "Seventy-five per cent of the products are independent and only 25 per cent are escorted. The American mentality i$ antagonistic to groups." Most people who take escorted tour packages want the security and convenience of having everything done for themtransportation accommodations, meal arrangements. Other people look to a different sort of package, one that offers economy. Still others take tours because they provide access to places and sights not easily visited by individual (China and the Soviet Union are examples).New-syle programmes cater to a traveler's sophistication and desire for independence and adventure. The market for the tours i$ growing along with the expansion of the product offerings. There are tours for every budget, taste, interest, age group and lifestyle. Examples are a journey by covered wagon (Wagons Ho, Phoenix); a mystery tour by bus where the destination is a surprise (Bixler Tours, Hiram, OH); a "Flight Through Fantasia" in the American Southwest (Special Expeditions, New York); ballooning in France (Bombard Society); an archaeological expedition (Crow Langon Archaeological Centre, Cortez, CO; Dinamation International, San juan Caistrano, CA); bicycling (Backroads Bicycle Touring, San Leandro, CA); an agricultural tour (Farm Tours, Etc., Tulare, CA); travel for women only (Mariah Wilderness Expeditions, El Cerrito, CA); travel for the d isabled (Flying \XIheels, Owatonna, MN); health and fitness enthusiasts, (Global Fitness Adventures, Aspen CO); and tours for the young (Contiki Holidays, Anaheim, CA) and the o ld (American Epress's programme for the American Association of Retired People). There are religious tour (Western World Tours, Sam.1 Barbara, CA); professional tours; ethnic tours; reunions for veterans; ~md tours for musicians (Performing Arts Abroad, Richland, Ml). There are also tours for artists, runners , students (Voices of the Future, Ne''' York), gardeners, nudists, and people who collect doll hollses, study caves, or want to go d<•g·slcdding.
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There are companies that specialize in the morre exotic, adenturous, and cultural programmes (Special Expeditions, New York; Society Expeditions, Seattle; Abercrombie & Kent, Oak Brook, IL; Mountain Travel & Sobek, El Cerrito, CA, two famous adventure companies that merged). The new trend among tour companies is to ~ocus on ecotourism (so-called green travel). These tours are oriented around and in turn are cocemed about protecting the environment (Biological journeys, McKinleyvile, CA; Geost.·u Travel, Rohnert Park, CA). Indeed, noted guidebook author Arthur Frommer has targeted a "second revolution in travel" (the first, mass travel to Europe, Launched with h is book Europe 01J $5 a Day). The new revolution is oriented around •cerebral" and experiential travel-travel for ideas, Learning, people. This kind of travel •shakes you up, introduces you to lifestyles, philosophical viewpoints .~ In his book 7be New \florid of Travel, he lists 1,200 companies offering programmes to places like personalgrowth centers, utopian villages and centers for alterative tead1ing (one company with this focus is Shelter International, Boulder, CO).
Literally thousands of companies operate packaged tours, but only about 350 operate on a nationwide basis and sell their product chiefly through travel agents. Fewer than SO of the companies handle as many as 20,000 passengers a year and only about 10 to 15 handle more than 100,000 passengers a year. This is in marked contrast to Europe, where massive travel organizations move hundreds of thousands of tourists a year; some handle one or two million packaged trips a year. In summary, tour companies differ markedly in their style and structure. They may specialize in certain destinations (Europe, the Caribbean, Asia); activities (river ra fting, visiting museums); markets (singles, youth, women, retirees). They may be geared to the deluxe, middle, economy, or budget market. A time of Radical Cbanges An intensely competitive industry, tour opprators work on very low markups (abm1t 2(1 to 25 per cent, compared with
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I
clothesretailers' 100 per cent markup). After expenses, p retax p rofit averages 3 per cent. This is a business where volume really pays off, yet ironically, the rising costs of advertising, printing, and postage are factors keeping operators wilhin small, specialized niches. The changeability of airfares, volume-based pricing, market segmentation and rising costS of marketing and selling tour productS, and the volatility of key suppliers like airlin es are all forcing radical chagcs among tour operators. One aspect of this is a shift away from small, entrepreneurial, family-owned companies to Big Businesses with specialized functions. Furthermore, a communications revolution is changing the makeup of the professionals inside the industry. "This the Electronics Age," declared Robert Whitley, president of the U.S. Tour Operators Association (US TO A), a membership association of about 40 of the largest tour companies. "The industry is hiring more and more technical people-computer specialists, telephone salcspeople, marketers." "We used to create a tour and then worry about operating it," reflected Cortell. "It was magical, creative then. Now we first have to consider whether the tour is operabEe from the computer end, or whether the cost of writing the software would eceed the profit potential. ''The criteria are changing for everything. Years ago, we would put out a ''dream" tour. Now it is all boiled down to airfares and body counts. We're not selling dreams anymore. We create a product we can operate the best-one where we can handle a booking in four minutes or less." In Cortell's view, the focus has shifted from operating the tour to distribution and delivery-that is, marketing and sales: "The challenge today is the cost of getting the message out to the people, and still make a profit.• Not everyone has lost the "magic," however; one company was formed to do space travel and was evem building its own rocketship. There are countless other examples of small companies bringing to life the creative imagingings of their founders: On trip recreates the voyage:; of Verne; another
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explores Antarcitica; yet another involes sailing up the Grand Cnal through China. Risy Business Tour operations is one of the riskiest buinesses in the travel industry. Operators deal with the most perishable commodity possible. Their product is space in time, like a seat on an airline flight or a room in a hotel on a particular night. Storing the product on the shelf for a markdown sale after the departure is not possible. They deal with foreign currencies that are subject to wide fluction . They are vulnerable to strikes, political upheavals, natural disasters, economic downturns, and simp le changes in the tastes of the traveling public. "The business is more nerve-racking than people realize," Whitley said. "It is a constant condition of management by crisis. You have to make quick decisions. It is difficult to plan ahead, yet you have to plan ahead. You need to be able to change plans at a moment's notice. "You could be a Hawaii 6perator, for exmaple," said Whitley. "l11ings are going great and you staff up and advertise. Then United Airlines [the biggest carrier to Hawaii] goes on strike for tree mon~hs. Or you specialize in Russia and plan for the 1980 Olympics. You go through the negotiations, print the brochures, advertise. Then the U.S. government boycotts. You put together your program to Europe or to the Middle East, and the Persian Gulf War erupts and no one is traveling abroad at all. You have to cope with the economy of this country and the rest of the world. ·You have to anticipate what will happen to currency. "You have to have patience and be able to handle details." Getting in
On one hand, tour operation is one of the most creative areas in the. travel industry and affords some of the best opportunities to fulfill dreams of traveling to exotic locales. On the other, however, job opportunities are limited and mobility is much more restricted than in other areas largely b ecause most of the- companies tend to be small, entrepreneurial, or
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family-run. Tauck Tours, a leading domestic tour company based in Westport, er, for example, "is geared for us to take over," said Peter Tauck, the third generation in the company. "We have five kids in the family, and all of us believe in nepotism." Still, Tauck empolys about 45 people . at headquarters plus another 55 to 100 tour escorts. A company that sends some 20,000 people abroad may have only six ten people in any position of real power. The vast majority of jobs are in reservations. Nonetheless, tour operations is one field that utilizes virtually every type of professions!. Doctors are involved in c~rdinating professional tours or assising with programmes for. the handicapped; former journalists handle public relations and marketing functions ; artists and musicians create and lead tours to the major art and music events of the world; former educators organize trips for teachers and students. Salaries tend to be low (decent at top management positions). A low salary is somewhat compensated for, however, by the opportunity to take the trips a company offers. "This business is designed for someone who starts ve ry young, even part-time when at school," said jeffrey joseph, an industry veteran who started in travel more than 20 years ago at the age of 18 working as a ticket agent for an Israeli domestic airline, ultimately wound up in New York where he heard of a new tour compay opening, and landed the top spot despite the fact that, as he admitted, "I had no credentials at all." He related, "We don't look for degrees, we look for personality, good communications skills, friendliness, helpfulness, and a desire to please. The whole industry is highly mobile. It's a matter of being in the right place at the right time, motivated, intelligent and capable. Your have to be flexibl e and willing to move. Success doesn't depend so much on your education as your perseverance and ability to capitalize on opportunities . Anyone that shows promise always finds positions at mid-level."
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Evolution of a Tour
A basic schedule for a sh ip or some major event or attraction may serve as the "embryo" of a tour package, with the rest of the itinerary organized arount it. (A trip to Machu Picchu, for example, involves not only plugging in extra days in various cities in order to acclimate tour-goers before they go up to such a high altitude but also taking into account limited departures of small airplanes that tend to be canceled due to weather). Next, the schedule may go to the tour development manager, who fills in the spaces, accounting for virtuaJiy every moment of time. Ncgtiators then block space and negotiate for rates from supliers (airlines, hotels, ground transportaion and sightseeing companies, restaurants) based on an expectation of how many passengers the program will carry. Then, the material goes to the production department, which creates a brochure. This is the actual product that goes out to retailers for sale to the public, as well as to marketing for further promotion. Once the tour is available for sale, it comes under the aegis of the operations and reservations departments. Reservationists take orders from travel agents and from the general public. The operations department gathers necessary documents and mails them to passengers, keeps track of tours as they are sold out or overbooked , and sends out passenger lists (manifests) to hotels. Tour escortS are assigned. The visa department gathers the documents needed by foreign govemments in order for the passengers to be admitted. Tour operators may also have sales and marketing specialists who are responsible for promoting the program to travel agents and the public relations, personnel, and accounting professionals. Salaries Salaries are tremendosly divergent (even among comparable companies) and do not always the level of responsibility. Salaries generally depend on the size of the company (number
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of passengers carried), geographical location, number of people managed, and prior experience. International operations and in-house operations of airlines generally pay better then domestic travel companies (even those motorcoach compaines that expanded into intematinal operations). Starting salary for a reservationist with one year of experience is about $18,000 to $20,000; after five years with company, a reservationist can make from $22,000 to $25,000. Other examples of positions and salaries are as follows: Hotel Negotiator, $20,000 to $40,000 Air Negotiator, $30,000 to $ 45,000
a
Air Desk Director, $30,000 Flight Operations Department Manager, Southeast, $30,000 Manager of Marketing Develpment, International Operator, $35,000 Operations Manager, $30,000to $52,000 Regional Sales Manager, $45,000 Salaries for top management positions are quite satisfactory. Examples include: Vice President, Operations, $ 55,000 Vice President, Sales and Marketing, $ 78,000 to 580,000 President, S 80,000 to S 100,000. For the near-term at least, there will be greater opportunities in operations (including MIS, reservations, customer service, and quality control) •than in sales and marketing. "There are many job in tour operations," commented Lars-Eric Lindblad, a pioneer in the field, "But what has been Jacking is trained people-the idea of going to a university to learn tour operations is new." Contacts and Sources
Organizations that can provide information include: U.S. Tour Operators Association (USTOA), Stc. 4B, 211E. Sist St., New York, NY 10022, tel. 212-944-5727; represents some of the most prestigious and best eswb~ bh ed tour
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Tour Operations 63 companies (mainly international) in the industry; has stringent member-ship requirements including bounding, and pubishes a membership listing. National Tour Association (NTA), 546 E. M
Other travel industry publications include: Tour & Traue/ News Travel weekly Travel agent Also check consumer travel publications and Sunday travel sections in newspapers. Domestic Tour Operattlons just as there are international tours for every taste and lifestyle, there is an extraordinary range of options for domestic trips-every-thing from a journey by covered wagon (C',olorado Wagon Train, Crawford, CO) to a mystery tour by bus where the destination is a surprise (Bixler Tours, Hiram, OH). Through similar to international tour companies, domestic companies, domestic companies have different origins and have evolved differently. They tend ot have an atmosphere that is more conservative-even provincial-one that is more o riented to serving a local community rather than a national market. Deregulation of the motorcoach industry has opened the
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way to innovation and made it possible for operators to creatively fashion programs that appeal to contemporary lifestyles and needs. Prior to deregulation, rules restricted the use of other forms of transportation (such as airlines) in conjunction with motorcoach. For example, if you had a cross-country trip by bus, you were required to bring the people back the same way. There were incredible restrictions of operating authorities, which meant thata bus could only go through a state for which it had obtained costly licensess. To become licensed, an app!icant had to prove a need for a service. That is, applicant h::d to prove a need for a service. That is, incumbents, like the two giants Greyhound and Trailways (now merged into Greyhound), did not have to prove that a new service would SNlll!how be detrimental. Moreover, motorcoach company could obtain rights to a service and then not exercise them blocking a newcomer. Also, the moLOrcoach tour operator (called a borker) could not be the motorcoach operator, witl1 tlte exception of Greyhound and Traihv:1ys, which had "grandt:uher rights." That L<>, both setviccs had operated prior to the Interstate Commerce Commission Act of 1939. All of this changed witll deregulation. entry into motorcoach operations, charters, and tour was vastly eased. The result was that literally hundreds of new companies opened almost overnight and the numbers of passengers traveling on · motorcoach tours and charters increased dramatically. The National Tour Association (NTA, the largest domestice travel organization with 4,000 members including 600 tour operators, 2,800 suppliers, and 650 destination marketing organizations) estimates that the industry carried 56.3 million passengers and grossed S5.6 billion. While the industry had its origins in escorted motorcoach travel, now programmes encompass many modes of transportation. Tours range in duration from on day to serval weeks, and prices r2ngs from S35 for a day-trip to nearly S 10,000. The most popular trips are give to seven days, and cost $400 to $500.
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Domestic tour operations may be smaller in scale and more narrowly focused than international tour operations but currently offers greater growth and more career opponunities. In many respects, domestic tour operations affords greater creativity; so many more markets are available for domestice tour products thatn for international products, and the industry has really only just begun to tap them. Indeeds, domestic tour operations has in a sense been reborn, and newcomers, to the field have a chance to be in on the ground floor. Tour participants still tend to be senior citizens, but the average age of all tour-goers is beginning to come down as new market. Indeed, the emerging specialties include programmes oriented around ecotourism and cultural torism (art, music, museums, cultural events), family travel (particularly "grandtravel" joining grandparents and grandkids on a tour), and such innovations as " hub and spole" itineraries. While a typical domestic package might be a sLx-day fall foliage trip through New England, new products include a three-day rafting outing greared to singles (introduced by Bixler Tours, the Hiram, Ohio, company that developed the mystery tou r). The elements of domestic tour operations are essentially the same as in tour operations gene~tlly. l11ey are product development (creating new products), sales and :marketing, reservations and operations and distribution. Significantly, according to a membership surv,e y by the National Tour Foundation (1\'TF), a subsidiary of the NTA, most tour operator's marketing strategy js oriented to produa d evelopment (developing new product'> for current customers) and market development (finding new customers for current products). Few focus on market penetration tselling existing products to cuJTent customers) or diversification (creating new products targeted at new markeL~). but these represent growth areas for the future. The industry is made up of a few large firms with a substantial number of employees and hundreds of smaller enterprises with fewer than 10. Most tour companies are relatively small: More than two-thirds have ~10n ual gross sales of less
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than $1.7 million; nearly one-fourth are mid-sized with sales from $1.8 to $7.5 million; only 8 per cent have sales of $7.5 million or more, according to the l'ITF membership survey. The vast majority (of NTA members at least) have been in business for 10 to 16 years. The average company usually employs 4 people plus 2 part timers, operates 81 tour departures. and handles 2,500 customers a year. The largest compan ies employ more than 200, operate 10,000 departures, and handle 100,000 customers a year. The vast majority draw their customers come from far away, making it necessary for operators to have links with travel agents. In most of the tour companies, the owner is mainly reponsible for tour development. Then the programme is given over to a tour planning department to fmd hotel rooms, negotiate rates, and figure out what attractions or sightseeing to include. The field is beccoming more professional Oess "Mom and Pop"), along with most segments of the travel industry. In the domestic tour business, too, there are some consolidations into larger corporations (but not to the same degree as in other segment'>), greater sophistication in business operations, and more automation. Automation is playing a growing role, making management more efficient by enabling managers to keep track of reservations, how tours are selling, load factors, and the like. Domestic tour operations is also becoming much more sales and marketing oriented. Fi,eld sales people are being hired to call upon travel agents and groups (senior citizens clubs, church groups and schools). High Mobility, Low Pay
Though there tends to be little trunover of staff (less than 1 per cent), considerable mobility exists within companies, probably more so than in internationl tour companies, mainly because domestic tour companies are not yet larg,e enough to hire specialists; Lhey hire generalists instead. It is ,common for tour escorts 1.0 r.ise within the company to the highest levels.
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According to the NTF suJVey, no consistent effort is made to recruit managers and employess with previous experience and provide them with competitive wages and incentives. This field is still one where people can get in with relatively little experience; however, salaries reflect it. Consequently, people can stay in a company, taking on enormous responsibility, and still earn modest salaries. Consider the following examples: • A woman with 12 years of experience with a company, rising up from a clerk typist to operations manager, was earning $30,000. • The director of operations for a company, who rose up from a tour escort over a seven-years period, was making $30,000. • Another person, with 11 years with the same company, rising from air tour coordinator to manager of tour development, was making $25,000. • Anotl1er perons, who was witl1 a company for six years, rising from tour escort to supeJVisor of tour and development, was earning $ 23,000. • The vice president and general manager of a company, with 24 years at the company, was making $47,000. Domestic tour operations is one of the lowest-paying fields in the industry. Indeed, the NTF's ftrst-ever salary suJVey disclosed: President-only 52 per cent earn over $ 40,000, 17 per cent earn .$ 30,000 to S 39,000, and 20 per cent earn under S 20,000. Vice President-42 per cent eam over 540,000. General Manager-24 per cent earn over S 40,000, and 38 per cent earn between S 20,000 dna $ 29,000. Operations Manager-41 per cent eam between $ 20,000 and S 29,999, and another 32 per cent earn between S 30,000 and S 39,999. Sales and Marketing-only 8 per cent earn over S tiO,OOO, 30 per cent earn S 30,000 to S 399,999, and .39
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per cent eam $ 20,000 to $ 29,999. Reservations Manager--only 4 per cent earn over $ 20,000, 33 per cent earn $15,000 to S 19,999, and 62 per cent earn under $ 20,000. Tour Planner--only 7 per cent eam over S 30,000, 27 per cent eam $ 20,000 to $ 29,999, and ;3 per .cent earn under $ 20,000. The rewards, however, come from having considerable responsibility, the diversity of tasks, the product, and the people you deal ·with. What compels people to stay? As one tour professional exclaimed. "In the tour business, you work with all components of tourism-hotel, restaurants, events, attraction •. destination marketing organization. You never get bored!" Contacts and Sources
The National Tour Association (NTA) has a listing of members and further details about the dometic tour operations industry. NTA provides some placement assistance via notices in its "Tuesday" newsletter (for $50 fee). National Tour Association (NTA), 546 E. Main St. , Lexingtion, KY 40508, Tel, 606-253-1036. The National Tou r Foundatio n (NTF) assists students with intemship placements in the tour business. NTF manages the Certified Tour Professional (CfP) progranm1e, the premier certification for tour professionals. It offers professional development seminars at its convention. Major trade publications include: Courier(NTA's magazine) Tour Trade Tours/
Tours & Trave News Travel \17eekfy Travel Agent
lnbound and Reception Services, Grow1d Handlers, and Sightseeing Companies
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Americans generally think in terms of outbound travel and rarely realize that there are people at the other end to service the travelers with transportation, sightseeing, and other facilities . Those that handle incoming visitors, coordinating their stay and escorting them about, are called "inboun," "reception services" or "ground handlers." Most U. S. teravel agencies are solely involved with sending visitors out from their areas to other states or countries, whereas most foreign travel agendes handle both outbound and inbound services. In this country, reception services are usually carred out by specialists, though many travel agencies are moving into the field . Handling reception requires some specialized skills and services-multilingual guides, for example, and contacts with travel agents abroad-for handling foreign groups. But groups also come from other parts of this country. The key ingredients are a through knowledge of your locality and contacts with local attractions and facilities. A Coral Gables, FL, agent, for example, handled a group of Norwegian zoo owners who were visiting to learn about faciltities for captive animals in southern Florida. Besides arranging visits to such facilities, the agent also had to coodinate matters concerning passports, visas, lost luggage, and sickness among the tour members. The reception service works in concert with the tour packager or the travel agent sending the group. Frequently, the travelers ar€. completely unaware that they are being handled by an agent for the tour company with which they booked. Many large compaines, particularly motorcoach operators, specialize in receptions services (sometimes know as Visit USA operators.). Among them are American Express and Greyhound. Many small companies, including travel agencies, however, are getting into this area. Convention and visitors bureaus arc excellant sources for names of companies operating in your area. The New York Convention and Visitors Bureau (2 Clumbus Circle, New York, NY 10019), for example, publishes a directory, geared for travel agents, which includes listing of reception companies.
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In addition to full-service sightseeing and transportation companies, there are specialized reception services. For example, New Your Fashion Works specializes in a ''shipping extraveaganza" in New York's garment district and department and specialty stores; Overseas International Tours hosts groups from abroad; Accent-on-Theatre Parties obtains bloks of tickets to theatre, dance, music, and special events; Art-in-Action arranges for art programmes as well as shopping; Behind-the-Scenes looks into New York lifestyles, antiques, fashion, fmance, food, and interior design; Doorway to Design "opens doors to spectacular design" and arranges visits to "trade" interior design and fashion showrooms; and Harlem Spirituals is one of several companies specializing in tours of that celebrated district. Cary Frederick, a Hoosier from Indiana who made his home in New York, knew what it was like to be an out-oftowner in the Big Apple-the fears, confusion, edxpense, wondem1ent, and delight. So, he set up his own personalized guide service, appropriately named "Rent-A-New-Yorker," to help visitors to the city, individually or in small groups. He draws upon his skills as a trained librarian to research and plan itineraries and to prearrange hotel accommodation, restaurants, theatre and events tickets, and sightseeing. He even stand on line at the TKTS booth to obtain Broadway theatre tickets at half price for his clients. "Everyon e talks about personal service," he said. "l am like a friend in town." As companies like Frederick's expand, due to repeat business and referrals, they generally take on associates or add staff. The American Society of Travel Agents (ASTA) has been actively working to help its member travel agencies to cultivate reception services, and several hundreds have already entered the field, with several hundreds more moving in the same d irection. This usually involves adding staff. ASTA member Rex Fritsehi, president of Rex Travel, Chicago, launched a reception service a decade ago, providing sightseeing p rograms in Chicago . His company, Chicago Welcomes, handles grou ps mainly from overseas, including England , France,
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Germany and Switzerland. "It's a completely different ball of wax from the travel agency," said Fritschi, "different selling, marketing approach, and different handling. The wants, needs, expectation of foreign travelers are different." It takes several. years to become established in receptive services, to develop the contacts abroad, to gain the name recognition. Help in penetrating markets is available from the U. S. Travel and Tourism Administration, a se<.."tion of the department of Commerce in Washington, D. C., and often, from state and regional travel offices. Also, ASTA has a listing of receptive services as well as an international membership division. International airlines can also be valuable allies. Skills that would be excellent assets for working in reception services are knowledge of forign languages (although not necessarily a prerequisite), experience of living abroa.d, contacts with travel companies abroad, knowledge of a locality or special interest. Good planning and oranizational skills, high creativity, and maturity and patience are also very important. Reception services also offer a means of entry into the travel business without your having to give up your current job. Many reception companies need par-timers to heip as escorts or guides (some areas, like New York City, require guides to be licensed) o r associated to plan and coordinate trips. These companies afford much of the excitement and sense of traveling without your ever leaving town because the clients are from faraway places. A job as a professional guide can be an excellent entree
into the travel industry and can be a challenging, creative, and financially rewarding position. Gudies can freelance for t!"Jvel companies, developing relationships with tour operator, travel agents, reception companies your knowledge of foreign languages, art, history, architecture, clothes, musk, theatre, entertainment, and virtually any special interest. some areas may require licensing; New York City's Department of consumer Affairs, for example, adminsters a test that qualifies an applicant to become a professional guide. There are sever~ll entities in
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New York that place guides. Reception services is a highly entrepreneurial field. If you are considering opening your own reception service, consider what your locality has and what it does not have. Talk with the local convention and visitors bureau or chamber of commerce people. There is tremendous opportunity particularly because of the countinued growth in travel into the United States, fueled in part by exchange rates that have made the United States as a destination. "Foreigners have 'done' disney World and York and want to see what more of the U. S. has to offer,rt said Fristschi. "There is great, great potential.• It is possible that your own professional area can be a starting point. For example, one company (Cityscapes) specializes in finding the right locales for meeting, ftlm shoots, receptions, and the like. There are so may reception services and ground handlers that one of the greates needs for individual companies is marketing. American Sightseeing International (ASI) was formed to meet this need. It is an association of sightseeing and tour companies in more than 100 major tourist markets (40 U. S. cities, 60 countries). Sightseeing is probably one of the more limited occupations in the travel industry. In sightseeing companies, most people in positions of prominence have come up through the ranks of a bus company. Rgther than travel professional, they tend ot be bus industry specialists. · The appeal of the sightseeing business is that it is intensely people-oriented. Escorts, Ticket sellers, and bus drivers are all in constant with the public. Deregulation has forced everyone to be more creative, innovative in tenns of product and marketing, b ucause there is so much more competition. "This is a growth area-any city can have a sightseeing company," said Richard Valerio, ASI president. "There are new hotels, convention centres opening all over the place.
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Call the convention and visitors bureau to see what is
happening." Ground transportation companies do not Qnly handle sightseeing. They may also handle transfers from airport to hotel or to sites for special events. They are used to great extent in conjunction with conven tions and meetings (even "spouse" sightseeing and shopping programs while meeting are going on). One of the AS! members is shortline Tours, which is unusally large for a bus company. Shortline had three bu~s when it started more than 20 years ago to p rovide transportaion ot rural areas. Later, the company bought up a sightseeing operation. Now, Shortline has 220 buses and 350 employes. The operations are so computerized that even sales bolcations on the road are tied to the main office in Manhattan. Bus maintenance---even when to change tires-is also logged in a computer inventory. The company has four . levels of salesmarketing, sales, sales support, and an art department to produce brochures. Why go into the ground transportation/sightseeing ~usinees? "The exvitement of being part of a worldwide community." declared Valerio, "of hosting visitors, conveying civic pride, being creative." Contacts and Sources Apart from local convention and visitors bureaus, other organization that provide information include: . U.S. Travel and Tourism Administration, . 14th and Constitution Ave., NW, Washington, D.C. 20230, tel. 202-377-0136. American Society of Travel Agents (ASTA), 1101 King St., Alexandria, VA 22314, Tel. 703-739-2782. Professional Guides Association of America, 241, S. Eads St., Arlington, VA 22202-:!532. Travel Industry Association of American, 1133 21st St. NW, Two Lafayette Centre, Washingtio, D.C. 2()036, tel. 202-293- 1433. •.
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Travel for the Disabled An infmite variety of tour compies spedalize in some interest, activity, or demographic group and fall into the category of "special-interest operators." In recent yea.rs however, the travel industry has become mindful of a huge group of people who had a deep desire to travel but due to some disability were unable to take advantage of conventional programmes. According to some experts, there are about 43 million Americans with disabilities, with a potential of generating about $60 billion in travel sales. A whole new industry has sprung up catering to these travelers. It is potentially so large and so specialized that handicapped travel is actually considered a separate field of tour operations. Edna Davis, a former travel agent, was brought into the field quite by accident when her son, the captain of his school football team, was tackled down and did not get up. "In the year that he spent at the hospital, people would hear I was in the travel business as ask me for help arranging travel for them. I realized no one knew anyone to help them. I realized no one knew anyone to help them. I handled groups, then tours, now reception services, also." Even Disneyland has called her for assistance. The disabled, Davis stated. "are not content to frt into the mold. They seek freedom of movement. They won't be content sitting still. Disability does not mean inability." Other companies have made this same realization. Flying Wheels Travel (P.O. Box 382, Owatonna, MN 55o60), for example, tailors tours for the physically disabled. Evergreen Travel Service (19505L 44th Ave. W., Lynnwood, WA 98036) "does whatever anybody else would do who is able-bodied, but we do it slower." This field of travel offers special opportuntiy for people trained in physical therapy. nursing, medicine and psychology, as ~veil as for people who are themselves handicapped. Travel agencies, for example, are becomi.n g very involved in serving disabled travelers, both on a group and an individual basis,
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and may be very amenable to hiring someone with familiarity with serving the disabled traveler. Indeed, a registered nurse, Pam Erickson, set up a business (Professional Respite Care, Denver, CO) to provide nurses as medical travel companions for the disabled and senors. According to Davis, getting into the disabled trav~l market requires a knowledge about particular details as well as meticulous efficiency in anticipating every need and making arrangements for these travelers. "Introduce yourself to a wheelchair," she advised. "See how it works. There is no one easy source of information. No two disabled people are alike. All are individual. Each must be counseled individually-their n eeds, desires. Always discuss with a carrier and check and recheck. Leave nothing to chance. Don't be timid; ask direct questions. They know they are disabled- they live with it. Their problems need to be discussed openly." Two laws, the Air Carriers Access Act of 1986 and The Americans with Disabilities Act of 1990, will force widespread improvements in access for the disabled and spur many traveloriented companies to cater to this market. The 1990 law s pecifically prohibits discrimination in transportation and public accommodations, including hotels and restaurants. Hyau Hotels Corporation, for example, launched a major program to increase accessibility at 107 of the chain's h otel and resorts, as well as a nationwide recruitment pwgram for persons with disabilities. The company hired Barrier Free Environments. Inc., Raleigh, NC, an architectural and product design f1m1 specializing in building design for persons with disabilities, to help develop the guidelines. Moreover, under the Air Carriers Access Act, travel agencies, as agents ofr the airlines, are actually required to be able to service handicapped people w~o wish to travel by air. This opens the way for qualified people to approach an agency and create their own position. Contacts and Sources
Sources of infom1ation and leads for p otential employers
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include: Sodety for the Advancement of Travel for the Handicapped (SATH), 347 Fifth Ave., Ste. 610, New York, NY 10016, tel. 212-447-7284; publishes a list of tour companies specializing in disabled travel as well as various guides. Travel Information Centre, Moss Rehabilitaion Hospital, 12th St & Tabor Rd., Philadelphia, PA 19141, tel. 215-329-5715; dispenses information by phone or mail. Tour Managus
Many people expect that they can start a career in tour operations as a tour manager (also called a tour escort or tour director). In many companies, this ob is relatively easy to obtain; in others, some very sophisticated background and skills are needed. For example, leaders of China tours may need to speak Mandarin and have strong academic backgrounds as sinologists (specialists who are higRly knowledgable about Chinese culture). Most tou.r operators contract tour managers on a freelance basis since the work is so highly seasonal. Tauck Torus, premier escorted motorcoach tour company, is unusual because it hires its own tour directors (paying salary and benefits) and tries to keep as many as possible working year-round. Randy Durband, Tauck's manager of tour directors, is responsible for hiring. As many as 150 tour directors are hired in peak season; about 80 are employed year-round. Durband's position is a key spot because at Taurck all positions in middle or upper management are filled from the escort staff. This is because, as Peter Tauck, direcor of reservations, explained, "We organize the tour here and sell it to travel agents, so the ,only way one would see the product is to be a tour escort. . Then you see the hotel, how they function. You are more able to handle the day-to-day decision making. It is ha·rd to teach the product by sho~ing someon the brochure. You are more able to handle the day-to-day decision making. It is hard to teach the product by showing someone the brochure. You have to expe1ience it." Even peter, the third generation at
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Tauck Tours, has been a tour escort. Though tour escorting is often a steppingstone, it is emerging as a career in itself, albeit one that is hard to keep up after marriage and children. "Things have changed," reflected Dick Sundby, a tour escort for 12 years, who served as being a tour escort Oeading the trips ot the Candian Rockies). "People are beginning to look at tour directing as a career. Many are writers and musicians. They want to work for five or six months and have their own thing to do in the off-season. Still, "it's a strange lifestyle for a married person or parent," noted Durband. "It's like being a professional athlete-does anyone question whether Bo jackson should be on the road? But it gives you very little opportunity for parenting. Most who do this who are married just do it in the summer. No specific skills are required, but there are many thing you have to be . "Like the Boy SeouL<;, you have to be honest, cheerful, brave, courteous, reverent, "said Sundby. "'You have to have the understanding and patience to deal with clients. You have to be able to go the extra mile to take care of people on an individual basis--that is equally important to knowing dates and places. It takes a special person to do a complete tour during the day and then handle individual requirements in the evening. You have to be a leader and be a friend ." Tour escorts need to be good communicators and diplomats. They must be detial-oriented, well-organized, and higly responsible becasuc they frequently have to manage emergencies as well as handle considerable sums of money. Tour escorts also must have a deep curiosity, desire to keep learning, and an inner desire to do a better job than the time before. Tauck has an intense training programme in which escorts (who range iin age from 21 to 60) leam how to deal with potential problems and emergencies. A rookes is p ut together with a more experienced driver and escort. Also, Taudk maintains special telephone lines should escorts get into difficulty along the way. The guides do a complete narration. "Clients expects
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a guides to know everythings," Sundby said. Tour escorts at Tauck typically make $250 to $450 a week before tips (but tips can amount to two-thirds of the escorts's income). Tauck also provides group health insurance benefits to tour escorst, which is unusual. Some tour escorts are married, but this arrangement generally does not work out well for long. Married couples w m sometimes work the same itinerary but for different groups (but they still do not get to see each other more than once a week). The work is emotionally and physically demanding. It involves working 15 to 25 weeks straight, 7 days a week, with no days off and only a limited amount of free time. There is little chance to sit down when you have to he lp lift o ut luggage and run around keeping everyone happy. Despite this rigorous schedule, Tauck has a fairly low atlrition rate. People either leave after one season or stay a decade. "It suit your p ersonality and lifestly or it doesno't," said Durband. It can be a lonely job. But, kyou develop camaraderie with the hotel people," remarked Sundby. kYou develop friendships in the towns you visit, and it is like going home each time." Normally, a tour escort will run one itinerary exclusively for one year; the next year, two itineraries; the next three. With seniority comes more choice of itineraries, but selections are made by performance. Out of 500 resumes, Taurck may hire 20 or 50 escorts. So many resumes come in unsolicited that Tauck does not have to do any active recruiting. kPersistence is the key," Sundby noted. "I tried to get into Tauck four or five tiems before I got in." Because so may resumes come in, "it's diffiC\IIIt to tell a good candidate, " Sundby advised, "so try to make personal contact." Friends who work in hotel or who are escorts can provide leads. lt is also important to demonstrate some kind of familiarity with the product (the tour) and the destination. Some companies may require a master's degree in botany
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or some other speciality. But for most tours, good general knowledge suffices," said Sundby. "1 became an expert in wildflowers and trees just t>y doing the same tour over and over and researching the question the passengers asked." The International Association of Tour Managers (IATM) has 2,000 members worldwide. Only 100 of these are in the United States mainly because. most domestic tour compaies employ local guides rather than escorts (who accompany a trip throughout its itinerary). '
Most tour escorts are freelance, working for such companies as American Express, Trafalgar, and the like. They eam a · minimum of SSO,OOO a year. Dom Pasarelli, who is the main contact for IATM in the United States, noted that the accociation, which often acts a referral serivce, has stringent membership requirements including five years of experience working as a tour manager. This kind I' of "chicken and an egg" situation can be overcome by working like an apprentice parallel with someone experienced and starting with a small tour company or a travel agency that operates groups. Membership also requires that the tour manager spend 180 dayJ on the road and that escorting be the primary source of inc6me. The vast majority of tour manage:rs in the United State/ w ork part-time; only about 1,000 are professionals. It is a h ighly specialized field-and one that is fairly elite. The IATM membership roster includes people who h ave doctorates, speak various foreign languages, and specialize in architecture art, culinary arts, and the like. Also among the IATM members are three barons, tow counts and a prince. "We're all crazy, eccentric," conm1ented Pasarelli, who holds a doctor.tte in foreign cultures and has been a tour manager since 1962. "There is tremendous responsibility; you have the lives of 48 people in your hands. You have an awful lot of power; like a ship captain, you can put someone off the tour. I've had to ship some home, including one in a body bag. And people end up in hospital or lose a passport." Though some p asseners may initially regard their tour
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escort as a kind of lackey to help with the luggage, his image changes. "You live with them for many days; they get up when they are told, eat where and when they are told; listen and learn. You function as an interpreter, a Big Sister, and their 'bridg~ over the cultural gap.' It's fun, and you get paid for it," summarized Pasarelli. But, he warned, tour managers can also be held liable and • some have been used. , I
Contacts and Sources
Intemational Association of Tour Managers (IATM), 1946 Chapel St., New Haven, er 06511, tel, 203-777-5994; has an annual membership fee of about $100. Training programmes include: International Tour Management Institute, 625 .Market " St., Ste. 1015, San Francisco, CA 94105, tel. 415-9579489; is the firs and the biggest school (also in Boston and Los Angeles) and the one from which most tour operators recruit. Other progrJmmes that have cropped up include: American Tour Management Institute, New York International Guide Academy, Denver Tour DireCtor Institute, San Diego Lucas Travel School, Virginia Beach, VA Educational Centre, New Haven, CT Starting Your Own Tour ,Company Most tour companies start in a small niche and grow slowly. A small company can be set up with about $50,000. A company that aims to reach a national market needs about $2 million to start primarily bnecause of the expense of printing and distributing the volume of brochures necessary for a national market, as well as advertising and promoting the product. The tour oper.!tion field is very difficult to break into since, chances are, there are bigger, stronger, better-financed , better-known competitors. Moreover, there have been failu res even among big, household-name companies, such as Rand-
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McNally, when they ventured into the market, mainly becasue they underestimate what tour operations is all about, tend to throuw money into the trappings and fail to give ·:!nough attention to winning the liyalty of travel agents. Furthermore, companies from outside the travel industry are accustomed to much higher profit margins and are not willing to hang in when acceptance takes longer than anticipated (usually to three years). More worrisome is the recent failure of well-established and well-respected tour companies with a great following among travel agents and consumers, such as Lindbald Travel (whose name was synonymous with adventure travel) and Four Winds Travel. Their demise demonstrates the difficult fmandal waters that tour operators must navigate. They simply couldn't survive the multiple assaults of a declining economy that cut demand for travel, spiraling costs, and fear of terrorism, which caused Americans to all but cease traevling abroad altogether. Many of the problem can be traced to the peculiarities of the business. For example, tour operators' biggest competitors these days are the airlines that they depend upon for space and good rates. Many major airlines have their own in-house tour operations, such as American's FlyAAWay Vacations and TWA's Getaway. Many people who launch· tour companies do so becuase they have some special interest (or passion) and want to build a business arount it. Tom Hale, for example, "jumped in head over heels" when he set up his own tour company, Bakroads, Bicycls Touring, San Leandor, CA, in 1979. He was in environmental planning "and just decided I didn't want to do it anymore. "He took a 5,00-mile bike ride through the West and then started Backroads. "I had an interest in doing something different and an interest in bicycling and just decided to do it." Oper-.1ting a tour company proved to be more expensive and harder to get off the ground than Hale thought it would be. To sell the tours nationally, he had to advertise. The company has grown steadily, however, with the rate faster
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now that at the beginning. Currently, the comany handles more than 2,000 customers a year and has a staff of 15 including 10 tour leaders. The remaining staff are in reservations, marketing, bookkeeping and equipment. Hale himself plans the itineraries but confessed, "I didn't know anything about the travel field. I didn't even know what a tour operator was. TI1e thought of motorcoach tour of Europe sickens me. n Backroads operates one-to-ten-d.1y bicycle tours, year-around. Offering bikers "pampered camping," the tours are deluxe and feature ftrst-class hotels, country inns and mountain resots. "I really like what I do," Hale asserted, but he only recommends starting up a tour operation to a small number of people. "There are obstacles at every corner. It takes someone with a fair amount of long-term ouliook to get over the shortterm frustration. You have to plug away. There are ftnancial obstacles. You don't make any money for a long perid of time-until you get to a size · customer base to support the operation. Like any business, you've got to pay your dues." While Hale launched a successful tour company based on his special interest, other people may do so by virture of a special way of selling. "If it was justjeffrey joseph opening another tour operation, I'd say it was a thankless task, very difficult to do,» said joseph when he was about to open his company Spa-Finders, which specializes in selling packaged spa vacations through a catalog. "There are so may companies, and so many wellfmanced ones already established. This is not an easy field to get into. Yet there are areas of travel that have hardly been touched-special matcts, special ways of selling. That's where I feel! can come in - I won't have thoughands of competitors. "I said to myself, ·1 can run a big company , :and if I am working that hard, I should be seeing more of the profits in my own hands.' The problem always was, what to do?" joseph was confident of his own success. "It's not the product that will be differe nt; there are products for everybodv
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already. It is the way of selling. Eassentially, the method of marketing tours has been unchanged-companies either sell directly to groups or through travel agents." His strategy was to reach consumers directly.
Five Key Considerations To Start up you own tour company, there are five key areas to consider, according to Raymond M. Cortel, whose early tour operations experience came from his father's tour company Europacar (which mushroomed into the Cortell Group and was family owned operated until it was swallowed up by a high technology company) and who has launched several new ventures. The five areas are : (1) product, (2) customer traget, (3) promotion, (4) distinction and (5) pricing. 1. Product: Consider the destinations chosen; suppliers selected; type of travel, such as cruises, educational trours, or fly/drive trips; and class of products, such as deluxe or budget. 2. Customer traget: Tailor the product to a demographic characteristic such as income or geographic location (a trip to Hong Kong can be a weekend shopping spree to West coast traveler but a two-week exotic Orient adventure to someone from Boston). Consider the "psychographic" characteristics of potential customers (are they, for example, retired, yuppie, or single).
3. Promotion: Plan not only the theme and execu tion but also the dollar amount in relation to size and frequency of the programme. Plan the method, such as advertising, direct mail, or personal sales calls. 4. Distribution: Get the product out to consumers. Even consider ite ms like the physical aspects of the b rochure (4 by 9-inch versues 8-1/2 by 11-inch, for example) and the kinds of distribution channels to be used, such as travel agents, clubs, or consumer-direct marketing.
5. Pricing: Position the product in relation to both the psychographic characteristics as well as competition. The idea is to maximize profit without crossing the "price breakpiont," at which you price youself out of the market. Pricing is critical
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to marketing strategy because it is one of the key decision factors consumers use to choose a tour product. The difference in price must be substantial enough to capture the target market's attention and motivate a shift in sales, while still leaving enough margin to make a profit. Yor must be able to sustain the price over a period of time. Setting up the tour programme-plotting out the itinerary, negotiating for space and rate-is only one aspet of establish ing a tour company. How you will handle reservations should not be underestimated. You have to consider the kind of telephone system, a computer system (if any), and who will take the reservations. This last faetor is so strong that many companies are moving their reservations centres to Denver. Atlanta or Las Vegas, where there is availability of cost-eff~ctive staff. You can also get tripped up with distribution. Just getting a brochure into a travel agent's hands does not ens·ure that the agent will sell your tour, particularly when the agency is hooked up with "preferred vendors" who can afford to pay a higher averred. More importanly, with so many companies failing, agents are skittish about linking up with an unknown, unproven supplier. And the cost of advertising directly to the consumer in order drive customers to the agent can be prohibitive. Tour operators are experimenting with alternate forms of distribution, such as computer-based shop-at-home services like CompuServe and Prodigy (a joint venture of IBM and Sears). Cortell himself is developing a company (TravelFax) that is aimed at rreducing operators' cost of distributing brochures to agents by using fax linked to a computer database. Newcomers can surmount many of the obstacles by focusing in on specific niches-special interest-where the main purpose of the trip is not the destination but a paticular activity or insterest. Specially markets are more defined, easy to reach (through clubs and specialty pubications), and more committed to traveL "The specialLy traveler is willing to pay more for the special features of a t:Jilored itinerary," said Ann H. Waigand, who publishes 7'be Educaled Traveler Newsletter.
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Franchising Your Dream Why a Franchlse?
In addition to buying or building your own restaurant, a third alternative exists-franchising. There are three distinct advantages to franchising for the first-time restaurateur: 1. The franchisor provides you with a complete package for opening and operating the establishment, which would be very advantageous if you are worried about lack expertise. 2. There is a lower investment risk because you are selling a proven product in an established market under a recognized name. 3. You would get a quicker return on your investment because of name recognition and corporate advertising; many franchisees realize profits from day one. However, the successful franchisee still needs sound management skills. The franchise package may set up all the systems. and controls, but unless you can carry them out successfully and run your operation efficiently, not only will you have dissatisfied customers, but the franchisor may 'consider replacing you .
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Why is a Franchlsc? A franchise is a contractual privilege granted by one person or company (the franchisor) to another person or company (the franchisee). The privilege granted by the franchisor to the franchisee is the right to sell in a specifaed manner, a particular product or service within a specified territory. The product or service is usually identified. by a trade name, trademark, logo or other commercial symbol over which the franchisor has exclusive control.
The Franchlsc Fee and What You Get Once you understand what a franchise is, then you will see that the franchise fee is merely a payment to gain the privilege of selling the franchisor's products, following his specific systems, using h is trademarks and logos, :and within a given area. In other words, the franchise fee is just like buying a license that can be revoked at any time if you do not obey the terms. So, apart from certain rights and privileges, what do you get for your franchise fee? This will vary from company to company, but for the first-time operator, you may wish to set the following criteria so as to maximize the protential for seccess. 1. Site Selection : If the franchise company selects the site, the important fact to establish is how they do this. · 2. Turnkey or Blueprints : Some companies will provide the site together with a set of blueprints, and tell you to call when you are ready to open. What the first-timer should be looking for is a turnkey operation, which most reputable companies would insist on anyway. But you must still analyze their construction and equipment costs. 3. Training : This should be in two stages: (a) Training for yourself in one o f their other location before you own store is open; (b) In-store training for your staff just prior
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to and during the opening period. 4. Operating Manual : To provide you with ongoing information on how to run you operation smoothly.
5. Ongoing Backup : Especially during the criticual first few months of operation, o r if things are not going too well. 6. Protected Territory or Aroa : After all, you do not want another franchise opening up right opposite you within a few months. The franchisor/ franchisee relationship should be viewed as a partnership, so it is essential to pick a partner that you can work with.
case Study-Two Brothers and the Donut Shop Peter and Tony Brown, two brothers, bought a Danny Dount Shop franchise early in the year. l11ey paid the· franchiser $12,000. But now, to their dismay, their total commitment is almost $100,000 which they have .)1ad to cover with loans, guarantees, and a personal mortgage. Peter and Tony are not happy with thdr situation. "We're making money, but ..." said Tony, one evening after they had dosed. "I know," replied Peter, "but not as much as we expected. We should have checked those market estimates that the franchiser gave us." "We could have spoken to that other Danny Donut Shop franchisee out in the suburbs. He'd have given us a good idea of what to expect." "Well, there's a ·new Danny Donut Shop coming into town. Do you want to do a good deed and talk to him?" suggested Peter. "What do you mean, another franchisee?" asked Tony indignantly. "The city is our territory!" "The contract we signed says the city is our territory in the sense that we have the right of ftrst refusal on any new franchises. Do you think we can afford to buy anorher Danny Donut Shop franchise?" asked Peter. "No way," said Tony shaking his head. "Not after all the
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money we had to lay out for equipment and ftxtures. Sure the franchise purchase price eas good deal, but 1 thought we could have bought just any equipment and perferably secondhand.• •our contract specified new equipment. And, as you know, it specifted the type of cookers, counters, everything in fact that' we needed, along with the supply source." · "Okay," interrupted Tony, "the shop looks nice but the wouldn't evem let us modify the layout. If we had smaller tables, we could get more people in. But our franchise said no." "It's all in the contract," answered Peter flatly. "just like I had to say no to that fellow who said he could sell us donut batter cheaper than we buy from the frachisor." "Why say no?" asked Tony. "That's the only way we can increase our margin, seeing that the franchisor won't let us adjust our retail prices." "Sorry, Tony. The contract says we buy our batter and all other supplies from the franchisor." Driving home with Tony, Peter remembered so;nething else concerning their Danny Donut Shop franchise. "i got a call from the franchisor's agent, today. We're late--on Ol.!r sixmonth royalty payment." "What do you mean by a royalty payment? We paid purchase price and we pay a service fee. What is this royalty business ?". queried Tony. "That is in the contract· also." explained Peter patiently. "Over a certain volume of sales, we must pay the franchisor a royalty." "And of course," added Tony, "the franchisor is always sending his agent down to check our operation and to see our books. So he'll always knows what our sales are." "They have to send someone down to make sure that Danny Donut Shop standards are the same everywhere. We've agreed to operate by their rules. It's in the contract." said Peter.
' .
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"It's a pity that you know the contract only now," commented Tonny bitterly. "It's both our faults." retorted Perter. "We should have examined the contract more carefully and should have checked out everyghing about the franchise fJISt."
The Advanges Let us look at some of the ·advantages to buying a franchise. 1. You get operational training.
2. You have the right to use a trade name or trademarks. 3. You are able to sell a preoven product and/or service that already has public acceptance. 4. You buy the package so you are able to start full operation sooner. S. Less start-up capital may be required. 6. Profit-and-loss forecasts may be more accurate. 7. Statistically, you have better chance of success. 8. TI1ere is a defmed sales territory, with no other franchisee within a certain redius. 9. You benefit from corporate advertising. 10. Depending on the type of franchise, you may be the only source of that particular product. 11. The fiXtures, equipment, and premises are often specified or provided by the franchisor. 12. You benefit from recipes and standard controls that have been tested and proven.
13. the franchisor may supply the product or you may benefit from his buying power. 14. The franchisor may be able to arrange financing through his company or a banking service.
The Disadvantages There are certain things you will have to consider or give up when buying a franchise.
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1. You have to pay an up-front franchise fee before you
start paying for your location. 2. You are not normally allowed to expand your menu, even if there is a need in your area. 3. The bad reputation that another franchisee may have could affect your business. 4. You have to contribute to corporate advertising whether you want it or not. 5. You may be obliged to buy only from the franchisor.
6. you have to live up to every high standards, or be in jeopardy of losing your franchise. 7. In most cases you have to pay a royalty, from 2 per cent to 8 per cent of sales. 8. Everyone has to franchlsee.
w~t:
the same uniform, including the
9. A franc~e often feel as if he is working for a large corporation.
10. You still have to find and train your own staff.
11. You must accept criticism from the franchisor. 12. Depending on the size of the companny, backup is not
always available.
13. When you buy a franchise, you may not be buying anything but the use of the facilities. 14. Prices may be controlled by head office.
.Investigate Before Buying
just because you are buying a franchise, it does not mean that all the previous points we have discussed in the book can be ignored. And as good as the statistics are for success in operating a franchise, even the best companies have losers. So preparing the business plan and checking the location criiteria are still very important. Be fore the franchise company granL'> you franchise, they will want to interview you and check you out fin :u1cilly and
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personally to see if you the type person want to operate one of their locations. But, in turn, you should do the same thing. Here are some of the questions you should ask, and then check out: 1. Who are the principals of the company and what are their backgrounds in the foodservice industry? 2. How long has the company been in business, particularly in your area? 3. How quickly has the compay grown? Is it a steady planned growth, or a rapid uncontrolled expansion? 4. How many failures h as the company had and why? S. What sort of training and backup does the company provide and what is their staff structure to administer this?
6. What are all the cosL<; you will incur befor you open and once you are in o peration? Write down what you art: told, then check this with your franchise agreement. Any reputable company would not be insulted by these types of question. ln fact, they should be inpressed with yo ur shrewd business approach. The second step you should take in checking out the franchise company is to talk to other franchisees. Find out if the company does what it says, and what problems the franchisee has had in its dealing with the company. Ask if the sales figures you have been given sound right and if there is an association of franchisees? Once you have gathered all the infom1ation from the first two steps, take it to your la'W')'er and accountant and ask them to explain everything again , from their understanding of the franchise agreement. If there are things that do n ot match, then clarify these points before signing the agreement. Some of the question the should be able to answer from the agreement are: I. Exactly what do you own or control? 2. Will/when will you ownership or license expire?
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3. How long has the company been in existence?
4. What sort of reputation does it have? 5. Are the projected sales figures realistic? 6. Who decides the location? 7. If you are a sub-lessee, how long is it for? 8. Is the equipment owned or leased by the franchise company? 9. What territorial rights do you have? 10. What happens if the franchise company goes under? Most franchise compaines are reputable, especially if they have been in business for somtime and have a good track record. However, never take anything at face value; always check. And remember, if it's not in writing, it doesn't mean a thing. Buyer Beware
Recently, a large canadian daily newspaper ran a headline: "Listed as a Giant, but franchise fum has few outlets." The story went on to expose a fast-food and restaurant company that was selling franchises and was listed in a nationally circulated directory as having 338 outlets in canada and over 1,000 outlets in the United States. These figures were given to the directory by the franchise company and published unchecked. The article went on to establish that, although the company was Indeed selling franchises, everything from submarin takeouts to licensed steakhouses, it had v~ry few, if any, locations actually open and operating. It is interesting to note that the same newspaper had given
the franchise company a favourable write-up only nine months before, as had many other newspapers and trade magazines.
Franchising and the Law The laws covering franchising vary from state to state and must be fully understood before and agreement is signed. Naturally your lawyer can complete the necessary investigative work for you , but if ·YQu wish to know more
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about franchising or a particular company, without incurring legal fees , then there is another way. The International Franchise Association, ( I. F. A.) located in Washington, D. C. is a self-regulating trade association of franchise companies, that overseee their own industry. Not only can gain valuable information about the franchising laws in your state, but also if a particular company is a member of the I. F. A. in good standing and other background informaion about lhe company.
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,[§] Investment in Tourism Although the legal end of any business is normally of the least interest to most business entrepreneurs and ftrst-time owners, it should be high on your list of priorities. Because of lack of interest and knowledge, the type of ownership and safeguards is normally only considered out of necessity, and not as part of the business plan. For the small business owner, there are several ways to set up you company, and each way has its advantages and disadvantges. Discussion with your lawyer and accountant will help you decide which way is best for you. lt should be qualified that what may be .advantageous today may be a disadvantage tomorrow, simply because the laws covering business ownership (nonnally taxes) are constantly changing with almost every budget or mini-budget. Before you go to your lawyer for the expert advice you will need to set up your restaurant business structure, you might consider reading all about the different kinds of business organizations available. An excellant book, for just ~hat kind of overview the 1be Financial Handbook, edited by Mr. jules I. Bogen, Ph.D.; published by The Ronald Press Company of New York, copyright 1968. This book will give you much to
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think about, and most of the information is current due to recent updates. Types of Business Structure
The three most common ways of structuring your business are: 1. Proprietorship
2. Partnership 3. Corporation The following outline deals with some of the generalities you may wish to consider, but your lawyer or accountant should be consulted before a final decision is made. Proprietorship
A proprietorship is an unincorporated company, owned by one person. It is the easiest and cheapest way of starting your business. You sin1ply have to register you business, under the name you wish to operate under, with the appropriate state or local authority, pay a small fee, and away you go. As a sole proprietor, you personally are entitled to all the profits from your business. These profits become your personal income. At the year-end you would simply me your own income-tex return, entering the profitS from your business as your self-employed income, and pay the necessay taxes that apply, at whatever rate a applicable. On the other side of the coin, the proprietor is personally responsible for any debtS the business may incur, especially if things aren't going too well. If your business fails, then your creditors can come after you, and anyth ing that you own (house, car, etc.). Partnership
A partnership is a business set up by two or more people with a common goal-to make a profit. The partnership has to be registered with the appropriate state or local authoriy and, again, is an inexpensive set-up, except for the fact that a
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partnership agreement should be drawn up by a lawyer. This agreement should specify the following points: 1. Contribution of each partner (time, money, etc.)
2. Duties of each partner 3. How profits or losses are divided
4. Signging officers of the partnership 5. Voting arrangement in making decisions 6. Method in which new partners can leave the fum 7. What happens in the event of the death of a partner Different Type of Partners
There are four different types of partners: 1. Active : One who works in the business and may have
contributed cash. 2. Silent : One who has nonnally contributed cash and may lend some expertise to the business, nonnally behind the scenes. 3. Ostensible : One who has no fmancial interest in the partnership, but lends his name and credit to the buisness. - 4. Limited: One who assumes no liability to .the partnership
beyond his intitial financial contribution. A general partnership is an association of two or more partners, both with unlimited liability for the debts of the business. Most partnership agreements must be in writing to meet the requirements of the Statute of frauds in most States. Partners who share the unlimited liability also share in any profits. This kind of business structure or organization is in a common law form, and many states have adopted statutes governing the relationship of partners to one another and to those with whom the partnership has dealings. The Uniform Partnership Act has been adopted by most states and the District of Columbia. This form of organization is very complicated, and you should query your l:lwyer completely about it before proceeding.
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The partnership form of organization is superior to the proprietorship because it permits several persons to combine their resources and abilities to make a business, and it is easier to form than a corporation. I.astly, the partnership is at somewhat of a disadvantage. With the unlimited liablility of the partners, the relative instabilitly of the form, and the difficulty in attraCting outside capital, it is a form that exists only among small-and medium-sized buinsesses.
Incorporation Incorporation your own company is the most expensive form of business ow nership, but often considered the best. An incorporated company is a separated legal entity or, in other words, the company is a person. You as the incorporator are not responsible for the debts of the company, but as shareholder are entitled to a share of the profits, according to the percentage of shares you own. Incorporating the company is usually done by a lawyer, and may cost you between $800 to $1,000, depending on the complexity of the share structure. However, many people now find it possible to incorporate their own company themselves, with the help of any of the "how-to" books now on the market. Check your local library for these b ook, and follow the guides exactly. Although it may take some of your time, it will cost you a lot less. This route is only advisable if the company you are incorporating has only a somple share structure, involing one or two shareholders, i.e., you and your spouse. The advantages of incorporating are far greater than the other two fom1s of business ownership : 1. Although you are the incorporator and a shareholder,
you will also be an employee of the company, drawing a salary, as can your spouse, if he or she is working in the business. 2. Your liability is limited to the amou nt of money you spent in purchasing your shares, which can be minial. If
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the company fails, it is the company that owes the money, not you. The only exception would be if you signed any personal guarantees with suppliers, banks, landlords, etc. You are then responsible to those individuals. Money lenders will always want your personal guarantee. 3. It becomes very easy for other people to buy into the company, especially employees, with whom you might want to share the profits. 4. The company doesn't die with the owner; it is a separate entity and, as such, immortality. 5. To sell business, the owner would simply have to sell his shares. as long as this transaction confonns to the shareholders agreement and by-laws of the company. 6. There can be certain tax advantages in incorporating, although this is questionable at the present time. However, there is more opportunity to write off certain expenses as company costs. This should be done only on a legitimate basis; if too much is written off, may affect your ability to sell your company in the future as the profit you are showing is very small. 7. An incorporated company seems to get better treatment from suppliers and other creditors as far as tenus are concerned although I've never understood why. The disadvantages of Incorporating are as follows: 1. Most expensive and fonn of business set-up. 2. More ongoing costs with record keeping, accounting, and legal requirements. 3. Corporations are more closely regulated by government. The Legal Requirements Municipal
When buying, building, or franchising a restaurant in any. location within a municipality you must check that the location you have chosen is correct within municipal guidelines and
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Often, in municipalities, you must first purchase an occupancy permit from the municipality. This usually entails providing city hall with copies of your lease, a letter from you stating your prospective use of the location a small fee plus a set dollar figure based on the cost of the building, renovations, etc., and about a 10-day wait while your application is authorized and issued. If your location is okay, this generally an easy process. Building Permits
This application is generally filed much later than the preceding one. At the tin1e of application, you must p rovide city hall with sealed copies of the plans completed by bolh your designer (for layouts, etc.) and sealed copies of plans completed by mechanical engineers (showing all services, untilitiesa, etc.). As well, the cost of building permits can be high. Not only is there a fee, but a sliding scale of dollars based on the total cost of building the operation. It is at Lhis point that the municipality will check all plans for their conformance to the building code with respect to materials and finishes, fire regulations, zoning, plumbing, and electrical wiring. The municipality must be notified by the local d eparunent of health that it !heir requirements also. This can be a lengthy process, perhaps lasting a month. But until a building perimt is issued, no work can begin on the restaurant. As well, throughout the buidling construction. city inspectors will visit the job site to ensure Lhat your contractors are following the plans exactly. Upon completion of the construction, city inspectors will do a final inspection and issue letters to you allowing you to commence business. Department oflfealtb
This a municipal body concerned
~vith
public health in the
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communtiy. A set of plans must als? be tendered to them for approval. They are most concerned with food storage, handling, cooking, equipment, and with sanitation (garbage) handling areas, as well as public washrooms and bar areas. They also have a required list of regulations and guidelines that you must meet during nonnal operations. They will notify the municipality of your compliance to their codes, do a fmal inspection to see that you have followed your own plans, and issue a latter allowoing you to open. Fire Departments
They are also concerned with building code regulations. Your design okayed by the city will have to conform with that code, and the local department will make inspections to see that it does. They are most concerned with the fire ratings of building materials exists, entrances, sprinklers and fire alarms, and structural codes. As well, they will inspect periodically to ensure that you are not overcrowding the premises. Utilities
The restaurateur usually deals with utility companieselectricity, gas, telephone-and installation of their metering devices. Plans are often necessary for electric componies and gas companies to approve before installation, along with estimated fees based on the extent of service, etc. Deposits based on estimated usage are often required for these utility companies. And often, these utility companies will be required to issue a letter of approval of inspection to your state liquor board before you can go get you liquor licence. State and Federal Concems
When you have decided to form your business into one of the several different business organizations, your lawyer and accountant will . then be able to advise you on what else you now need to know. Because the requirements vary so widely from state to state, you might be reponsible for a great many dirrerent items to satisy you legal requirements. Make sure you pay strict attention to the experts you've hired; their advice should be both listened to .....and followed to the letter.
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Insurance
7be first importa,rt step towards fu/ftlling your insurance needs is to choose the right agent. Determining what previous dealings and experience the agent has had in the restaurant industry will teU you whether this person can be helpful to you, or will just be learning on your time. It is imponant to tell the agent accurately all the costs requirements involved with you operation. Your lease may require certain coverages that you are not aware of, so the agent should be given a copy of your lease so as to make sure you meet all the specifications as listed. It is also important that your agent visit your permises, so
he or she can fully understand your requirements. This visit may also prompt suggestions from your agent that may not have surfaced if the transactions had been completed by phone. Although it is impossible to specify exactly the kind of insurance that your operation will require, the following areas should bd considered and discussed with you agent. Fire
Because of the very nature of the restaurant industry. frre is a constant casuse for concern. There are two important areas to consider. The first is that you insure your restaurant and its con tens at .replacement cost, simply because that is what it will cost you. The second area of concern is to determine the total loss a fire could cause, expeciaUy if you are attached to other buildings or you are located within a shaping mall. General Liability
This can cover several areas, but as an example, consider this situation. A customer gets drunks in your restruant. and immediately after leaving is involved in a serious car accident in which someone else is fatally injured. As a consequence, you could be sued, because you were reponsible for allowing that customer to get drunk on your pennises. llwento1y Coerage
Another area to consider is covering your inventory against
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loss through such things as power failures, which could cause all your frozen and refrigerated prouducts to spoil. However, it is important to calculate how much the deduction would be for this kind of coverage, and how much your total may be at any one time. When you have assessed this, you may fmd that this insurance in unjustified.
Bushzess lntenuplion This type is insurance is often overlooked. If your restaurant is closed because of Hre damage, your insurance would cover all replacement costs. But, what about the loss of income to you as the owner? If you have a good staff, and you don't want to lose them, you may feel it is necessary to continue paying them during this period of closure. Your business interrution coverage will at least provide income to meet this and other obligations you may have to fulftll, such as rent, etc.
Oime Insurance This cover you against such things as hold-up and theft. You may also wish to consider bonding key personnel who control or have access to cash or inventory, such as liquor.
Automobile Insurance This would be necessary in two situations: 1. If your vehicle is an asset of the company, or 2. If you or a member of staff is involved in an accident in a privately owned car, but while they or your were on company business. The injured party may consider it more advantageous to sue your company than car's owrier. Key Person or Life Insurance
Key person insurance is often tal<en out when a partnership is involved. The non-native partner will insure the life of the active partner, and this would supply cash to either hire a manager in the interim, of the deceased active partner can be found , or to buy our the shares of the deceased partner so that the business can pe easily sold. Life insurance should also be considered by the owner/operator, as the bus iness may quickly deteriorate after his or her de:uh. Cash could be drained
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from the business and p ersonal savings, if the remaining spouse is left with a business he or she is unable to operate. Benefit Insurance This type of coverage is now available to even the smalles of companies. You can provide group, dental, and life insurance as a staff benefit, or as a benefit for the owner/operator. Your regular insurance agent may not actually deal in this specific area but should be able to make recommedations. Timing is a very important aspect of the tot.al insurance package. Your perrnises should be insured either with the commencement of your lease or from the time you t.ake possession, whichever is sooner. The landlord may allow you possession before the lease-date commencement, but if any accidents or damages occur, he may hold you or your company responible. Insurance is certainly not an area in which to try to save pennies!
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The Experts Qua1ifyh1g the Experts If you are a prospective reStaurateur and need advice abnout the procedures necessary to open a foodservice operation, your best bet is to deal only with experts. Checking out or qualifying the experts you are planning to retain :is the first step you must take. They should have eperience in, and knowledge of, the restaurant business in order to give you the advice you are seeking and, most likely, paying for. Suppose you are going to buy a farachise and have decided to take the franchise agreement to your family lawyer. In the past you have received goods service from this lawyer and you feel comfortable with him. But if you stop to recall your legal transactions with this lawyer, you will begin to realize that they prbably involved the sale or purchase of a house, the drawing up of a will, or a minor legal offence such as a traffice violation. Has your lawyer ever dealt with a franchise agreement? This is a fact you must ascetain in order to ensure that your best interests are served. Forget that you like this man or that you think he might do the job for less money. In the long run, his lack of experience in the restaurant field might cost you more than you can afford.
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A visit to your family doctor is a good is a analogy of this situation. If the problem is minor, he or she will prescrible the necessary cure, and all is well. But if your ailment is complex, your family doctor will sugest that you see a specialist who deals only in that particular area of medicine. Lawyers, and many other experts, are no different from doctors, in that they often specialize in certain areas of their given field. It is up to you to decide if this particular person can give you the help you need, or if you should retain the help of a specialist. The Initial Interview
The first meeting you have with any potential expert should be treated as an interview. Remember, you are the customer, the person who is going to pay the bill, so don't be intimidated or afraid to ask all the relevant questions regarding this person's past experience. Ask for references or to see other work of a similar nature that his person or company has completed. If they are any good , they will be only too happy to boast of their accomplishments. This is also the time to establish the expert's fee structure: the amount and the various alternatives, hourly rate, daily rate, project rate, or cost plus percentage. Make sure you fully understand not only how much the work is going to cost, but when you arc expected to pay. up-front, on completion, or payments over the period of work. All of these questions will not only help you establish your total budget, but will also let the person you are dealing with know that you are a business-minded individual and are not going to accept any unnecessary or exorbitant fees or costs. Dealing with Experts
Dealing with experts, either at the initial or subsequent meeting, can be an expensive proposition, especially if you are paying for their services by the hour. So the key thing to remember is to be well prepared before you have your meeting. The following points should help in this preparation : 1. first, you should only deal with experts who have the
knowledge to help you not just those that you like or feel comfor1able with.
•
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2. Prepare all the questions that you can think of in advance and write them down. This will not only save you time, but if the expert is charging by the hour, it can also save you money. 3. Take notes at the meeting. You may forget a lot of the conversation afterwards.
4. If there is something you don't understand, say so, and ask the person you are dealing with to explain the point again. 5. Always ask for quotes or estimates in writing, specifying costs, fees, timing, etc. If, for some reason, this is not possible, then conftnn the points of the discussion in writing, following the meeting.
6. Be open-minded and hear what you are told, not just what you what to hear. 7. Never get angry if you don't get what you want (especially if you are dealing with a bank manager). Try to learn from the experience. 8. Ask the experts you are dealing with if they can recommend other experts that you might need. For example, your lawyer may be able to recommend a good acccountant.
9. Always try to see more then one expert in each field. This not only allows you to compare cost, but also style, knowledge and compatibility. 10. Finally, never be afraid to dangle a carrot in front of an expensive expert. Suggest that someday you may be a very good client, indeed, and one who remembers favours granted in the early days. Experts Who Charge
The first category of experts we are going to discuss are those who will charge you a fee for their services, regardless of the outcome of yo ur dealing with them. LAwyers The
e~n
be very helpful in several areas. They will, of
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curse, handle all legal contracts and negotiations, advise you in all the legal requirements in starting your business, and act on your behalf in obtaining various permits and licenses. They can also be very helpful in fmding partners or investors from within their own client list.
Accounta11ts They can also be a good source for funding or obtaining partners. Their main help will be in the preparation of your fmancial projection and they will even accompany you when are applying to your lender. From the figures you supply, they may be able to point out problem areas they see. Accountants will also be of help on an ongoing basis with the preparation of yearly statements and returns. Market analysts They will, from the infonruuion you supply regarding concept and location, determine if there is a market for your type of restaurant. Consultants TI1ese experts can be a great help by advising the prospective restaurateur on all aspeCL-; of the business, from analy.zing the inital concept feasibility to staffing, opening the location and everything in-between.
Desig1w1VArcbitects They are the people that formulate the design that will complement your restaurant concept. They will also coordinate all necessay codes and regulations, so that your operation will open without problems from the municipal regulatory bodies. Mecbanical E11gineers
Working no1mally with the designer, they are the people who will plan your plumbing, electrical, air conditioning, healing, and exhausting needs. Experts Who Sell
The experts listed in this category do not charge for the
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their primary job is to sell the products of the company they represent, their advice will be bisased. It is up to you ·to evaluate each company's products, and make the decision that best suits you. When dealing with a company that is selling a particular piece of equipment, always ask where you can see that equipment in use. This gives you the opportunity to discuss its perfomance with a similar operator. Kitcbett Equipment Companies
They will be able to provide all the equipment you require for the preparation, cooking and service areas. Many companies also provide a complete design service for your kitchen and service areas, but normally this service is free only if you purchase the equipment from them. If, after they have completed the design work, you decide to buy your equipment elsewhere, they will then invoice you for the designs they have provided. Many companies also deal in used equipment. But, ::~!though the initial costs may be lower, yor will have to consider what you are giving up by way of warranties. The net result could be little, if any saving. Furniture Companies
They can be very helpful in locating the type of furnishings that will complement your concept. The range in prices can sometimes be very wide, so it is advisable to shop around. It is important to realize that furnishings must be of industrial rather than household quality, so they will be able to stand up to heavy usage in the restaurant. Sou,uJ System Compa11ies Sound system companies are a fast-growing industry. It is essential to use a company that sells equipment that will stand up to from i.welve to sixteen hours of use each day. It is also important to use a company that has the expertise to install the equipment, so the sound system is well-balanced throughout your operation. Bar System Compmtfes They will provide you with various types of control systems, greatly varying in price and quality. The system best for you
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will depend on the kind of volumes that you anticipate as well as the person who will be serving the liquor. Again, discussions with other users in similar operations will give you a ben.er idea of the system best for you. Cash Control System Companies They are probablY. as numerous as the different type of restaurants in existence. As with the bar system, it is important to anticipate the kind of volumes you expect, the type of information you require, and the person who will be handling the cash. A look at similar operations will give you a ben.er idea. These companies should also provide full training in the use of the system as part of the price. Secu'ity System Companies They may be required, depending on the location of yout operation. Again, there are many systems available, but your insurance agent may be able to help you in this regard. Urzifonn Companies These companies have many different styles and designs readily available. They will also design uniforms for your specific operation, but as with the kitchen equipment companies, these designs arc offered free of charge, as long as you purchase the unifom1S from them. It is also important, when selecting a custom design, to ascertain the reorder period and minimun quantities, especially if you do not have a particuarly large operation. Printing Companies Printing companies will also provide facilities to complete artwork suggestions, as long as they get the fmal order. During busy times of the year, you may have to wait from four to six weeks for delivery, so don't leave this item to the last minute. As well as menus, they can also provide other printed items such as matches, napkins, guest checks and various bar accessories. Advertisl11g mui Prornoti01l'-ll Companies
These companies can also provide promotional materials such as matches, key rings, pens-in fact just abo1.1t anyth ing
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that you want your name on in an effort to promote your operation. It is important no to get too carried away in this area and blow your annual advertising budget in the ftrst month.
The Free Experts .Not only are free eXperts often the best, they are probably the most overlooked. The first two in this section, the manager and the chef, can be the most valuable of the experts, if you have to hire people to fill these positions. Manager
If hired prior to opening, the manager can save the new restaurateur a considerable amount of time money, as his or her previous experience can offset a lot of costly mistake. The manager can provide expertise on systems, controls, staffmg, and most of the areas previously covered. Hiring a manager can also help you to obtain financing. Many lending institutions are hesitant to loan funds to an inexperienced restaruateur; but if they know you have, or are go~g to hire an experienced manager, it can make the difference. Cbej A chef can be another valuable asset to the first-timer,
especially if your menu is complex o r you have absolutely no idea about what is required. If you that hiring a manager and a chef would be of help to you, prior ot opening you may wish to consider their previous experience in opening restaurant operations. There is a great deal of difference between opening a restaurant and running an existing one. Bank Ma11agers
They have had experience in opening n ew !businesses, and they may be able to provide contacts. It is often the case that they will not offer their help unless it. is requested, but then they are only too happy to provide any assistance they can. The bank manager often knows of restaurants for sale in the areas o r quality prospective sellers or franchisors, can
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check credit references of contractors and suppliers, adise you on your business plan and many other areas-all at no cost to you.
Insurance Agenl.s They are constantly moving around tl1e business community and may be able to provide valuable information. Your agent could also be a source of funding, through clients he knows are looking for good inveslrnents. Real Estate Agents
Real estate agents are another source of information. They often know of properties that will be, or might be coming onto the market. It must be remembered that the agent only makes money when the proper is sold, so the information you receive be biased.
Frmzchisees They can provide a lot of inside information about the franchise company you may be considering. Their advice should be unbiased, but it is advisable to talk to more one, in order to get a broad picture. Family mzd Friends
TI1ese people are often overlooked as a source of expertise. Sometimes we don't know exactly what kind of business a relative or friend is in. It never hurts to ask what everyone does for a living within you immediate circle. Part11ers
They may seem an obvious source of expertise, but if there are ten or more investors involved, it can sometimes be overlooked. Just by checking the present and past business experiences of each partner, you may trun up a free expert with a vested interest in makirlg tl1e business a success.
Suppliers They are not normally contacted until the restaurant is close to operation, but talking to local sales staff, as a prospective customer, can provide a great deal of inside information about
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a restaruant that is up for sale, or that has recently closed.
1be Better Business Bureau The Better Business Bureau can be used to obtain information regarding franchise companies, contractors, suppliers, and other companies you may be considering. This service is available to members and nonmembers alike, and can be accessed by a simple phone call. Referrmces Sources
Reference sources such as libraries, U.S. government statistics, trade and local associations, business and trade publications, banks, saving and loans, and the many government-both state and federal-agencies, all provide booklets and reference material that can be of great use to the prospective restaurateur. By utilizing the services of the business section of your local library, sources of material, names and addresses of publications and agencies can be esaily obtained. Conclusion
In summarizing your dealing with any expert, there are three points, that apply at all times. 1. Is the expert qualified or experienced enough to provide
the services that you require? 2. Have you shopped around to compare the price and style of various experts? 3. Is the expert whom you are dealing with biased in any way? Does the e:x'Perts stand to profit from the advice he o r she give?
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Systems and Controls Control really means controlling people rather than things. That is, control is the process by which managers attempt to direct, regulate, and restrain the actions of people, in order to achieve desired goals. Now those people are not only staff, but include deljvery men, servicemen and so forth. They all use your new restaurant to earn a living, directly or indirectly. Any of the difficulties that could arise are the result of human action, or Jack of it, and if your restaurant is to succeed according to plan, it is the actions of people that must be controlled. In order to ensure that your restaurant succeeds, you must ftrst understand that the responsibility for control rests with you, and you alone. A number of factors, including the nature and scope of your restaurant, will dictate the extent to which you delegate that responsibility. But remember, the ultimate reponsiblity is yours. Basically, there are five tactices to effectively control your new restaurant, and you should be aware fo them before you open. They are as follow: 1. Standards
2. Systems
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114 Tourism and Travel Industry
3. Management Style 4. Staff Training 5. Staff monitoring Standards Simply put, standards are measures set by you in order to make a judgment, or a decision. This decision will enable you to compare your actual reataurant operations with what you had planned and expected. To enable you to understand these standards, remember that there are three you must plan beforehand : (1) quality, (2) quantity, (3) actual versus potential standards. Quality The term "quality standards" refers to the degree of excellence of raw or finished materials and a subtle spin-off, work or productivity levels. You must establish these quality standards for many areas of your new restaurant. For instance, when you are buying beef, you must be aware of the different grades of each item you purchase. And when that steak or prime rib is consumed by your customers you must be aware that their satisfaction is based on that quality. The same holds true for all for your menu items. since your customers r.lte that quality against the selling price, the "perceived value" of their meal. To ensure that the perceived value is high, you must insist on quality standards, eve in your staff. A high degree of skill or quality is often required by members of your staff, like managers and chefs, to ensure your restaurant's success. Quantity Quantity standards refer to measures of size and weight. You must establish such quantity standards as portiion sizes for food and beverage times, and work output for employees. In setting up your quantity standards, you must clearly establish the portion size for all your menu items, both food and beverage, from predetermining that there willl be eight chicken wings in each and every order to 1 oz. of vodka in every screwdriver. This will require you to compose a
Elements sous droit< d auteur
Systems and Controls 115
recipe file, listing a complete breakdown of each method of preparation. The recipe file system must, of course, be developed early, as a spin-off of your menu creation. It must list every menu item and the recipe and procedure for producing it. As well, if the items are produced in a master batch, for portioning, it must include a cost per ir)gredient. Assemble the complete castings, not forgetting to add in any garnish or condiment listings and costs. It also helps to list any utensils needed and the plating necessary to service the item. Your food cost is generated per each individual menu item for use in determining your potential food cost. And by indicating on each menu me card the date of the last cost update, you can see any costing changes by the next update. It is a handy tool to use for the study of food cost changes, and the variance between your potential and actual food cost (see Simple S13). Your staff must also be considered. It is useful to know just how many people are necessary to staff the restaurant, and just what volume of products they can produce. Actual ve~us Potential Actual, versus potential standards are useful in measuring the effectiveness of your new operation. You must ftrst realize that these standards are to be used to measure other costs. For instance, consider a bottle of vodka. If it contains 40 ozs. and costs $12, each ounce then costs 30c/; that is the standard cost of one ounce of vodka that may be used alone in :a drink, or as part of cocktail. But that is only the potential cost. It dosesn't allow for spillage, evaporation, or theft, all of which are likely to occur. In the day-to-day operations, many ouncess of vodka might be wasted or misused. Those ounces represent lost sales revenue. When you establish the sales untits you did sell, divided by the number you purchased, that will give you your actual usage. And measuring the actual against the potential will show you just how many units were lost-another way to control your restaurant. Using these actual versus potential standards will detennine
Elements sous drot!S d auteur
11Q...:Tourism and Travel Industry
II
SAMPLE#13 Reclpt Flit N.1ME:
Ranch House Chili
YIELD:
32 Portions
INGREVIENTS
WE/GifTS
Bacon, diced, small
5oz.
Stewing Beef, lean, cut in 112 inch cubes. Pork Shoulder, boneless, lean, cut in '12 inch cubes.
4 1bs.
Onion, dry, sliced Garlic. dry, minced Oregano, dry Salt, table Cumin, ground Coriander. ground Chilcs; green, diced Beef broth Cooking bu rgundy Chile Salsa, green 1omato sauce Celery, sliced
-
-
27 oz.
-
-
28 oz. 2lbs. 17 oz.
Round Soup Spoon
Mt:ASURES 8 strips
-
X
8 oz. Bowl
METHOD
'
PLATING
COSTING
I. Cook bacon
2. Remove bacon. Save drippings.
.75
3. Brown mealS in drippings.
8. 12
7.01 1
hcup I t~p. I tbsp. 4 tsp. 2tsp. 2tsp. 2 cans 3 cups 3 cups 2 cans I qt. I qt.
4. Combine meats with all ingredients. Bring to boil. Simmer under lid for 11h hours or until mc:at is tender.
5. Recipe complete.
Wh ite soup bowl holding 8 oz. portion, with salad plate as an underliner.
.21
.09 .10 .12 .19 .22 12.00 1.02 5. 17 7.00 3.n 1.42 47.19
MASTER BATCH RECIPE COST + 32 PORTIONS = PORTION COST
+ CONDIMENT OR GARNISH COST TOTAL PORTION COST
I
I
PORTION SIZE: I
4 lbs.
GARNISH 3 oz. shredded Jack cheese@ .09 or CONDIMENT per oz. UTENSILS
11
11 F/L£131
1.47 .27 1.74
DATE OF LAST COSTING October 13, 1982
Elements sous droit< d auteur
Systems and Controls 117
you profitability, and is a necessary part of comparing what you are doing with what you should be doi1tg. Systems
The methods you develop to prepare a food or beverage product or perform a job are syst.ems. These systems are your correct procedures for perf9rming these day-to-day tasks. You must set up these systems for every stage of production and service of food and beverage items, as well as for you sales/cash controls. First systemize your ordering and buying procedures to ensure that your products come to you in the needed quantities and quality. Then consider your receiving procedures: are you geuing the right products and at the right price? And are you storing products to guard against theft, wast anci spoliage? You must then make sure those produL'IS are issued properly, rotated uniformly, and put into production on time. Moreover, records of these product-issues must be maintained in order to calculate the actual cost-per-item-produced. This you compare to the potential cost-per-item-produced as estimatd in your recipe file. Again, this is another method for increasing profitability. All of you production procedures must be systemized to ensure that any given menu item is produced the same way every time, in the same quality and qunantity, to ensure customer satisfaction and a continuity of standards. When your systems are combined with the previous standards, it becomes possihble to measure each aspect of your restaurant business. The day-to-day operating realities should be compared to your combined standards and systems. Any variances must be rated, and changes and to bring actual standards and systems more in line with the potential ones you pre-planned. When actual 'standards and systems compare favourably to the potential, it means effective controls exist. Obviously, .you can't be everywhere at once to observer your staff's actions. The larger your restaurant, the more likely
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118 Tourism and Travel Industry
it is that you'll have to rely on a gariety of records and reports. Some of the ones you should consider are listed below. Requisition Forms
These forms indicate the quantity of products requisitioned from storage by the kitchen and bar staff. They will be measured against your sales analys~ _form to see if what was requisitioned and then produced was sold. If not, where did these items go (see Sample If 14). Production Forms
These forms are meant for daily use by the kitchen staff to enable them to produce enough food items for each day's business volume. Generally drawn up by your chef, it will ensure both accountability of product and that you won't overproduce with resulting waste (see Simple # 15). SAMPLE#14
Requisition Fonn To:
Main Kitchen
Quantity
Description
6
Jt
5
10 lb. bags-Frozen hamburger
201b
Whole grain rice
18
Heads of Cabbage
6lb.
.B read Crumbs
30
Onions-Medium
24
Eggs-Large
Usage:
(I) Ma:.1er Batch of Cabbage Rolls,
Date: Aug. 31 , 1982
10 Cans-Whole Tomatoes
yielding 240 portion
Charge To:
Food Cost
Signature:
-Chef
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Systems and Controls 119
Daily Cash Report
Thi.s report (see Sample # 16) should break down your daily sales into categories. You'll want to know not only that each server or casher remitted the correct amount, but also the breakdown of cash, credit-card vouchers, and house accounts for your banking and accounting purposes. This report is then compiled into weekly, then monthly totals for you sales control analysis. Sample tt 16 outlines the various things you will need to know in order to balance your daily cash. 1. Register Sales of $2,341 .65 represent the sales totals from
all cash register machines. 2. Opening Float is the amount of money you have on hand every day to run your restaumnt. You'll need it for cash purchases, floats for your cash register, etc. It's a constant amount that will be o n hand, every day you're open. 3. Cash purchases can be many things, as shown. You list the item first (food costs, beverage costs, and other operating expenses), then post each item to the department where it will eventually be totaled. 4. Subtotal tt 1 is, of course, the float minus your cash purchase for the day. 5. Sales by Server is a list of the names of each server working on the particular day, and the amount of sales each server had accumulated. Every staff member who is reponsible for taking cash should be on this list, including waiters/waitresses, cahsieres, bar staff, etc.
6. Subtotal
2 is the total of all these points of sale and should be the same total as Register Sales. tt
7. Over/Short is the difference between Soubtotal # 2 and Register Sales. Any substantial variance between these two totals, whether Over or Short, is a cause for concem, and shows that your cash-control system is breaking down.
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120 Tourism and Travel Industry
r
SAMPLE#lS
'
Daily Production Form HOLDING ON STATE HAND
II DATE:
ITEM
FORMAT
Chicken Wings
SO lb. Box
frozen
2llbs.
Lasagna
8 portions per tray
frozen
12 36 portions portions
B.B.Q. Sauce
100 lbs. daily
PREPARA110N TASK
/NI· TIAL.
Thaw (2) boxes tonight Thaw (2) trays in cooler overnight
Unspiccd I Xl28 4X 12S~~
Pre-Cookcd Apple Pie
USAGE
October I, 1982
6pcrcase
in
~
storage
spiced
4X 128 OZ. weekly
frozen
2
4 daily
Thaw ( I) case in cooler
IS heads
(I) case & store in
Wash , clean. trim Iceberg Lettuce
Strip Loins (Al-A2)(10-12lbs. avg.)
Shrimp (P&D) 4 1/SO count
24 per case
(I) piece yields 14 portions
31b. bags yield 10 portions
S heads Fresh uncleaned
frozen
frozen
cooler overnight in scaled bags.
IS portions 9 portions
Thaw (I) strip loin in cooler overnight in pan to catch all water & blood. Sec recipe lf37 for prep.
11 portions 7 portions
Thaw (I) bag overnight in cooler Sec recipe #21 for prep.
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systems and Controls 121
OAT/i:
I ~·o . I,
lVI!
I
SMIPLF.116
I
MGR:
J. Rudoi.:k
1=~1
OAILY C-'SH REPORl'
-
~. uo
..
SALf.S 11\ SE.RVER
...
- S9.15
ITEM
POST COST
....ou
I(«<
Foud ("""
l l .l l
l..dtucc
Fuud CO>l
21.00
Sl>mj>O
Ollitt
6 .30
Ru1 C~..,Inr. ~n i«
IS.OO
,)7b. $S
I
2.J.II.M
CASH PURl'IIASES
•
~~""Y
j
JIO 211
•. f-.....;.._ _ _ _,_ _ _ _ _ ,.__ - ..
.~&m--y~-------------+,--~--.,-·~~--~f----+-~ -1'1------t----~---l
t~l~t:iiihll"'t:\hlttl --~ - :r,l•)~·-1~---·-t---i--i ~ Sue ,_ _ ___ __ . -- - t -I'll -0- i l - -- +--+---i
1
m .15 I
- - ------ ·- _j_ J.ll.W TOTAl. ! .l iO.SO Rcnl:U1~ ~-----1-,- - J AnJttt
I \
I
O.
+
: AJd- Sut-1•'11111
~ ~-- • ·-·
TOI'AL (.'ASH ON HAND
LESS(II'I::>I'<:G FL<~r
!
I
- .
ot .'1111 ~ 4-IO.!S
H B
: ! .7Sl.MII fl 1
SW.IlU · 1
IIANK·;;;-;.-;~ "~- -·t'7zsJ 80 ~
~.-
..
- ~~----- --~1
----
122 Tourism and Travel Industry
8. Totoal cash On Hand is attained by the addition of Subtotals #l and # 2, allowing for any cash Overs or Shorts. 9. Bank Deposit is the total of your Gash On Hand less your $500 Opening Float. The only variance to this total happens if you accept charge-card vouchers which you have to redeem from the card company or from ·another bank. If this is the case, then it is advisable to keep a separate record of these transactions. Sales Analysis Report This report is generated from your cash register. It should list the sales by each server of every menu item sold, by food and beverage grouping. It is used to analyze how productive each server was that day, which need more training or a lesser work load in order to cope, and to analyze which menu items sell well and which don't. If a nonnally good seller has slackened off, why? Aie your standards and systems not being followed, and has that put your customers oft? As well, comparing this actual listing of sold menu items to you requisition and production forms will tell you if you're losing products before they get to your customers. lm.Nmtory Report This report usually lists every item you buy for eventual production into menu items. Although lengthy, it is a very necessary part of your operation, and is used many ways. If you take a complete inventory on a Sunday, you can measure you "on-hand" levels.against your weekly volumes and order, on Monday, up to those levels. A four-week inventroy report, with the added purchased items less your on-hand items, will give you your monthly-usage report. This usage report, when extended by unit-dollar values for food and beverage items, can be measured against your acccumulated daily-sales reports. This will then give you potential food and beverage costs, and will show you when your standards and systems are not being followed. These are important guidelines for your success. Simple 1t 17 is used as follow: 1. · The Item column is used for listing all the food and
Elements sous drot!S d auteur
Systems and Controls 123
-
-
SAMPL~IJ7
DATE: 0<1. I, 1982
INVENTORY REPORT MGR: J. Smio.h
fTf.M
UNTT
i' ~
r ..[
J.
ir
)'h
)
6'h
2'1>
2
s
7
•
~
[
2
UNTTI'RJCE
COST
IU:·OitDER
•
.,.00
180.00
2
)
19.60
S8.80
u
Suboolal
238.80
MEATS: Chiden Wines SJ~ ~ t'f(Of'o"
.I(). lb.
boA l().llo. boA
FROZEN VEGETABLE:
French Frtes Onioo Rlnp
)().lb.
bo• l().lb.
bo•
'
20
2S
4
21
IUS
261.1S
2S
2
I
)
I
2
uo
17.60
2
Suboolal
2U.3S
BARUQUOII: Canadian Club
nch
11
-
11
)
8
14.6S
117.20
10
J&B Scotch
each
I
6
7
)
16.6S
49.9S
8
Bcefater Gin
uch
)
-
•
)
I
2
IS.2S
30.SO
)
Subcocal
197.6S
t-
~AL COST:
-
721.!10
beverage items that you have in stock. It is advisable to break these down into categories such as meats, produce, dairy products, beverages, dried goods, etc., and subtotal each category for ease of calculating your total inventory. 2. The Unit column should depict the way in which each item will be counted and priced, i.e., lbs., cans, packets, cases, bottles, etc.
3. The Opening column is, in fact, your dosing-inventory figure from the last inventory you completed. For the very frrst inventory report taken for your operation, there should be no opening figures. 4. The Purchases column would include all the purchases for the period since you last inventory report.
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124 Tourism and Travel Industry
5. The Total column figure is arrived at by adding the Opening and Purchase columns together.
6. The Closing columns would b e the amount of inventory physically on hand, taken at the end of the period.
7. The Used column is the sum of the Total column, less the Closing column, and tell you what h as actually been used in your operating during the period. 8. Unit Price is the most recent rice of each item, reduced to the unit by which it is counted, as depicted in Unit column. 9. Cost is arrived at by multiplying the Unint Price by the number of units used (from the Used column). The sum of this column, Total Cost, will give you the total amount of food and beverages used in a give period. 10. The Re-Order column is a handy device for instantly recognizing what is, or should be, needed for the next period of operation. You n ow know what has been used and what you have left, so it is quite easy to calculate w hat you should reorder. Note
The completion of physical inventory report is quite consuming: but it is the only way to measure how well you and your staff are controlling the operations' cost o f sales. For the new owner, a weekly report should be completed until such a time as you think everything is running as it should be. Then you can drop down to monthly report. However, if at any time the food costs start to get out of line, then the reintroduction of the weekly report should tell you where things are going wrong.
Management Style The establishment of standards and systems must be lY.tcked up bu your one management style. This not only includes your manners with your stall, but also your reponse to situations , that require action. Always remember that, as the owner, it is up to you to
Elements sous drot!S d auteur
Systems and Controls 125
instruct your staff in the way their jobs are to be done. You're controlling your staff; your own behaviour set an example. Presumably, your long-range goal of success means that your behaviour will reflect the standards and systems you have reated. That, in turn, will influence your staff's beheviour when following your standards and systems. For example, if, when you're helping to plate dinners, you use excessive portions, your staff will tooo when you're nor around. Remember to be consistent. Too often, owners vary their actions, and that does not offer a clear picture to employees. Such inconsisteny confuses the staff and tends to wa ter down whatever control you've created. Staff Training Setting an example for staff to follow in standards and systems is not enough. You must first train staff in these areas before you can expect your example to be followed. Initially, you must create a complete training programme for each job category in your operation: manager, chef, cooks, dishwashers, janitors, servers, bartenders, hostesses, busboys, etc. You must writ out out their job descriptions for them, telling them what they will be expected to do. They must be instructed in product knowledge (what you sell and how). They'll have to be taught your standards for products as well as your systems for handling and producing these products, and your systems for sales cashcontrol and remittances for the staff that serves \~ustomers. Although a lengthy process, it must be done if you are to expert a professional staff. And every time a new person is hired, you'll have to do it all over again. Staff Monitoring One of your most important tasks is to control your operations by continually observihg the actiions of all of your staff as they go about their daily tasks. You must judge their actions in light of your standards and systems, and correct them when neccessary.
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126 Tourism and Travellndustty
The object of this monitoring is to change or modify the staff's job perfomance, or to control each person's job activity, so that it is consistent with your standards and systems. For example, if you observe a bartender mixing drinks without measuring the ingredients and fail to direct him to measure, then your bartender could assume that his work is acceptable. You have just missed an opportunity to apply a control to a job task that was not consistent with your standards and systems. The effectiveness of your standards and systems depends on the continuous monitoring and correction of your staff. Staff that follow the standards and systems should recevie a positive response and prasise, but conversely, those staff members that do not follow the guidelines must be corrected, and may require retraining in the particular task.
Other Conslderatlons Some other reports and forms that you may want to consider are as follows: 1. Beverage inventory control form
2. Beverage requisition form 3. Spillage, spoilage, breakage report 4. Bin control form 5. Purchase order form
6. Labour cost report 7. Waiting list form 8. Staff schedule form 9. Shift change form 10. Sign in/our form 11. Vacatio n report 12. Server/cashier remittance report 13. Costed inventory report 14. Payroll deduction authorization form
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Systems and Controls 127
15. Purchase summary report 16. Equipment history report 17. Staff time cards 18. Kitchen/bar transfer report In general, you must remember that at the heart of the control process are three basic steps. · Begin by establishing both your standards and systems for operations. Be as thorough as possible. These are the building blocks of control, and there must be a flflll foundation to build on. Measure perfonnance in all areas from your own management style to your staff's training and monitoring. Adhere closely to those standards and systems. Don't deviate as your success will depend upon them. And finally, through your reporting, learn how to analyze infonnation early. The variances between your potential and actual stantards and systems will eat up your r.>rofits, os take action quickly to correct these areas.
Elements sous drot!S d auteur
i
128 Tourism and Travel Industry
Personnel One of the most important assets in your new restaurant will . be your staff. That single point must be remembered at all time. Consider that the staff you hire represents your restaurant to the public. They're the ftrst and last people that your customers will meet. They sell your products, or waste tham, or steal them from you. Their service may make or break you. Or even worse, they may try to rip off your customers, and everyone will hear about that! Whatever they do, you are paying them for their actions. You expect them to follow the standards and systems you've created for them, and you'll use both training and monitoring "to ensure that they do. But never forget that you must set an example they can follow. So h ow do you begin? You might find it easier to look at your personnel needs as a series of seven stages, or steps, that should be followed in order from planning, right through to training. Policy The first step is one that will be very impotant to you as the owner of· a new restaurant. The policies you set down
Elements sous drot!S d auteur
Personnel 129
before you open are the rules and regulations, the law, if you will, that your staff will have to live by. Any they are also loaded with information that your staff will want to know. Consider some of the following areas: SAMPLE# 18 The Seven Steps to Organizing Personel Needs T ram ..m~
Files Interviewing & Hiring
Descriptions Rates Category Specifications Policy
Probation Period
How long will your employees be on probation? Will you sit down with them at the end of this time and evaluate their performance? Discipliue a11d Dimissa/
What constitutes a disciplinay situation? How will discipline employees? How many such situations are grounds for dismissal?
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130 Tourism and Travel Industry
What constitutes ground for immediate dismissal? TI1efi? Lat~ness? A no-show for a shift? An unclean uniform? Are you aware of standards laid down in the federal and state labour laws? StaffMeals
Does your staff eat free when on duty? Or at half-price? Or what ? Can they have anything they want? Or selected item only? Can they drink alcohol on duty? Do they any discount when they come in as customers? Are there some who'll have to pay and others who won't? Where can they eat? In the dinning room? Or do you have a separate place for !them? StaffBreaks
Who gets a break? For how long? Do you pay them for that break? What are the labour Jaws concerning breaks? Where do they take their breaks? Who do they ask for a break, or do they just walk off the floor? Saff Somkt,g
Are staff allowed to smoke at their work stations? In the dining room? On their breaks? Or not at all? Schedules
When will the week's schedule be posted? Can they ask for specific time oft? Do they just switch shifts with each other or must you okay it? What about vacations? How far in advance must they request vacation? What if they all want the same day or week oft? How will you decide? Staff as Customers
Can your staff stay after work as customers? Can they come in on days oft? Must they keep to the front-o!f-the-house areas? Are they allowed to charge meals? Or drinks? Vnifomts Will you have any? Do you supply them? To all or just
some of the staff? Or does your staff buy them? What about cleaning? Repairs? Deposits? What about shoes? What colours and styles are acceptable? And nylons? Aprons? If employees wear their own clothes, what styles and colours are acceptable?
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Personnel 131 Cash Responsibility
Are the staff members who handle cash reposible? Do they make up shortage? How will you collect those monies? What about improperly verified credit-card vocuchers? StaffAn?as
Can staff be in the back of the house when they're off duty? Where will their friends/pouses wait for them to finish after hours? Payroll
When is pay day? Do you pay extra for public holidays? What deductions might affect all or some staff? Will you cash their checks? How often do you review rates? TipSplUs
Will you collect all or some portion of the tips? How will you distribute it among other staff members? StaffHygiene
Have you considered acceptable hair styles? Make-up? Jewellery? Their hand for cleanliness? Nail polish colours? Category Secllications
Throughout your new restaumat, each position falls within one of the tradtional job categories-from chef to sous-chef to line cooks, prep cooks, dishwahers, janitors, managers, assistant managers, floor supervisors, servers, bartenders,, busboys, hostesses and bar porters And each of those categories will need just so many people to fill your needs. You'll plan to 'ful each category to the maximum level needed to run your restaurant. But be forewarned about the experience factor. For example, at opening you may have to put eight servers on the floor to cover the dining room. But a month later, after they are experienced, only six or seven are really needed to handle the floor. So what do you do with those extra se rve rs? You can partially get around this problem by using part-time staff might from the start. That way, you'll noe be cutting down o n your full-time staff. Natural attrition may also solve this problem.
Elements sous droit< d auteur
'\.
13? Tourism and Travel Industry
RatesofPay
Begin this third step by checking around in your community as to what rates are being paid for each job category. Your local restaurant and foodservice association office will supply you with a breakdown of these rates. Study them, carefully, since it's your money your're looking at Check around with other owners ·as to their rates. Remembers that many of these rates will be based on experienced staff. But you'll be most interested in starting rates, taking into account minumum wage amounts. As well as establishing your starting rates for each category, you should decide when the staff will be eligible for raises . This informatin should also be passed on the staff, reminding them that raises will be based on performance and merit, not just on length of employment. Job Descriptions
The fourth step is to take each job category and write a complete job description for it. This job description will also be handed out to all employees so they know just what is expected of them. It will dear up any misconceptions or , excuses like "you didn't tell me I had to do that." For example, here is a job description for a server in a full-table-service, licensed resturant: 1. To serve every guest with courtesy and a smile. 2. To check in 15 minutes before each shift to receive cash register Key, guest chec!<s, section, assignment, and daily special information. 3. To arrive each day in a clean, neat uniform and with personal appearance in accordance with policy. 4. To be fully knowldegeab in all menu item and prices. 5. To know proper garnishing of menu items and bar tiems.
6. To check each server station to see if it's fully stocked. 7. To check you section and see that every table is properly
set.
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Personnel 133
8. To check the chairs, booths, and rug for dirt or crumbs. 9. To make sure coffee's hot and ready on each server station.
10. To inform you supervisor in case of customer complaints, equipment malfunctions, or poor housekeeing by cleaning staff. 11 . To perform any other duties as may be requested (covers
anything else you may forget). Interviewing and Hiring
The fifth step uses all of the previous steps and is often the hardest. It involves the actual interviewing of everyon.e who applies for a job with you. But before you can interview, you have to know what you're looking for in the each job category. For each category, remember to list the four analysis points to use when interviewing. They are as follow: 1. Knowledge: What knowledge is needed to do this job?
2. Skills: What are needed to do this job?
3. Physical: What are the physical demands of the job? 4. personal: What personal qualities are necessary for the job? As an exapmle, here's a job analysis for the cashier category/ 1. Knowledge: (a) How to make change accurately (b) How to make up a cash repot for each shift
(c) How to record adjustments (d) How to handle credit-card vouchers, travelers' checks and goverments checks. (e) How to handle coustomer complaints (f) How to service the cash register for tape or ribbons 2. Skills:
(a) Basic Math, English, reding. and writing
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(b) Skill and speed on a cash register
(c) a counteous and frienly tn.IUlOer of speaking 3. Phsical: (a) Ability to stand up for a long time (b) Ability to punch in number keys on cash register
4. Personal: (a) Responsible, fast and eftlcent (b) Sociable and tactfully cooperative
(c) Cheerful, but tough when necessary (d) Honest Regardless of whether your applicants are walk-ins, come from employment agencies or schools, are referrals, or ·are responding to a newpaper ad, your next step is to have everyone fill out an application form. The application form is used: (a) togather all personal data you may need , (b) to show work experience and educational levels, (c) to help you direct questions arising from the information given and general data required. The application can, therefore, reduce the time you spend on each interview, while still giving you vital information in areas you would question. It can also aid in quickly eliminating candidates without the sills or ~xperience you need. Once the application completed, it's your tum. lnterview applicants in private-you're trying to get each candidate to open up to you, and that's impossible when surrounded by other candidates. Ask questions that call for more than a "yes" or "no" answer. Don't ask a sever cand.i~te if they like being a server; intead ask them what they li.lce/dislike about their job, and why? Check their listed skills by asking them about their training for those skills. Or ask a technical question about those skills to test the ir knowledge and see if they really do have a
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particular skill. Always refer to the past employment record and get them to explain why they left. This will give you some infromation as to how they perceived their old job and past employers. Then tell about what happens next: how long you'll be considering applications, when ~e candidates will be notified if they're hired, when ·the starting dates are, etc. These things are important to your applicants, so be honest with them. Remember too, that you want the applicant to talk as much as possible. Listen well, and take notes on what is said and let them sell you on themselves. After the interview is over, you should then check the references of every applicant who is a serious candidate. Simply call the listed employers and ask their opinion of the applicants' work habits, skills, perfonnance, etc. This will give you a good idea of any problems in the candidates· past employment histories. You know have all hte information that can be gathered on each candidate. It is time to make your decision. Use your written notes to create a. strength/weakness outline for each applicant. Both will be present, of course, for each position you have. Remember that each staff member is very important to. your operation, so rate them on a scale from one to ten, according to how well you think the candidate can nu the requirements .of the position. You now have a list of their knowledge, skills, physical abilities, personal characteristics, references, strengths· and weaknesses, and a risk-rating to help you decide.
fUes It is very important to set up personnel files for you restaurant. Purchase one of the pre-printed cardboard mefolders available. The covers have space to allow you to insert all personal infonnation on each employee such as: name, address, Social Security number, the person to notify in case of emergency, and medical plan, and income tax rating, etc. Space is also provided for your comments coneming promotions,
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tradiness, discipline, etc.
You will soon learn that restaurant business, like all other businesses, generates a lot of paper. But these personn.el flies should not be forgotten; you'll refer to them regularly, and an updated, complete set of files is a necessary part of the smooth relations between you and your staff. Training
The seventh and fmal step is the training of your newly hired staff. This traning programme is often assembled into a training manual for instruction to the staff, and a staff handout for them to study and refer to. They general purpose of any training program is to turn these newly hired staff members into "professionals,• regardless of their previous experience, and to improve the perfonnance of each staff member. The benefits of any training programme are vaaried. They help your staff to earn a pay check and trips, satisfy your cusxtomers, and build your sales, which will lead to your new restaurant's success. In any training pogram, regardless of your individual restaurant type, there are some basic areas to conv:e r in depth. Generally they are as follows:
Product knowledge-standards Your staff must be knowledgeable about your complete menu, both food and beverage item. You must tell show them your standards for all Items, from the receiving d oor to the customer's plate or glass. They must know what constitutes a perfect meal, in quality and portion quantity. They must know what plate or glass is to be used so they will be able to properly server and sell the items on your customers. job Procedures-systems This area, again to be fully developed and presentented to the staff, will explain how to do each task in every job category. Although lengthy, these procedures will show the staff the correct way to follow the systems. In order for your restaurant
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to run smoothly, everything must be listed, and taught to your staff, from how to cook a prime rib of beef, to how to greet and seat guest; from how to carry a trayful of drinks, to how to mix a drink. Selling Aids Because your servers will be the direct link to your customers, you must infonn them about how you are going to enable them to sell. Use your menu to show what is for sale, and what accompanies each meal. Teach them about your bar listings too-they're a great check7builder. What other things are available that may not be on the menus? Do you have blackboards with daily speciais? Or placemats? Is there a childeren's menu? Or an after-theratre menu? Show each one of the servers, and test them on their product knowledge. Remember, to help your servers sell for you, must fully develop these aids and systemize all of the procedures they will be using to sell. Recipe File
This file is created for instruction of tall production staff. Generally, the recipe me is composed of every menued or featured food and beverage item. In lists ingredients and qualities end quantities to be used, and the procedure to be followed erery time that item is prduced. This ensures that the consisteny of the menu item is constant in taste and quality. Often these recipes are printed or typed on cards for easy reference by your kitchen or bartending staff. Many restaurants include a photo of the finished item so the staff will be consistent about plate arrangments as well. As the onwner, you'll not only want these recipes followed religiously for consistency of taste, but to ensure that the production staff are following the standards and systems s~t up to control your food and beverage costs. Conclusion Any new restaurant has problems in almost every area,
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and yours will be no different One thing t? remember is that your new restaurant will probably have few problems in attracting customers right off the bat The difficult thing is to please them that first time. If you lose the, because they are not happy, it's ve ry difficult to get those dissatisfied coustomer to come back again. One of the best tactics to use in smoothing out those opening problems, is to organize dry runs. TI1is tactic involves providing a full-service meal to selected guest for free (or perhaps all monies might be donated to a charity). Basically it's to give your staff the time to fme-tune your standards and systems. Begin by splitting your categories in half, wherever possible. This ftrSt dry run would be planned using one half of the staff to come in to work and completely set up the restaurant for service. The sceond group then comes in as customers. They are seated, served, etc. Afte r they have gone, the working half then closes up. Then :reverse the two groups, and do the same again. Next, you might invite all of the tradesm(~n in, or your supppliers, or your family and friends, or local merchants, or business people, or all of them for staggered meal priods. They'll act as "guinea pigs" for your systems. Problems will surface quickly and you'll be able to adapt befor your have paying guest. And the experience your staff gains will out weigh the costs of such dry runs. Once you are open, you're not finished by any means. just because you've trained all your staff, don't thing it's over. Training exployees never stops. The staff are costantly leaving one position for another, and you'll have to train your new employees as well as your opening staff were trained. You 'll also have to motivate them to help you new restaurant to succeed. SUPPUER
As a new restaurateur preparing to open your business, yo u must realize that way in wh ich suppliers view you. Certainly,
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Personnel 139 the sales staff look on you as potential new business, the lifeblood of successful sales people, but every supply company has a killjoy, and his title is usually credit manager. To the credit manager, you are another potential risk in an industry with a high mortality rate. So as far as he is concerned you will have to prove you are worthy before he allows the privilege of credit. The procedure theat many suppliers are now adopting is that your first order, which is always the largest, will be delivered C.O.D. Then, depending on the supplier, he may give you terms ranging from 10 to 30 days. Sometimes a supplier may not otTer you credit for the first month or two, until he sees how your business is progressing. You progress can e-.Jsily be determined by the volume of product that you are ordering, or by the local salesperson dropping into your location, at what should be peak time for business, to see how busy you really are. Service v ersus Price Service
As an operator in the service industry, you have deadlines to meet daily. When a customer comes through the door of yor restaurant, the meal that he is expecting has to be available. This can only be achieved . if you have ordered the product and your supplier has delivered iL Consequently, service by the suppliers you use must be high on your list of requirements, and equally important is the availability of the products you need. T.O.S.'s (temp orarly out of stocks) can't be served to the customer. So service and avilability are the hallmarks of a good suppl ier. These requil:ements can be established prior to opening, by taking to other restaurants serviced by the supplier, and will very quickly be confirmed once you are open. Plice
The price you pay for the goods you receive is a lso very important, but low price and poor service will most definitely cost you more money in the long run. If various items are
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constantly T.O.S., then you'll be running to the comer store or local supermarket and paying far more than you should. You must also be wary of the supplier who comes in with the lowest· prices intitially and then gradually raises them over the next few weeks or months. Many new operators are so concerned with the day-to-day running of their they fail to notice prices creeping up, especially if they are not taking time to phone other suppliers ot compare prices. Remember, if you can save $100 per week because of good buying practices, that money is direct profit because your menu prices are often fixed for a 3-to-6 month period, and product price increases cannot always be pased on to the customer immediately. The Sales Representative
As we mentioned earlier in this chapter, the life-blood of selling is new business, and to the supplier's 53,les staff, you are new business. Although most reputable companies give tl1e sales staff strict guidelines to follow when selling, not all sales person follow these instructions to the letter. Some of the questions you should ask are: 1. What is the minimum dollar or case delivery? 2. What credit terms can be arranged or can y,o u expect, once you are established? 3.. Does the company deliver every day in your area and , if not, what are the delivery days? 4. What time of the day can you expect delivery? 5. What is the cutoff time ofr ordering to receive delivery the following day? 6. When an item is T.O.S., does the supplier call you to let you know, allowing you to subsititute, or does the company just dieliver without the item, or substitute at the same price? · 7. Are the delivery personnal unionized, and has the supplier experienced may tabor disputes? Once you have discussed all these points with your sales representative, don't be afraid to confirm the details with the
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company's manager and credit manager. Other Services Supplier can provide many other seJVices, such as: 1. Product information 2. Product-manufactureres' recommendation on cooking, storing, and seJVing ideas 3. New products on the market 4. Equipment related to the seJVice of their products. The last item can be a great intitial cost saving to the new restauranteur. For Example, some coffee companies will provide coffee manchines at no up-front cost to you, as long as you only use their product in the machine. However, there may be an up-charge in the cost of the product you puchase, i.t., lOc per lb. extra for the coffee. Many other types of companies also offer this kind of service, such as ice-cream suppliers, carbonated-soft-drink suppliers, milk suppliers, etc. But it should be remembered that the supplier will only offer this seJVice if he feels that you volume of purchases from his company is high enough to justify the capital exense his company will incur. In other words, nobody is going to give you something for nothing. Receiving Checking off the suppliers' delivery slips against what you have received is a task that any member of the staff should be able to complete. But knowing if the product is acceptable is something that only an experienced person can decide, especially when dealing with produce, meats and fish products. lt is therefore essential that you try to schedule all deliveries at a time when they can be received and checked properly, and that any unaccaptable items can be noted on the delivery slip and returned immediately. Products delivered during a busy lunch period, not only fail to get checked properly, but often do not get put mto storage until after the luch rush is over. For perisable goods, this can not only be costly, but very dangerous. Good ordering and receiving pratices are as important for you restaurant's success as any other control.
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Travel Writing Making a living as a freelance travel writer in the 1990s is becoming increasingly dilfircult. ewspspers, whose Sunday travel sections had been the largest market for travel articles, are becoming fewer. As n ewspapers decline in number, however, all kinds of specialized magazines spring up. They do not use as many travel articles as the newspapers had, and their standards are often higher, but magazines of many kinds use travel articles in hopes of attracting travel advertising. This has incresased the umber of jobs ofr staff writers and editors. A growing threat to freelance travel writ~rs the decision by a few of the most prestigious magazines to rt:fuse articles generated by sponsored trips, as a few top newspapers did two earlier.
History of Travel Writing In English slang a few generations ago, a "traveler's tale" meant a tall story-a h ighly coloured and exaggerated account of adventures in exotic and faraway lands. Most of the world's literatures have included s uch reports. Homer's Odyssey, dating from about 850 B.C. not only relates the adventures of Odysseus (Ulysses) over the 20 years it took him to come home from the Trojan War, but also decribes accurately many parts of the Mediterranean world that he visited.
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One of the world's most fascinating travel classics is 11Je Book of Mar-eo Polo. Fortunately for the world, this Venetian man of action, after his epochal journeys across Asia and his 24 years in the service of Kublai Khan, was taken prisoner in a war between Venice and Genoa. Using his carefully written travel notebooks, in 1298 he dictated to a fellow captive, the scribe Rustigielo of Pisa, the book that disclosed Cathay to Europe. Christopher Columbus had a copy of this book and made notations on more than 70 pages. His object, when he sailed in 1492, was to reach Marco Polo's Cathy. Another monumental travel writer was Richard Hakluyt of England, who became archdeacon of Westminster and is buried in Westmister Abbey. Between 1582 and 1600, he wrote several books, chief of which is his Principal Navigatiou.s, Voiages, and Discoveries of tbe E11glisb Nation, describing all the great sealbome expeditions o f English captains to America, the Arctic, the Pacific, and around the world. If only some chronicler had joined the fishing e xpeditions of early Pottugues, French, English, and Scandinavian Fishennen, we might know much more about ancient landings in North America. lt is suspected that there was fishing from European ships on the Grands Banks off Newfoundland and Nova Scotia as long as a thousand years ago. The fJtSt important analysis of the United States and its life is De la democratie cm Amerique (Democracy i1t America), published in 1835, by Comte Alexis de Tocqueville. Sent to examine the United States pentientiary system for the French government, de Tocquevill wrote his report on prisons, and then, in Democracy iu America, he described American life with such penetration as had neoer been applied before, and seldom since. He perceived that the great difference between Europe and America was the American insistence on equality, and he showed how this affected every facet of life, from emergent literature to science, religion, philosph}~ . the arts, language, b usiness, the family, the military and manners. He didn't care much for our ancestors' manners, but he fore saw that the inOuence of democracy would bring about the
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emancipation of women. De Tocquevill's work would not be considered travel writing by some persons-those who believe that travel writing conoerns it self solely with the traveler's transportation, accommodations, shopping and recreation. But, in reality, this is the very best kind of travel writing because de Tocqueville delivers that most precious gift-insight. The insight of the travel writer can bring the reader to feel kinship with people of another land and another race, by showing the universal emotions and motivatins behind customs that seem strange, even bizarre. An alert travel writer is always auuned to the subtle emanations of a new place and its people. Every bit of feeling that a place arouses in · the travel writer must be savored, perhaps analyzed, but certainly fully realized, so that the writer can express it in a way that makes the reader feel it as well. Two men who strongly influenced the development of travel guidebooks as we know them today were John Murray of London and Karl Beadeker of Koblenz, Germany. John Murray (1808-1892) was the third of a distinguished line of publishers, all bearing the same name. He wrote a series of handbooks on the Netherlands, Belgium, France, the Rhine, South Germany and Switzerland. Karl Baedeker (1801-1859) started a printing in Koblenz in 1827. Under an arrangement with John Murray, he published a pocket-sized guidebook on the Rhine, Belgium, and the Netherlands in 1839. He subsequently brought out guides covering most of Europe and part of Nortl1 America and the Orient. These books were so reliable and thorough that the name baedeker became a synonym for the word guidebook. The era of exaggerated "tra veler's tales• had ended. Baedeker started the pratice of marking with one or more stars in his books places of special interest or attraction, so travelers with little time could determine quickly what to see. ··starred in Beadeker" soon came to mean "well worth seeing." These . Beadekers were published from the beginning in Gennan, French, and English, and this helped them to gain extremely wide readership.
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Modern Travel Guidebooks ln our own time, the mantle of Beadeker graces the shoulders of Eugene Fodor, a native, Hungarian w ho is now a United States Citizen. He was editing travel books by 1936 and began p ublishing Fodor's Guides in Paris after World War TI. He moved his headquarters to the United States in the 1960s and retired in the late 1970s. For each jodor Guide, authorship is generally shared by a number of witers and researcherwhenever possible, experts residing in the country descibed by the book. Quite different are the highly personal guidebooks exemplified by Myra Waldo's Travel arui Motoring Guide to Europe and Fielding's Travel Guide to Eurpoe(j)y Temple Fielding ). These popular guidebooks, revised annually, d!epend for their attraction on the readers' confidence that they can rely upon the taste and perferences of Myra Woldo and the late Temple Fielding. Arthur Frommcr, after traveling through Europe with his wife, as inexpensively as possible, worte Europe on $5 a Day, an inexpensive paperback book. Tile title's assertion mat travel could be very inexpensive doubtless inspired many Americans to visit Europe. For millions of Young people, it was a bible of essential information, carried around Europe until it was dogeared and tattered. It was such a success that Frommer strated a publishing house and. now keeps a number busy writing and updating over 40 titles. Each book is wiritten by a single writer or a team of two writers. Having achieved fame as a travel write r, then as a travel-book publisher, Frommer went on to become a package-tour operator and hotel impresario. Many readers seek excitement, exotice scenes an d escapist literature which takes them out of meir daily routines. Tr-.avel books do this, with descriptions of true adventure in jungle exploration or mountain climbing, treasure hunting or visiting natives of lost civilizations, archeological exploration or sailing trips across an ocean on a raft. This kind of escapist nonfktion pem1its armchair travel and is at the opposite end of the spectrum of travel writing from the step-by-step Beadeker.
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In between these opposites are many kinds of books on outdoor life, hunting and fiShing, camping, ecology, folklore, local crafts, transportation, skiing, boating, history, cruising, flying , gliding and so forth. Some of these are written to amaze or amuse the reader, other to give the reader practical advice and istruction. As travel has become more widespread, the amount of
travel coverage in magazines and newpapers has increased. Travel is a major interest, and people do mroe trave ling every year. Another reason for the increase .in the number of travel articles is that travel advertising has been increasing from year to year. A magazine or newspaper carrying a great deal of travel advertising must carry a commensurate amount of trAvel writing: otherwise, readers do not look at "the advertising. If a Sunday newspaper's travel section had only advertisement, most people would discard it unread.
Job Opportunities While travel writing is important to readers, and therefore essential to magazines and newspapers, it is not a lucrative field for the writers. The reason is an anient econimc one, the law of supply and demand: so many people are willing to write to write articles on travel for little or nothing (and public relations people supply so many free articles and pictures) that a newspaper editor on a slim budget may decide to buy no articles at all, relying solely in free material. During the economic slowdown of the mid-1970s, when newspapers suffereed a shortage of newsprint (paper) and greatly increased cost (ink and labour), many newspapers that had been regular buyers of travel articles from freelancers completely stopped buying. They had their travel editors write articles, they used free articles from public relations sources, and they used articles provided by the wire seJVices at very low cost. This is happening again in the 1990s. Freelance Travel Writing
Travel writing on a full-time freelance basis is a highly insecure profession. As a result, there are very few full -time
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freelance travel writers. Many people who would like to be full-time freelance travel writers find it necessary to do some writing in public relation or in other fields in order to sruvive. Staff position as travel editor or assistant travel editor on a magazine or newspaper are more secure. Almost never, however, is a person give such a position because he or she has trained for it or is a specialist in travel. On newspaper, unfortunately, the travel editorships· are sometimes given to aging reporters coasting toward retirement, as a reward for past service, They get an opportunity to do some traveling and to write about it, but they do not regard suh writing very seriously, and, consequently, readers are shortchanged. To help combat such attitudes, the Society of American Travel Writers was founded in 1956. Its two primary goals are (1) to convince publishers that reponsible travel reporting is an essential editorial service, an inescapable obligatio to reader in this age of rising leisure and discretionary income and (2) to build joint strength of travel writers in support of their elemental function in the travel industry-as true spokespeople and travel critics for the average traveler. The frrst president of ths Society of American Travel Writer was Peter Celliers, who for several years was travel editor of both playboy and modem Bride at the same time. Now senior partner of a public relation agency, Celliers notes with distress that more than half of the United States newspapers and magazines that purport to cover travel do so without any professional consisteny. In 1980 a second national travel writers' organization was fom1ed-the Travel Houmalists Guild (TJG). Composed solely of freelance travel writers and travel photographers, its establishment was necessitated by the fact that freelance objective could not be pursued in the SATW because they conflicted with the policies that travel editiors in SATW had to enforce for their publishers. The founding presiden ofTJG, Bern Keatin, performed a signal service for all American freelance writers by obtaining the introduction in the Sentate of a bill amend the copyright law so that publisher wo uld n ot be permitted to
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buy other than first serial rights of articles, unless other rights were paid for, the bill had a hearing about did not reach the Senate floors. Many other write', photograhpers' and aritists' groups joined ranks in supports of the amendement, and the fight goes on. TJG has about 75 members in 1990. Membership is being kept small and highly professional. Travel writing, for most freelance writers, does not eam enough to cover the costs of the necessary travel. !Recognizing this (and hoping to obtain coverage of their attractions or facilities) airlines, resorts, hotels, railroads, cruise lines, and local and national governments often invite travel writers on press trips and cover part or all of their expenses. In the early 1970s, several prestigious newspapers, declared they would no longer buy travel articles based articles based on "sponsored" trips. One editor went so far as to say this was a dishonest way of obtaining information for an article, despite the fact that his publication pays low rates, demands, "magazine quality" articles, and pays no expenses. Under these conditions, of course, a travel writer sepdalizing in faraway places must have other irncome in order to write for these papers. This cuts out the professional freelancer, in fact, and leaves this article market to those who do not depend on travel writing for their income-business travelers, pleasure travelors with a flair for writing, and others for whom travel · writing is a sideline. The same newspapers that reject press trips as unethical accept free tickets to plays, ballets, concerts, and :sport events for their theatre critics, dance critics, music critics, and sports wirters. They also pay the expenses of any reporter who must travel to cover a story. Writing about press trips, Richard Dunlop, author of unmerous travel books and former president of the Society of American Travel Writers, says; I cannot imagine that any responsible public relations person who works for an honourable client, whether it be a hote l company, airline, state, or foreign government, thinks he can .buy a repected travel writer by inviting his on a press trip.
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Nor would a travel writer of stature go on such a trip if he thought he was being bought. I have always felt free to write exactly what I thought of the areas I vistied on press trips, and I belive that all travel writers who are members of the STAW should take the same attitude. Another difficulty for trying to become full-time professional free-lance travel wiriters is that the "star" system in effect at most of the best magazines. An editor wants to p ublish as many articles by celebrities as possbile, so their names can be printed on the cover to help sell the magazine. This makes it difficult for a newcomer to break into the field and to sell enough articles to keep going. This look at the problems show that freelance travel writing is, in general, an insecure field. For those with talent and persistence, however, it is a fascinating way to earn a living. Travel Editiors A position as /raiX!I editor of a magazine or newspaper is much more secure thatn that of a freelance. There is :a regular salary, there are regular hours in the publication's offices, and, in the case of most metropolitan newspapers, a union contract to regulate working conditions. The Newspapers Guild, the union for reporters and editors, has been quite militant about obtaining good salaries and other benefits for its members. Travel writing and travel editing are generally not recognized as specialities open to begining reporters and editors in the newspaper world, so the neophyte must begin as a general reporter or copy editor. As more educational institution develop curricula in TIT (transportation, travel and tourism), newspapers may begin to place TIT graduates in assignments that cover these subjects. Since the colleges with TIT generally do not require courses in writing, ncv.'Spapers may obtain TIT specialists from among journalism graduates who have minored in TIT. There are so few magazine travel editors that it is difficul~ to generalize about them, but it can be said that collage education is required fo~ such work. Some travel editors are journalism
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graduates, but many are in fme arts. For both newspapers and magazines, the master's degree is becoming increasingly necessray. The work of a travel editors varies greatly from one publication to another. On some newpapers and magazines, the travel editors is actually the sole travel writer. Richard joseph, for example, was travel editors of Esquire from 1946 until he died while on a trip in the late 1970s. He generally wrote two articles for each issue, and Esquin? seldom bought any other travel articles. , On a metropolitan newspaper that buys 10 to 30 travel articles each week, the travel editor's job is completely different. He or she generally works regular hours and is inundated with unsolicited articles, queries about prospective articles, and press releases from carriers, hotel and arrraction. Selecting articles, correspondinng with travel writers, editing articls, and coping with problem of layout, photography, and deadlines require long hours, leaving the travel editor little time for personal travel. On the prosperous newpapers, there are one to four assistant travel editors, so the travel editors, so the travel section can be prepared even if two of them are traveling on assignment. On the papers with lower budgets, the travel editor may have no funds for personal travel or four buying articles. Then he or she must rely on publec relations press releases and write an occasional vacation article. To become any kind of a tra~el writer, editor, or broadcaster today, an undergraduate college education is essential, and graduate degrees help. A travel photographer does not need collage training, but must have a great deal of technical expertise, as well as flair for the work. The competition in this work is very stiff-a magazine editors selecting photographs to illustrate an aritcle often will have 100 to 200 or more offered, of which one to five may be used. Further information about opportunities on newspapers and salaries for graduates of journalism schools, as well as a list of scholarships, fellowships, assistantships, and lo:1ns for
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Travel Writing 151 journalism students, may be obtained from the following organization: The Newspaper Fund, Inc. Box 300 Princeton, NJ 08540 Current union wage scale infonnalion can be requested from the following addresses: The Newspapers Guild Research Department 1125, 15th Street, N.W. Washington, DC 20005 Canadian Daily Newspaper publishers Association 321 Bloor Street, East Toronto, Ontarion M4W 1E7. Opportunities for Women Opportunities ofr women in tragvel writing are good. The roster of the Society of American Travel Writers(SATW) includes about 40 per cent women as active members. Active members include freelance writers, photographers, broadcasters, staff travel writers, photographers on newspapers and magazines, and travel editors in magazines, newspapers and bookpublishing house. Women have peresided over all of SATW's regional chapter, all of its major committees, and the national organization itself. Opportunities for women in newspapers, magazines, and broad-casting are described in information from this address: Women in Communications, Inc., 2101 Wilson Boulevard, Suite 417 Arlington, VA 22201
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Start, buy, or Franchise? There are three ways of becommg the owner of a travel business: • Starting a new agency • Buying an exising agency • Investing in a frachise How do you decide which is the way for you? You should investigate the advantage and disadvantages of each alternative by compiling answers to a lot of question. This chapter poses these questions and then focuses on the buy option before a brief consideration of franchsing. The Chapter closes with suggestions about how to get fmancing. Other chapters in this part relate more specifically to the myriad details involved in starting a new agency. Many points are equally relevant to taking over an exising agency. Starting a new agency means building a business from nothing-unless you yourself have access to substantial business, or the staff you hire have a good following. Most new agencieslike most new businesses of any kind-do not make money the first year. The books of many do not have much bleak ink
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until the second or third year of operation. Buying an established agency has a somewhat different set of advantages and disadvantages. For a franchise agency you must take into account most of the elements of starting, if its is a new franchise; or buying, if it is an existing franchise-but important additional factors have to be considered in both cases. Franchising requires even more careful consideration before you sign a contract. Here are some questions to be answered if you are thinking about starting a new agency: • Can the community support an(other) agency? • Are trained staff available? • · Are suitable premises availble?
• Is sufficient capital available to cover operating expenses until the agency reches a self-supporting stage? Here is a summary checklist of points to consider when you are trying to decide whether to start a new agency or buy an existing one: Reasons to Buy: • Already at an approved location with conference appointments, which can be transferred if the new owner meets conference requirements. • Has experienced staff who have helped build clientele. • The buyer would have immediate income. • The agency has already achieved a sales volume an.d profit base. • The seller can give the buyer the benefit of his or her experience and provide instructions to individual clients, business accounts, and key people in the community. • It may be possible to buy the agency at a b argain price. For personal reasons, the owner may be anxious to sell and would give you a favourable buy. Reasons not to Buy: • You may pay too much for the agency because of your
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inaccurate assessment of its value. • Things may not actually be what they seem-the owner may misrepresent important facts . • The agency may be in d efault, under investigation for deceptive practices, or have lawsuits pending. • The location may be poor..If a previous owner has been unable to build up the agency, the chances are a new owner cannot do so either. • The owner may have a bad reputation, and the buyer would have to overcome prejudices of former clients. • Purchase requires more up-front mo ney then does a start-up. • Cash would be required for working capital apart from the cash needed for the purchase price. The larger the agency, the more working captial will be necessary. • Key staff may leave, and individual and business clients may be lost as well. Rezoning or other events that affect the location may be in the offing, which the seller failed to mention. Considerations About an Establlshed Agency Considerations the following specific questions if you are thinking about buying an established agency. There will no doubt be many other questions and details which must be investigated, but you should answer these first: • Is adequate capital available-to provide the purchase price and sufficient working capital to support the sales volume for at least one year? • Is there an agency for sale within your price range in the area or areas where you want to operate a business? • Is the agency available at a realistic establish a price is discussed below).
price? (How to
• Can the agency be acquired with a moderate down payment and attractive payout terms? • Does the agency have a consistent pattern o f growth?
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• Will the agency generate sufficient income to repay any loans and p rovide a return on the initial investment? • Will the selling owner remain for a reasonable u-.msition period? Aside from the fact the sellers are notorious for asking more than a business is worth, prospective buyers often underestimate the amount of capital required to buy and operate an agency. It is important to evaluate you fmancial position realistically in order to judge whether it is strong enough to acquire a going concern-or whether you should instead be thinking about a start-up situation. All things considered, buying an existing agency is generally the better choice since it will provide immediate income. But it requires substantially more capital than starting an agency from scratch. Always buy the largest agency you can affordpreferable one that generates at least $750,000 to Sll million in annual sales. Many smaller agencies either are operating at a loss or are marginally profitable and generate only enough income to pay a small salary to the owner and support one or two employees. If the staff of an agency you are thinking of p urchasing are likely to leave when a new owner takes over, there will be very little goodwill value left. Since the goodwill represents the major share of the purchase price, such an agency will then have only nominal value-so you would be better off starting your own. What Is an Agen cy Wo rth?
Perhaps the greatest problem of buying or selling a travel agency is establishing a realistic selling price. There are different and often conflicting opinions as the best metl1od to use to price an agency. But there are also rules to thumb which, if used intelligently, will help the buyer and the seller arrive at an equitable price. Many agency owners set an asking price that is subantially more than an agency is worth and then wonder why it does not sell. An inordinately high ask ing price will discourage: a
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potential buyer from negotiating. A realistic asking price will usually result in negotiations that reach a mutually accepetable figure. Evaluations Factors
No two travel agencies are alike. Each must be judged on its own merits and inancial data. For example, two agencies with $1 million in annual sales might have very different market values. One might be worth $98,000 and the other only $35,000. As with any reliable method of evaluation, the factors must all be considered in relation to each other. For example, an agency might have an unusually high tumover of staff (a negative factor); but this is counterected by an above-average business/eamings ratio (also called mix) and by being a longestablished b usiness (two positive factors). An ethnic agency (one whose owner and clientele have a
strong ethnic background-such as Polish, Greek, Hispanic, or whatever), might be an ideal acquisition for someong else of the same background. But such an agency would be worth a great deal less to someone else. A checklist of important factors by which to evaluate any travel agency is as follow:
.
Pasitivc (plus) factors. '
Long established
• Stable management and staff • Well-trained management and staff • A large percentage of vacation-oriented business ( unless
it is specifically a commerial agency) • History show a consistent growth pattem
• A mix of 10 per cent or better • A good location • A favourable lease with an option to renew • Attractive decor and good quality fumiture and equipment • Automated with a major computerized reservation system
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(and perhaps accounting system also) • Holds all necessary conference appointments. • Has trade association memberships (ASTA,ARTA) • Is a member of a consortium • Has a good cash flow • Has a good product mix (a wide variety of travel products) • Owner(s) will remain for a reasonable transition period after the sale • Loaction in a growing an developing community Negative (minus) Factors
• Newly established • High turnover of staff • High percentage of cornrnerdal business (unless primarily a commercial agency) • A mix of less than 10 per cent • Poor or deteriorating location • Shabby premises • Nonproductive employees • Too many nonproductive commissioned salespeople • An ethnic agency (unless the potential buyer has the same background as the clients served) • Any disproportion of charter, student, ethinic, or group business (such business is often built around one or two persons, who might leave the agency after a new owner takes over) • Poor cash flow • Slow-paying commercial accounts which the agency must carry for an extended period • High or unreasonable rent • No option to renew lease • Owner(s) will leave as soon as the transaction closes
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• Owner is unwilling to sign a covenant not to compete Since each transaction is different, there may be other positive or negative factor which must be thoroughly investigated ·and negoticated. Assets
Every business has both tangible and intangible assets. The tangible assets are those items carried on the books-office equipment, furniture, automobiles, and so forth . The value of tangible assets is easy to establish because they were acquired for cash, are depreciated annually, and their value is readily measued in dollars and cents. But tangible assets usually represent only a minor portion of the asking price for a business. The intangible assets are much more difflCUclt to "inventory" or place a value on. In a service business goodwill represents the lion's share of the selling price. Goodwill consists of a collection of intangible factors. It Includes a good reputation in business (honesty, professionalism and so forth), a steady and loyal dientel, a good lease, qualified and experienced staff, automated reservation, a good mix, or a combination of these and similar factors. Goodwill is earned over time. It does not appear overnight, nor does it appear automatically. It may take an agency five years or longer to build wothwhile goodwill. The Numbers
You will often read In financial and business publications that a business was acquired for X times pretax earnings. This is called the pricing-by-multiples method and is a traditional formula for buying and selling a business. An example is shown below, but this method is_not usuallyy suitable for application to smaller businesses, especially a service buisnesssuch as a travel agency. The method frequently, used in establishing the price of a travel agency is the gross sales method. A third method uses the gross pofits (commissions) as means of establishing the price. .
Pricfng-by-multiples method. In the pricing-by-multiples
method the price is established by applying the fonnula to the
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last complete calendar or fJScal years figures. The following example will serve to illustrate how this method is used: Gross sales
$1,235,000
Gross profit (commissions)
128,751
Operating expenses
101,834
Net profit (pretax)
26-,917
A multiple is then applied to' the new profit (before taxes) to cstabish the price. The multiple used in the sale of many business is 5, but this is often too high when applied to many agencies. A multiple of 4 would be more appropriate. In the above example, the new profit of $26,917 multipled by four is $107,668. The net worth is then added. The net worth of business is the sum of its assets less the sum of its liabilities. The net worth can include atsh, receivables and payable, tangible assets, capital stock paid-in capital, and retained ea.mings. After the multiple and net worth are established, the fi.rm price can be set only after all of the other points d iscussed in this chapter are taken into consideration. But remember the statement above that this method is not likely to suitable for a small service business such as a travel agency. Gross sales method: In the gross sales method, look first at gross sale, then at commissions (gross profit), then at the operating expenses, then at the new profit (pretax). Do not be too concerned at fmding a paper loss on the profit and loss statement for the year. Red ink does not necessarily mean that an agency is a loser. Look at what the owner is taking out of the business in salary, profit sharing and ·pension plans, travel and other benefits. Many other miscellaneous expenses are often charged to the business. These may include auomobiles and automobile operating expenses, insurance, travel, and so forth. It has even been known for agents to also charge items to the business that were .strictly personal in order to lower tax obligations. Any otlbeat expenses must always be identified
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and extracted from the operating figures if you are to arrive at a true fmancial picture of the agency. Unlike net earnings, the gross sales and commission figures cannot be distorted, and they will often provide a much more accurate and clear picture of the agency than will net earnings. A potential buyer should p repare an operating budget that would reflect his or her estimate of how an agency would operate under different mangement. price is often fiXed at 10 per cent of the agency's gross sales for the previous calendar or fJScal year. But it is unrealistic to evaluate any business on a single year's performance. Unusual circurrJStances might easily influence sales and income in one year that might not be present in another. For example, an ag-ency might have sold a one-time group movement, and that would have substantial effect on a particular year's performance. A
It would be more revealing to look at the complete history of an agency. Its market value can then be determined by averaging its figures over at least a five-year period, or as long as the agency has been in business if less than five years. The following figures will serve as an example: Gross sales
lst year
$523,000
2nd year
706,000
3rd year
901,000
4th year
1,010,000
· 5th year
1,187,000
Total
$4,327,000
Average annual sales $ 865,400
The above agency in this example would be worth somewhere between a low of 4 per cent ($34 ,616) and a high of 10 per cent ($86,540) of the average annual sale figure of $865,400. If the checklists of positive and negative factors showed this agency to have primarily positive factors, including operating
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profitably, then it should sell near the high end of the rang$86,540. But if negative factors dominate, then the value would drop closer to the low end of the range, $34,616. An agency in good standing should be worth about 8 per cent of the fiveyear average-in this example, $69, 320. The kind of formula just given will help buyers and sellers establish a fair price for most independent travel agencies. It assumes that that the agency is a going concern, full accredited, and not on the verger of bankruptcy, and it allows a great deal of leeway. However, this formula is invalid in a buyer's market such as occurred in 1984/85 when may agencies came on the market and agency prices dropped substanitially. The formula also allows for average tangible assets (desks, tables, chairs, and office machines), but excludes automobiles, owned automated reservation equipment, notes payable and receivable, accounts payable and receivable and cash. These should b e treated as sepocate items and allowances made for them after the selling price of the agency is established. It is essential in any business transaction that the seller
make available to a buyer all profit and loss statements, balance sheets, tax returns, inventories, and other documents. These should be reviewed by an accountant and/or attorney. Only after a prospective buyer has made throught analysis of the records should a sale be consummated. If an accounted examines the fmancial records, the services of a lawyer are still necessary. And to avoid any conflict of interest and to provide maximum protection to both buyer and seller, each should be represented by his or her own attorney.
Gross profit method: In the gross profit method the commissions are used as a basis for establishing the price. The most frequent formu la is to use the total commissions of the previous calendar or fiscal year. But as already pointed out above, it is unrealistic to evaluate any business on a single year's perfom1ance, and if this method is used then the average of the total commission of the previous five years would be more appropriate.
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Franchising
There have been a number of attempts at travel agency franchising. Until recently most failed becasue the frachiser d id not have enough knowledge about the travel industJy, or promises were made which the franchiser was unable or unwilling to keep. As airline d eregulation gradually took effect, several new franchise operations came into existence. Others will probably enter the scene. Past history has clearly indicated that travel agencies have not been a sutible kind of business for franchising. Whether this continues remains to be see,. The travel agency business has always been a relatively low-revenue-priducing, low-income business, not able to support franchise fee, yearly service fees, and other such assessment, But franchisers say that with an umbrella name and identification, a central marketing campa.ign, training facilites, and so forth, travel agencies are now ideal as franchises. Fees very from one franchiser to another. One company charges an up-front fee o f$30,000 for a new turnkey operation. To this is added a 10 per cent service charge on income plus a $30Q-a-month assessment to cover cooperative advertising. In return for these fees and assessments, the franchiser contracts to provide investors with training, a corporate identity, business advice, sales techniques, and other assistance. Oth.er franchisers may charge less. Fees are generally lower for existing agencies that opt to become a franchise operation. Anyone considering investment in a franchise travel agency should thoroughly investigate the services and promises of the franchiser. Here are some questions to ask: • Does the franchiser offer a protected territory? If so, it limited to a specific community, or d oes it just extent a specific number of miles? (There is little point in investing in a frachise if another outlet can be opened in the same community.) • What support services (accounting, managerial, training) are p rovided?
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• If the agency fails, how can the investor get ·out of the contract? • Is the franchiser more interested in selling a franchise than in selling travel product? Do not invest on a franchise unless you are completely statisfied that the franchiser will provide what is contracted for. It would be wise to talk with other investors who have bought that franchise. This will be the best sources for an objective evaltuion. And, as always, do not invest in anything until your attorney has reviewed the contract and perhaps conducted an investigation into the company selling the franchise. The following companies are at present engaged in travel agency frachises: Cardillo Travel Systems, Inc., 5710 Hannum Avenue, Culver City, CA 90230 (At the present time will convert only existing agencies to their operation. Empress Travel, 5 Penn Plaza, New York, NY 10001. (Franchises only exising agencies.) International Tours, Inc., 530 Sooner Federal Centre, 5001 East 68th Street, Oklahoma City, OK 74136 Jewelcor Travel, 15 South Franklin Street, Wilkes-Barre, PA 18701 Tenholder Travel, 2801 ltaska, St. Louis, MO 63111. Uniglobe Travel (International) inc., 90 - 10051 Shellbridge Way, Richmondm B.C., Canada V6X 2W9 (Although this company frachises in the United States all requests for information should be sent to .the home office in Canada. How to Get Financing
Borrowing money to finance a service business is often impossible. At best it is exceedingly difficult to locate a source of fmancing. Still, there are several ways of obtaining fmancing if you do not have sufficient funds to start or busy a travel agency. If you borrow from a bank or through the Small Business Administration programme you must still be prepared to pledge your home and other personal assets as collateral. If you go to
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equity fmancing your will have to relinquiesh a percentage of the bnsiness to the investors. Such drawbacks might be in signifincant if you have the ability and confidence in yourself to establish a successful enterprise. It is often easier to locate finacing to buy an existing travel agency than to start one from scratch. Even though it will take more cash to buy and finance a going concern, some ivestors and lenders are more inclined to consider something which has a record of consistent sales and earnings than something which involves taking on an unknown. These are the usual sources of capital: Bank Loans Bankers as conservative and are not prone to loaning money unless they are certain of repayment, or have recourse against other assets in the event of failure. If you do take out a bank loan you will have to be prepared to put up your home and perhaps other personal assets as securitey. E.ven if the bank will loan money to your corporation (which is a separate leagel entity from its owners) you will still have to personally guarantee the loan. The bank will want that personal guarantee in the event the corporation becomes insolvent and cannot repay the loan. The bank will also maintain that if you do not have sufficient faith in yourself and in your business venture to be willing to back it with everything you have, then they should not be asked take the risk. There are several types of loans. Term loans may be for as short as one or two days or for years. Long-term loans can be secured by such assets as real estate, life insurance, stocks and bonds and gold. a Character loan is usually short term and generally unsecured. Only someone with a high credit rating would be eligible. A good credit rating is a prerequisite for any loan-not only for you, for the bank may even require a cosigner who will be equally obligated for repayment. Small Business Administration Loans
The Small Business Administration is an independent ageny of the federal government with offices in many cities. The SBA
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~
offers vairous type of assitance ot small business owners, including loans for start-up and acquisition situations. While the SBA does have limited funds to loan direct, most SBA loans are made through comercial banks, with the SBA guaranteeing 90 per cent of the loan. The borrower must meet speific credit requirements, must put up collateral, and must also have extensive business experience in the particular field or business for which the loan is required. The borrower must also prove to the SBA that he or she cannot obtain a loan from any other source. If a bank has refused you a business loan, do not let it deter you from applying to the SBA. Get in touch with your nearest SBA office for complete information on this loan programme. Small Business Investment Companies
0
Small business invesunent companies (SBISs) are licensed by the Small Business Administration to supply equity capital to those who are unable to obtain fmancing from other sources. Your local SBA office can give a list of approved SBICs. Remember that SBICs are private invesunent companies. They expect a profitable return on their investments. Your venture will have to stand up to severe and critical evaluation. Some SBICs specialize only in stright loans while other will want equity in you company through ownership of a percentage of stock. They will also what a say in the running of the business and will require representation through one or more directorships. Equity Financing
In equity fmancing outsiders put money into the businessnot as lenders who expect repayment, but as investor who anticipate a profitable return on their investments. Equity capital can be subscribed by relatives, friends, professional peopleperhaps even an invesunent club. Equity investors usually know and trust the person in whose business they invest, and they are willing to invest not only money but also a very great deal of faith. Equity investors, participate by buying stock in the corporation or by becoming limited partners in the venture. their return comes in the form of dividends in the case of a
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corporation; as a sha.re of the profits in the case of a partnership. There are several drawbacks to equity fmancing.lt certainly is not for everyone. First, of all, you must know those who invest in your business very well, because you have to work closely with them. They, like SBICs, will also want to protect thier investment by expecting a say in the running of the business and will want a seat on your board. They are likely to interfere in the operation if they do not like the way things are going or disagree with management policies. Inviting friends and relatives to invest in your business is a great way to end up without friends and on nonspeaking terms with your relatives. Be very, very careful before you embark on an equity-financed venture. Be sure to hire a lawyer to help you draw up contracts, terms. and conditions. Even indealing with friends and relatives it is essential to proceed in a proper and busineslike manner so that everyone is protected later. Never relinquish more than 49 per cent of you company, which will leave you in control as majority stockholder with 51 per cent of the stock. Two of the more important points you will want covered in an equity fmancing agreement are: 1. The terms under which an investor can sell his or her stock. For example, if the investor decides to withdraw, the aggreement should be worded in such a way that the stock must be offered to you first (right of refusal), then to the other stockholders in the event you are unable or unwilling to acquire it. If an investor wants to offer his or her stock to an outsider, that outsider should first be unanimously approved by all stockholders. 2. Teh degree of involement or contribution (other than money) o f each investor. Are the investors going to be silent partners, or will they want to help with the bookkeeping, ticketing, or make sales calls? While it is natural for investors to want some say, it is best if they are prohibited, thorugh a signed agreement, from interfering with, or becoming involved in, the actual day-to-day operation of the agency.
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Capital Venture capital comes from companies which are prepared to back pronrising venture in return for equity in the company. Such sorces are known to lawyers, accountants, business brokers, and often, to bankers who cannot help you themselves but will be prepared to arrange an introduction ot venture capital sources. Venture capital sources. Ventrue capital companies are prepared to accept a certain degree of risk, but you will still have to do a good job of convincing them that your idea is sound and has good profit potential. How to Prepare a Proposal
Wherever you apply for a business loan or seek capital you will have to submit a comprehensive and detailed blueprint of the proposed enterprise. Bankers and fmanciers are not at all interested in vague proposals. They want specific facts and figures so that they can thoroughly evaluate the venture. Take the time to prepare you data in geat detail, and present it in a businesslike but clear and easy-to-understand formaL Remember that those who will read and evaluate your proposal may know little, if anything, about the business aspect of the travel industry. Do not confuse them. A good proposal usually incorporates the following: l. An introduction (goals, why you think you will succed, and so forth). 2. Where you intend to establish your agency. 3. .Estimated start-up expenses. 4. Estimated operation expenses by category for the first three years. 5. Estimated sales for the first three years. 6. Estimated conunissions (income) for the first three years. (If you base you projected income on a 10 per cent mix you may not be exact, but you will not be far off, e ither. 7. The total investment required, and:
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a. The amount of cash you can raise yourself. b . The amount of cash you need from a loan, equity capital etc. 8. A biography or resume. This should include you buisness experience, education and references. 9. A personal financial statement. This will be required in the case of a bank loan. The bank will also want a list (including valuation) or the assets you intend to use as loan collateral. If you are purchasing an existing agency, you will also need to provide the bank or investor with operating statements and balance sheets for the previous five years at least. Projection figures and data for untried and unproven ventures is always a challenge, but if you do your homework and know you field you should come suprisingly close. Your proposal should be carefully though through and neatly and accurately typed. A well-presented proposal will get more attention than one which is incomplete or sloppy. Whether you get what you want-a loan or other form of fmancingwill often on just how well you prepare your presentation.
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Starting Up If you decide that you want to start a new travel agency, there is a great deal of thinking and other work to do before you can open the door to your first client. Starting up an agency is a complicated prodedure. You have to decide on an operating budget for the first year-and you also have to decide on furniture and equipment. You have to arrange for occupancy of the premises you have chosen-and you also have to decide on what of working tools (manuals and tariffs) you need. Below is a checklist that will help you keep track of everything. It is not necesarily in the order of importance, or in the order in which you should do things. It may help you establish priorities based on your own circumstances, however. And it will remind you of things you may otherwise forget. It is meant to be bracing rather than discouraging. Checklist for Opening a Travel Agency 1. Contact all conferences for information. and application fom1S.
2. Order Catalogs from travel agency printers and office supply stores.
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3. Consult with you attorney and tax advisor to discuss from of legal structure. 4. Establish start-up expenses and the first year's operating budget. 5. Establish the name of the agency. 6. Locate suitable office space. 7. Form your corporation. 8. Negotiate lease .
9. Order telephone installation and obtain assigned numbers from telephone comany. 10. Open a bank account. 11. Arrange of design of logo, stationery, etc. 12. Set up accounting system. 13. Order all office furniture and equipment. 14. Order any automated equipment (reservation system, ticket imprinter, etc.) 15. Order all stationery and supplies. 16. Subscribe to all necessary manuals and tariffs. 17. Establish contact with tour operators, cruise lines, and other suppliers, and order a supply of literature. 18. Hire the agency manager. 19. Plan opening promotion, advertising, and dire ct mail campaign.
20. Obtain ARG bond, and take out insuranc-e policies as needed. 21 . Carefully read and complete conference application forms. 22. File for conference appointments. 23. Arrange insurance. · ~thnating Initial Expenses .
The most seriouS problems that face many new entrepreneurs ~re (1) insufficient capital and (2) underestimation of the
•
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intitial cash outlay required to get a business opening opnig and running. Unfortunately, the new entrepreneur is often too engrossed in sales promotion and marketing matters to devote time and attention to making sure that the necessary cash is available. First things ftrst means that before you sing a lease, commit yourself for furinture and equipment, or do anything else, you sit down and estimate both your start-up costs and your first year's operating expenses. 7ben you can get down to the more enjoyable tasks, such as designing your agency's interior and planning your opening campaign. Tile start-up costs are what you must spend to furnish, equip, and staff your agency so it can open for business. OperalirJg expenses are what you must spend to urn you agency once you are itr business. Spend a couple of hours with a sharp pencil, an office supply catalog, and some other realistic figures. This will help you estimate what it will cost to get going. If you later spend a couple of days (or more) seeking our good used office furniture and equipment at stores or auctions and get them at less then you budgeted, so much the better. It is important to estimate accurately, and it is also important to try to stay within your budgeted figures, not ending up spending far more than planned. Start-up Costs
Start-up costs include, in addition to the cost of everything needed to furnish and equip your agency, all the ftrSt month's recurring expenses, like salaries and rent, and also all grand . opening promotional expenses. Some items relating to start-up minght easily be overlooked be an inexperienced planner. Watch out for them. Furniture attd Equipments
Here, your costs will depend on whether you buy new or used furniture and equipment, and whether you pay cash or finance it over a period of years. Travel counselors need a lot of work area, so look for desks which have an overhanging top rather than settle for a
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standard desk. Even better, since most counselors also do their own tryping, consider modular units. This consists of a normal size desk with a typing module attached to the side. Such a unit is self-contained, so each cunselor will have a total work area geared for optimum efficiency. Do buy the best chairs you can afford. A cheap or uncomfortable cha.ir is an abomination. And it will not last long either. People must be comfortable if they are to do good work. I have found the padded swivel chair with a reclining spring-back not only the ~st comfortable, but the easiest to get in and out of when one has to jump up to get something or greet an client. You will also need one or more side chairs for clients as well as seating in the reception area. It is important to have sufficient space for ftling and storing
literature, client files, and so forth . The four-drawer letter-size filling cabinet is the most appropriate. You will need a minimum of four such flles to start with, and unless you have a rear storage area, you will probably have to add more very quickly. Do not fail to consider buying used furniture. If often costs a fraction of what new pieces cost, and it can be refmished. If that is done properly, you will have some attractive pieces still at modest cost. If you decide on new furniture and are in or near a larger city, the Yellow Pages may have listing for disount office furniture outlets. At such a place you may be able to buy at well below list or what you would have to pay in the average office supply or. retail store. If you place a large order, you may save even more. Your will need an electric typewiriter for each position in the agency. (Nonelectric machines will not do the job when you need tickets typed or four or five copies of an itinerary.) Not every agency can afford IBM Correcting Selectrics, but do not buy the cheapest machines you can find either-they will not hold up and will have to be replaced sooner than you would like. A good typewirter will last for years and in the long run will probably cost you less than an inexpensive machine which has to be replaced. Rebuilt typewriters may be
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Starting Up 173 a little fidderent in styling from new model but will work just as well and usually carry a good guarantee. And they cost a great deal less. Each counselor will also need an electronic calculator. A hand-held model that does the four basic mathematical functions as well as percentages can be bought for as little as $12. However, a printing model is better, for you can then attach a tape of figures to the clients' me, and also recheck additions or invoices. The price of a printing calculator ranges from about $30 to $200. Access to a copy machine is essential. You will fmd you cannot do without one. Before you buy or lease a machine, see if one may be available to you in another way.. Often the "quick print" outlets which can now be found in small as well as large cities have copy machines for their coustomer's use. Cost varies form 10' to 25' a copy; and is often lower in quantity. Many post offices as well as libraries have copy machines available also. If you want to buy your own copying machine, the range in price of some kinds suitable for low-level use may sometimes now be as liule as $100. Other kinds, whose print quality compares favourable with "quick-print" offeset printing, are already being marketed for appreciably less than$1,000. There are essentially three types: those that use a powdery toner, those that use a liquied, and those that use heat. Most rquire a specila paper just for that machine, but there are also "plainpaper" copiers with which any bond paper will. do the job and well. The technology and competition in this field are working the magic of a free market economy and causing dramatic drops in prices. So the best advice here is to shop around. Of course, the cost-per-copy should be considered also. It should include cost of toner or liquid or e~ectricity as well as paper-and maintenance and repair costs. That cost could range from less than 5c to 20c per copy. If you are near a bank, you could store all working-supply air tickets, and otl1er valuables in a safe deposit box rather than invest in an on-premises vault or safe. This is just another
Elements sous drot!S d auteur
174 Tourism and Travel Industry
example of how taking time to think about you equipment needs may save you money. That thinking time may reveal other ways you can hold your start-up costs to a bare minmum. Used file cabinets, typewriters, and copy agency. The estimates in Figure 8.1 suggest what it will cost to frunish and equip a small travel agency. Actual costs may vary considerable and will depend on whether you buy new or used, buget or top-of-the-line. These figures are based on buying rather than leasing office equipment, such as a copy machine. Some Typical Furnlture and Equipment Costs Total
CostCJICh
H ow.,tmyl
Low
111gb
Low
H lgb
Desks
2
$200
500
$400
1,000
Chairs (swivel)
2
100
300
200
600
Chairs (side)
4
40
100
160
400
4 2
no
200
440
800
300
800
600
1,600
Typerwrlter stands (If desks with typing modules not used) 2
50
100
100
200
Calculator (Prindng
2
40
150
80
300
Uterature racks
1
100
300
100
Shelving/bookcases
1
200
Safe/vault
1
50 150
800
50 150
300 200 800
Copy machine
1
200
3,000
200
. 3,000
Coat rack
1
30
100
3(J
100
u mps
2
20
50
40
100
200
500
200
500
$1,590
7,100
$2,750
9,900
Etpdpntertl
File drawers (four-dnwer, letter size) Typerwrlters
MlsceDaneous Totals
Figure 21.1 These figures show low and high costs fnr many standard pieces of furinture and ~quiprnent.
These start-up costs for furnishing and equipping a small agency could go as high as $10,000 or be less than $3,000.
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Starting Up 175 If yo buy new equir~ent, it can be bought for cash, fmanced by a bank, o r leased with an option to buy. There are advantages to each arrangement. If you can depreciate the equipment on you tax returns over a period of years. Your start-up cost could be lower if you finance you furniture and lease the office equipment with an option to buy when the lease expires. If you lease with an errangement to buy for a one-time payment of 10 per sent of the list price at the conclusion of the lease, a lease plan on a $1,750,00 piece of equipment would look as follows : Ptutytfll!lll perWd
Molllbly
Total rewtai
1'otai cost to ooo"
$159.00
$1,908
$2,083
24
87.00
2,088
2,263
36
64.50
2,322
2,497
48
52.75
2,532
2,707
60
45.75
2,475
2,920
12 months
Under this plan you would end up paying anything from $2,083 to $2,920 for a $1,750 iece of equipment. Yo u may be better off to get a bank loan and buy it ourtight and then write off the interest and depreciation on your tax return. On the other hand, although it may cost you more this way, it is easier to pay out thirty six payments than one lump sum. You will also be paying for furniture and equipment as the agency grow and busines flows. Once you have estimated the cost of your furniture and equipment, add a 5 per cent contingency .to cover things you had not thought of and to allow for price increases and sales taxes. Use Worksheet (1.) to help budget these costs and then carry the total to Worksheet (2.) where you can list the other start-up costs. Add another 5 per cent contingency to this total. Otber Start-Up Costs
Here are some of the expenses to be prepared for in getting your premises read for occupancy.
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176 Tourism and Travel Industry
Tenants in a brand-new shopping mall or office building most often bear the costs the cost of "fmishing," such as carpeting, painting and wallapering. Such tenants may also have to pay for any doors or partitions needed to create separate rooms or to enclosed a storage area. If you are going to be required to pay for such "finishing" costs, get the specific obligations in writing. Also get an estinmte in writing of what these costs will be, and the terms of payment. The landord may want payment in full upon occupancy, but often the cost can be spread out over the same period as your lease, in which case you may be required to pay interest. If you are moving into previously occupied space, your landlord may agree to pay for minor redecoration, such as a paint job. Anything beyond this would normally be your responsibilitly. If the landlord wants a tenant badly enough, he may be willing to do more, and perhaps split the costs. Just make sure that you understand what will be done, and who will pay for it. Decorating and altering your office space may be one area where a little extra time (if yo u have it) may save you some money. If you decide to handle the contracting youself, or even do the work youself, you may reduce your costs. But you may have to get the landlord's approval ftrSt. Get several estimates, including the landord's, before you decide. Figure 12.2 suggests ran~es for a variety of other initial expenses necesssary to bring a new travel to the operational stage. It includes both one-time expenses .such as decorating and decorating and regular periodic expenses such as annual subscriptions and monthly salaries. Budget salary for either a manager or counselor to start at least two weeks-preferable one month-before you plan to open. Estimate what all these costs will be in your case and set them down on Worksheet 2: Estimate of Start-up Costs. Where this money is to come from is discussed in another chapter.
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Stal'ting Up 177
Some Typical Initial Expenses High $800
Low
$150 50
Rent (first month) Utility deposits Decorating Signs Business Ucenses Conference fee Legal and accounting services Opening promotion Manager's salary (one month) One counselor's salary (one month) Insurance/bond Telephone lnstaUatlon Subscriptions, tariffs, etc SuppUers and forms
200 4,000(or more) 2,000
0 300 0
100 600
500 500
2 ,000 2,000
1,000
1,200 900 225 300 600
600 600
150 50 400 800 300 $15,725 $4,900 Totals Figure 12.2. These figures show low and high costs of many basic star·up expenses.
WORKSHEETl
Schedule of Furniture and Equipment 11 you pll!ll 10
·I
pay casn 1n fulL
tn!t~ t~ tl.lll , ari"..O$$t ~ r--
~d •n c:olum.n S.
If 'r'Q'J are 90'''9 to pay by .nstalltnent. hll 01..1
I
Pr•ce 12)
Acoenones Avtomorti01'1 eou;oment
Booi<uses Calculators CatOittS.
' I
I
Oown
ea
payment
~nsta..tm&nt
I
I
i
•
t
O.ru
I
Frte cabtnets l.'l,.,. Outstd'a s:gn Safetvau!l
I I
StOtaae cat'Mets Taoles Te~epnot~e aMwtnng rnacr'l•llf!
TvoeW11:t ! S
I
I
I
-
i
i I
I
I
-
I
I
''
.
I
I
Sl:ti!VlnQ
(51
I
Counters
I I
I
I
CMrs Copy rnacn•ne
I
equ.pment
(41
131
I i I
l
r\;1
I I I
fum+.JI't and
Amount or
1
PI
lmmed-.ale casn you ._.la<
the cotutms ceto-: entef .., a»umn 5 your I!>Ol'Wl -ai.vment gius 011 feast Oft« •r:st.ai:m.-nt
;'
!
I
I
Misce::.aneo-..-, I I I Suooolal Cont1~0"19: iaod S oercenn TOTAL f enlef :tu:s l~eVte a:iso Jtl tr.e Nrsl llne ot Wc:... Stle'l"l 2. Es11ma:e 01 Stan"'"c Cot I':
s
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178 Tourism and Travel Industry
The expected onging operational costs should be calculated on an annual basis and set down on Worksheet 3: Annual Operatin Expenses Budget WORKSHEET2
Estimate of Start-up Costs
Fixtures and equipment (from Worksheet 1)
$
Advertising and other opening promotional expenses Conference, filJing, and application fees Decorating and remodeling Incorporation and other organizational expenses Insurance, bond, etc. Legal and other professional fees Printing Oetterhead, envelopes, etc,.) Travel agency supplies and forms Accounting and other office supplies Subscriptions to tariffs, manuals, trade journals, etc. Telephone installation Outside signs Other expenses Subtotal Contingency (add 5 percent) Total
$
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Starting Up 179
WORKSHEET3
Annual Operating Expense Budget
Salary of owner
$
Salary of manager All other salaries and wages Advertising and promotions Conference fees Depreciation Dues and subscriptions Entertainment Insurance premiums, bond Legal and accounting Miscellaneous expenses Postage Rent and Utilities Sationary and supplies Taxes (including Social Security and other payroll taxes) Telephone and telegraph Travel expenses Other Other Other Other Subotal Five per cent contingency Total annual operating expenses
s
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180 Tourism and Travel Industry
The First Year's Operating Budget
What can you expect in sales and income for the first year? degree of accuracy. But you must establish some guidelines against which to measure your ftrst year's income and expenses. Budgeting requires predicting these things: • Total travel sales • Income • Oper&ting expenses Sales and income are, of course, related to each other. For the nt:w agency without an earnings history, they are hard to predict, they will have to be "guesstimated" as specific sales goals. Operating Expenses, however, can be forecast with considerable a.::courcy. Sales
Your budgeted sales will be total sales. For example, a ·to\Jr is sold ·for S875; a cruise for Sl,275~· and an air ·ticket for S135. These figures are what the client pays the agency for the product. in this particular example the sales add up to $2,285. Keeping track of sales is important, because you :.hould know your agency's gross sales volume. Set a traget tor at least $400,000 for the first twelve months of operation. If you are aggressive and promotionally minded (and you had beuer be), this is not too high a ma·rk to shoot for. It may not be easy, but it certanily is realistic and attainable. Income
At a 10 per cent business/earings ratio, or "mix" :an average travel agency could expect to earn commissions of about $30,000 on $300,000 gross sales. But new agencies do not usually operate at the average mix. Be conservative the first year. This will not only be realistic, it will test your ability to be frugal. If you budget for a 9 per c~nt mix and end up the fiest year woth 10 perc ent or better, you will be very pleasantly surprised and have more cash than expected. After the second full year in business you
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Starting Up 181
will have a better idea of what your average mix is and so be able to estimate you income with some accuracy. If you decide you must improve your income substantially, concentrate sales efforts on higher yielding products, such as tours, cruises and perhaps groups. Operating Expenses
After a year's experence you should have pretty good idea of what it will cost to run the agency. Your will be able to buget more accuratr ly for succeeding years. Fixed expenses and fluctuating expenses combine to form your operating expenses. Fixed expenses: Your largest single fiXed expenses will be salaries, followed by rent. These are know expenses. Once they are established they do not change much. Other examples of fiXed expenses are such things as telephone intallations, subscriptions to trade journals, tariffs and manuals; utility deposits; automation and other equipment leases; accounting fees; incorporation legal fees; insurance premiums; and dues to trade associations. Fluctuating expenses: Your largest expeses in this ,category will probably be advertising and promotion expenses. That includes all advertising, direct mail, refreshments, display items, the cost of a tour package or gift certificate if you are ihaving a drawing, and anything else you can think of connected with your grand opening. Other expenses will include telephone, stationery and office supplies, utilities and postage. Some of these-telephone and postage, for example-may be . substantial and should be budgeted with care. Insurance Matters
Are you a gambler? Chances are you do not think so. However, anyone who opertes a small business-that includes a travel agency-and neglects proper insurance coverage is gambling with disaster. You are gambling that you will never become ill, get sued, have a frrc, or get robbed. You may get away with it. Then, again, you may not.
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182 Tourism and Travel Industry
Even if you have some coverage, you are courting tragedy if you do not keep up with your changing needs. Used properly, investment in insurance can contnbute to your agency's soundness and prosperity. Having insurance will reduce the uncertainty under which you operate. It can reduce employee turnover as well. And insurance can make it easier to sell the agency should you wish to. These benefits make insurance well worth the cost. Since you may not be sure exactly what insurance can do for you, and what kinds of insurance you need to consider, this section will help you decide what kinds of coverage are right for your business. Identify /he Risks First spend sometime thinking over your day-to-day opperation in order to identify the inherent risks. Do not adopt a head-in-the-sand attitude; wishful thinking will not protect you. You need protection not only against catastrophesfire or burglary-but also from dissatisfied client and dishonest employees. The kinds of risk you face arise form three sources: loss or destruction of property illness or death of personnel; and litigation involving disgrunlled or injured clients or employees. The several types o f coverage to match these risks are described below. Types of Coverage
Not every type of insurance is absolutely necessary for a travel agency, but the following categories are and should be included in any insurance programme • Property insurance • Workers' compensation • Liability insurance • Errors and omissions fusurance. Keep in mind, however, that insurance is a detailed, complex subject. Its intricacies are often difficult for the layperson to understand. A qualified agent or broker can recommend a complete insurance programme for your agency and can explain
Elements sous aro1t< a auteur
Starting Up 183
the differences in coverages and answer you questions. Property insurance. A complete property insurace policy protects against loss or damage by ftre, smoke, lightning, win~torm, hail, sprinkler malfunction, and so forth. Such a policy will cover the replacement cost of buildings, fiXtures, office machines, and very often trees and shrubs. Some property is subject to limited coverage. For example, some policies limit the coverage of computer data storage systems (hardor floppy disks) to the cost of the blank disk. This means that unless you had the foresight to keep a backup disk at another location, you will not be cover.ed for the expenses of restoring records that may be destroyed. This means that you could lose you entire mailing list, accounting records, or tour information and not be compnsated. You can buy special policies to cover computer data loss, but it is much les exensive to make a backup disk and store it in another location. Business i111enuptio1J Insurance. This insurance, though not vital, will add greatly to the security of your business. Business interruption insurance compensates the agency in the evemt the premises are damaged by frre, storm (hurricane or tornado), flooding, and so forth and become untenantable. It covers fiXed expenses that would continue if the agency were shut down--such as salaries to key employess, taxes, utilities, depreciation-as well as the actual loss of business during such shutdown and the expenses necessary to resume normal business operations. Rent lrzsurance. Rent insurance will pay your rent if the premises you lease become unusable dues to fire o r other insured perils but your lease calls for continued payments. Glass in.surance. Many leases make the tenant and not the
landlord reponsible for replacing damaged or broken glass. While glass is covered in many package insurance policies, se'p arate policies are also available that will cover all risks to plate glass windows, doors, glass signs, countertops and so forth.
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184 Tourism and Travel Industry
Automobile insurance. Any car owned or leased by your business should carry complete insurance protection against loss or damage to the car itself through accident or theft. It should also carry liability insurance and uninsured motorist insurance. If other emplyees will be driving the car, make certain the policy covers those employess.
Also, remember that when an employee or independent contractor, such as a commissioned salesperson, uses his or her own car for company busines, the agency can be held libale in the event of an accident They agency need not own the car. Make sure that employees who use their cars for business purposes-such as delivering ticket, making sales calls, and so forth-have their cars insured for business purposes. You may also want to reimburse these employess for the higher insurance premiums they will have to pay. If you u:;e you own car for won car for agency business, be certain that the policy is extended to policy is extended to cover the car in business use. You will undoubtedly pay a higher premium for business coverage, but it is well worth the extra cost. If you are involved in an accident involving injury while performing :a business function, the insurance company may not honour your claim unless the car is properly insured for business use. Crime insurance. A comprehensive crime insurance policy covers the loss of money, securities, and other valuables in the safe; theft of office machines and equipment; damage caused to the premises during a burglary; and theft by employess. Bonding Bonding is an insurance policy that will reimburse you agency if an employee steals or embezzles. Since there is no safe way to determine who may steal or embezzle, it is a good ideas to bond all employes automaticallJy whe n they are hired. Bonding protection is important because few agencies can withstand significant losses. Agencies have been known to go bankrupt due to theft or embezzlement by a manager or employee. Life itl.S"..lrance. Group life insurance programs are available by which you can cover all employees at a reasonable cost.
Elements sous drot!S d auteur
Starting Up 185 But, more important, life insurance for the owner(s) of the agency is essential-especially if the business operates as a partnership or sole proprietorship. Life insurance in important for the continuation fo the business. And many problems and possible disputes in a partnership can be avoided if the partners buy life insurance on each other in a face amount equal to each partner's share in the agency.
Key person insurance. One of the most serious setbacks that can hit a travel agency is the loss of a key person, such as a manager or a highsales-producing counselor or commission salesperson. A key person can be insured with life and disability insurance paid for by the agency. Health iusurance. More and more travel agencies are inluding
group health insurance as a benefit to employess. Such coverage tends for attract top-notch employees and reduce empoyee trunover. Some agencies pay the entire premium. ln others it is divided equally between agency and employee. W'orken' compensation. Most states now require employers to cover their employess under workers' compensation. This form of insurance protect and compensates employess who are injured or disabled while performig their job. Working in a agency is one of the less hazardous occupations, but it is not totally immune to injuries. Employess have been known to get electric shocks from office equipment, fall down :steps, trop over obstacles, and tip over file drawers. Rates for workers' compensation vary f~om sate to state and from ocupation to ocupation. A manufacturing business will pay higher premiums than will a service business. This means that your costs should be relatively low. Disabflilly lnsuraP~ce. Workers' compensation insurance pays
an employee only for time lost due to work-related injuries and sickness. It does not cover time lost because of injuries or disabilities incurred off the job. But you can bu insrance that provides employees with an income for life, or for the duration of the disability, when they are unable to work as a result of non-work related sickness or accident. Make sure that such a policy covers employees who are on a familiarization trip,
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186 Tourism and Travel Industry
escorting a group or tour, or otherwise engaged in agency business off the premises. Liability tnsuratu:e. This type of insurance protects the agency in the event of injuries to clients' property while they are on the premises. It may also cover acts of employees. High medical cost and the cost of defending a lawsuit make it extremely important to carry liability insurance. For example, if a client slips on a highly polished floor or trips over a wastepaper basket or other obstacle and breaks a leg or suffers other injury, your fmancialloss could be substantial unless you have adequate liability insurance. Many liability insurance policies also cover personal injuries, such as libel or slander, or damage done through advertising (called advertising injury insurance). Remember that your agency can be liable for the acts of its employees and even independent contractors such as commision sales people. Liability insurance will protect you business from the acts fo its employess. Even if a lawsuit is false or frivolous, you still have to hire a lwayer to defend you. Defending against even a frivolous lawsuit can cost a si::able amount in legal fees . Many liability insurance policies prvide for the insurer to pay legal fees and court cost in addition to any liability judgment. Error and omissions tnsuratu:e. Malpractice insurance is another essential for every travel agency. In todays' litigious society, more nad more disgruntled clients are suing their travel agents for real or irnagjnary errors and omissions caused by the negligence of employees. Mistakes can and do occur, and not every client sues as a result. But the wrong date or flight number on an air ticket-resulting in a missed flight-or an employee's failure to make a hotel reservation-resulting in . other inconvenience-could bring a lawsuit seeking not only actual damages but punitive damages also. Do not risk losing your your business-perhaps even your personal assets if you operate the agency a5 a sole proprietorship or partnership. Managing Your Insurance Programme
Deuctibles are available for many policies and should be
Elements sous drot!S d auteur
Starting Up 187 considered. How much loss could you, the insured, absorb before the insurance company starts covering the rest? If your premises were to be damaged by fire to a loss of $8,000 and your policy carries a SSOO deductible--so that you would pay $500 and the insurance company $7,500-you might still be better off than to be paying the premium for a policy with no deductible. Usually the higher the deductible, the lower premium. Very often you have a choice of the decutible amount and so can choose a policy and permium to fit your budget. How to keep insurance costs at the lowest possible level: • Decide what perils to insure against and how much loss you can afford to suffer from each. • Cover your largest loss exposure fust. • Use as high a deductible as you can afford. • Avoid duplication of insurance. • Buy insurance in as large a unit as possible. For example, there are package policies covering fire, theft, liability, and so on that are suitable for travel agencies. Very often a package policy is the only way a small business can obtain adequate protection. • Review your insurance programmes annually to keep your coverage current and adequate and you premiums as low as possible for complete protection.
I I I I
It is essential to your continuing prosperity that you realize that neglecting insurance is the worst gamble you can make. If you do hot have coverage, get it. If you do have coverage, evaluate it. Is it plugging all the gaps? If not, get the coverage you need. You cannot protect against everything, but yo should protect yourself where you can. In short, remember that all your efforts in building your business can be wasted if you do not have sensible insurance p rogramme. Here is a summary cheklist for managing your insurance programme. Checklist for a good insurance programme: • Write down what you expect from insurance. • Choose one agent to handle all your needs. l3ut choose
I I
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188 Tourism and Travel Industry
only after evaluating several. Your agent is vital to your protection; get the best. • Confide in your insurance agent Provide the agent full information about your agency and its exposure to loss. • If someone else-a partner or employee-is to be reponsible for the insurance pr:ogramme, be sure that person understands what is involved. • Learn how you can prevent losses, and how to keep unavoidable losses to a minimum. • Do not try to save money by underinsuring or by neglecting coverage of some perils because you think that chances of their happening are small. Chances are, in such cases the premium will also be small. • Keep complete records of your insurance policies, premiums paid, loasses and loss recoveries. • Have you property appraised regularly-at least once a year-by an independent appraiser. This will help keep you informed as to what you exposures are. You will also be in a strong position to prove what your actual losses are if any occur.
Elements sous drot!S d auteur
The Legal Structure Selecting which of the three forms of business structure .under which to operate your travel agency is an extremely important decision. It should be weighed carefully. You can operate a travel agency as a sole proprie torship, as a partnership with others, or as a corporation. The form you select will affect your personal liabililty your taxes, your personal compensation, your benefits, your profits, and even your retirement programme. There is no one single best choice of business structure because individual situations differ. Each agency is unique in the general · characteristics which help determine its most apporpriate business structure. Each owner must consider such things as tax advantages and disadvantages; the degree of protection required for personal assets; the need for financing (at the begining, or possibly at a later date); and several other factors. You should certainly discuss your proposed venture with your lawyer and tax advisor before going into business. Once an agancy is estalished, to make a change in the form of business structure requires considerable bureaucratic red tape with the conferences.
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190 Tourism and Travel Industry
One reason the corporation fonn of structure is the probable first choice is that it affords the stockholder limited libality. For example, if a corporation is sued for damages by a disgrunteled client, the personal liability of the stockholers is limited to the assets of the corporation. Generally speaking, the sole proprietorship and the partnership forms of structure involve personal liabilities. In the· event of an adverse legal judgment against the business, proprietors or partners could possibly loose not only their business assets, but also their homes and personal cash. This would be an extreme case, but in theory it is possible. A nerve-shattering thought, to say the least. A brief review of the three forms of busines structure will help you understand each so you can decide which is suitable for you. Each has both advantages and disadvantages. Bear in mind that this is only a synopsis. Discuss the different forms with your lawyer. Based on my own experience, I believe that a corporation with Subchapter S status is probably the best business structure for most independent travel agencies. Sole Proprietorship The sole proprietorship is the oldest and probably the most widesspread fonn of business structure. It is also the simplest, as well as the easiest to start and to dissolve. A sole proprietoship has no existence apart from the owner; it terminates with the owner's death. Its liabilities are the personal liabilities of the proprietor, who undertakes the risks of the business to the extent of his or h'l!r assets, whether they are acrurally used in the business or personally owned. Because of this liability, the sole proprietorship is not the best choice ·for a travel agency operation. Admittedly, however, hundreds if not thousands of travel agencies are being operated as sole prorietorships. Some Advantages of Sole Proprietorsblps or Partnerships 1. Low in cost to roganize-no incorporation fees. 2. Generally easier rocord keeping. 3. Owner(s) can deduct losses from personal income. 4. Owner(s) must ftl.e just one tax rerum.
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The Legal Structure 191
Some DJsadvaotages of Sole Proprietorship or Partnerships 1. Owner(s) personally liable for all debts and judgments
against the business. 2. All profits are taxed personally to the owner(s). 3. Usually difficult to auract additional investors. 4. · In a partinership, each partner can bind the other so that one partner can a1use the other to become personally liable for business .obligations. S. If a sole proprietor dies, the business usually terminates, or may be tied up for months. 6. The owner(s) will not have full tax benfllS and advantages of retirement and profit-sharing plans that are available to a corporation.
Partnership A partnership is the relationship existing between two or more persons who join together to operate a business. Each person contributes money, labour, or skill, and all partners are expected to share equal in the profits or losses of the business. There are two types of pamership: general partnership and Limited partnership. A general partnership is formed by the partners drawing up a partnership agreement. As with a proprietorship, the partners can be held personally laible to the extent of their assets, and each member of a general partnership is reponsible for the business debts owed ~y the other partners. Limited partnerships are somewhat more formal and consequently are more difficult to form than general partnerships. The limited partners have no say in the actual day-to-day operation of the business, which is handled by a general or "working" partner. Limited partners are protected in their liabilities in that they cannot be held responsible for any losses or liabilities in excess of the amount they invest. The Corporation
The corporation is the most formal of business structures.
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It is also more difficult to form than a p roprietorship or partnership. It operates under the laws of the state where it incorporates, and it is a distinct and separate legal entity from its stockholders and management. Liabilities are limited to the assets of the corporation, individual stockholders' personal assets are protected against claims and losses in the event of a judgment against, or bankruptcy of, the corporation. Corporate profits are taxed to the corporation. That portion of the profit distributed as dividends is also taxed to the individu al stockholder, subject to exclusions. A corporation can elect not to be taxed as a corporation, but, rather, have its profits and losses taxed to the individual stockhoders. These are subchapter S corporations. They are discussed below in the section on taxes. Some Advanbge of a Corporation StnlctUre 1. Limited liability. For example, creditors, can force payment
of their claims only up to the limit of the assets of the corporation; they cannot make claims against the stockholder owners. A stockholder may lose the money he or she invested but cannot be forced to contribute additional fundc; to meet business debts o r satisfy business judgments, even if the corporate assets are insufficient to meet those debts. 2. Death of its owners does not affect the corporation; its life is in a sense everlasting through transfer of its stock from owner to owner. 3. A corporation is a separate legal entity from its stockholders. It can enter into contracts and sue and be sued. 4. Should additional capital be required, the corporation can attract new investors through the sale stock. 5. The business can operate with all the advantages of a corporation and still be taxed at the personal tax rate (Subchapter S corporation). 6. Owners can quickly transfer ownership, which is represented by shares of stock, without dissolving the
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corporation. 7. Shares of stock can be used for family and estate planning. 8. More tax options are available to corporations than to sole proprietorships and partnerships. 9. Pension, benefit, profit-sharing, and stock option plans can be established that are favourable to stockholder of the privately owned corporation. Some Disadvantages of a Corporation Sturcture 1. Organizing expense is higher for a corporation than for
either a proprietorship or partnership. 2. The corporation must operate under the laws of the state in which it is being set up. 3. The stockholder owners of a privately owned corporation file two tax returns, corporate and individual. 4. Additional paperwork is required, including bookkeeping, corporate records, annual report, among other things. 5. Minimum requiremnets in most states. For example, Illinois requires a minimum capital of Sl,OOO before it will grant a corporate charter. Taxes
A look at the tax structure and method of reporting taxes of the three business formates is relevant to your decision. For complete inotmation, read Tax GuUJefor Small Business (Internal Revenue Service Publication 334, available free from any IRS office or service centre). The book is updated annually and is packed with everything you need to know about taxes as related to a business. Examples help you understand and show you how to prepare your tax returns. This section is based on this book.
How P,·oprletorsbip are Taxed A proprietorship is not a tax-paying or tax-reporting entity. Income from a sole proprietorship is part of the total gross income received by the proprietor. The proprietorship has a bank account separate from the owner's personal account, as
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well as records of business income and expenses, inventories, capital acquisitions, and so forth. The income received from the business is reported on a shedule of IRS From 1040 (the standard long federal tax return). Business expenses are also reported on the same form. After business expenses are subtracted from business income, the profit or loss is entered on the owner's From 1040 individual tax return. A sole proprietoship is also liable for the self-employment tax-which is nothing more than provision for Social Security coverage for those who work for themselves. All sole proprietors must pay this tax. The sole proprietor usually must estimate his or her incom for the year, file a Declaration of Estimated Tax, and then make quarterly tax payments. How Partnerships are Taxed
A partnership, like a proprietorship, is not a taxble entity. However, a partnership must maintain careful business records of all income and expenditures and file federal Form 1065, U.S. Partnership Return of income. A partner's share of income, losses, gain, and so forth is determined by the partnership agreeement, which should spell out each partner's portion or allocation. The partners report their disributive shares on their personal tax returns. How Corporations are Taxed A corporation is a complete entiy that is separate from its stockholders. Its profits and losses are reported on federal tax return form 1120. The corporation pays tax on its profits (taxable income) at varying rates. After-tax profits distributed in the form for dividendds are then taxed again to the individual stockhoder owners of the corporation, who report them on ther own them on the ir own tax returns, and pay tax at individual rates. ~ How Subcbapters Corporations are Ta.'tt:ed Some corporations may elect not to be taxed as ·<:prorations but, rather, to have their profits taxed to the separate shareholder owners. They are called Subchapter S corporations.
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The Subchapter S cotporation flles its tax return on Form 11205. All the profits are, in effect, passed on to the sharholders. They include their prorata portions of proftts, or losses, on their personal tax returns to be taxed at the rates for their respective tax brackets. Subchapter S status has nothing to do with how a corporation is formed under state law, it relates solely to tax status under Subchapter S of the Internal Revenue Code. The corporation is first created in the usual way. Then, if it meets the eligibility requirements of the IRS, the owners may elect Subchpater S status by completing and filing IRS Fonn 2553. To qualify for Subchapter S status, the cotporation must meet all of the following requirements: 1. It is a domestic corporation.
2. It has no more than thirty-five shareholders; (before 1983 the limit was tewenty-five). A husband and wife are treated as one shareholder. 3. It has individual, estates, or certain trusts as sharehoders. 4. It has no nonresident alien shareholder. 5. It has only one class of stock. 6. It is not a member of an afTJ..Iiated group. The latest edition of Tax Guide for SmaU Business give comprehensive up-to-date information and inslructions on how to qualify for Subchapter S status and the implications and restrictions. A quilified cotporation may elect Subchapter S status at any time within the first seventy-five days of the tax year to which it applies or at any time during the preceding year. Because the rules do change from time to time, be certain that you have that latest information and forms before you file . They can be obtained from any IRS office. But before electing Subchapter S status, be sure to have your tax advisor review your situation and advise you as to the best format for your corporation. The advisabiliJity of becoming a Subchapter S corporation depends primarly upon
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the personal tax situation of the shareholders.
How to Set up a Corporation Because corporate laws vary from state to state, tl1e subject of incorporation can be covered only in generalities. However, some aspects of the incorporation process are common to all states. The incorporation laws of Illinois are used in the examples cited in this chapter. This section is not intended to be a substitute for professional or legal advice. It is. intended to introduce you to the step-bystep processs of setting up a corporation. Contrary to popular belief, the incorporation process is relatively uncomplicated. Of course, you must take time to read and understand the particular laws and requirements of your state. The procedure of incorporating an exising agency or forming a corporation for a new one can be handled by anyone who takes the time and trouble to learn how to do it. Many corporations are formed without the help of a lawyer. If your situation is a. simple one, you should have no trouble doing the work yourself, but if you require estate planning, or if there are outside investors involved, the matter is best handled by a lawyer. Whether or not you decide after reading this section that you can form your own corporation, you should at least consult with a lawyer before you become too involved. Let him or her review what you plan to do. Step in Incorporating In Travel Ageny • Request from the office of yo u secretary of state, or other state official responsible for ·granting corporate chapters, a copy of the corporation law of your state, with all instructions and necessary forms. • Select the name for your agency. Have a second choice in the event your fi!St choice is unavailable . Find out if the name you want is available by a telephone call to the state office you are dealing with. • Buy a corporation kit. These kits are available through most office supply stores or from a corporation supply stationer. They include a corporate seal, stock certificates,
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and minute book to record all corporate business. • Open a bank account in the corporate name. • File your Articles of Incorporation, following the instrucions careful. • Order all letterheads, envelopes, stationery, itinerary forms, exclunge orders, office suppliers, furniture, etc. • Apply for all conference appointments. KnowiNg Corporate Laws It is imporant, first, to study the corporation laws of the state in which you intend to incorporate. Contact the approriate department or offical of your state (usually the office of the secretary of state) and ask for a copy of the publication relating to corporations and corporation law. In lllinois this publication is 1be Business Corporation Act. At the same time request all the forms needed to incorprate in your state. Selecting the .Agency Name Before completing any frorns, pick the telephone, call the state corporation department, and give the appropriate official the name you have selected for your agency. This name should include a corporate designation such as Inc., Ltd., Company or corporation. The state official will check the record and tell you if you can incorporate under that name in your state. In some states you can reserve the name for a period by paying a small registralion fee. This will give yor the opportunity to open a corporate bank account and file the articles of incorporation. The name you select must not be so similar to that of another corporation that names could be confused. Also, the name must not be deceptive, so that it might mislead the publice. If you are incorporating an existing ageny which is being operated as a proprietorship or a partnership, be certain that you can use the same name. It is also important to make certain that yo u have not inadvertently chosen someone else's trade name or trademark. Electing Directors The number of directors will depend on the corporation
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laws of your state. In Illinois a corporation must ha.ve at least three directors, unless it has less than three shareholders; then the number of directors may be less than three, but not less than the number of shareholders. In the case of a corporation where all stock is held by a husband and wife, for example, Illinois law requires only two directors--ilie husband and the wife. If all of the stock is held by on person, then that person can be the sole director. Choosing Offu:es
The officers of a corporation consist of a president, one or more vicepresidents (if the corporation is large enough), a secretary, and a treasurer. Any two or more offices may be held by the same person. In Illinois a person could be the only stockholder, the sole directors, the president, the treasurer, and the secretary. Cash Rrequirements
Most states have a minimum cash requirement provision and require that this minimum ($1 ,000 in Illinois) be credited to the corporate bank account before the filing of the articles of incorporation. Because the frnancial requirements of ARC and IATAN are well in excess of state requirememts, meeting state requirements will not be a problem when you are incorporating a travel agency. When you open the corporate bank account, transferring your personal funds, you "buy~ stock in your corporation, in return for which you issue a stock certificate. For example the sum of $25,000 may be subsdrbed in exchange for 1,000 shares of stock at $250 a share. You would issue a stock certifcate (tehy come blank) with its value as 1,000 shares. Takes note that you need not put the entire $25,000 into a checking account. Part of it could be in an interest-bearing account or in a money market fund. Filing the Articles of Incorporations
In most states this a relatively simple form to complete. It is filed along with a filing fee, a franchise tax, and a license fee.
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Converting Existing Agency into a Corporations
There may be several reason for wanting to convert a sole proprietorship or a partnership into corporation. The main one is that the owner needs better business protection. Incorporating an exising agency is somewhat more complicated than starting a new agency as a corporation. While the job can be done by an owner, it is better to have your lawyer handle this for you . He or she will be thoroughly familiar with the incorporation procedure itself as well as with tax and other advantages. A sole proprietorship or partnership can be converted tax-fee to a corporation provided (1) that assets are transferred to the corporation solely in exchange for stock and (2) that immediately upon incorporating the proprietor or partners own 80 per cent of the voting stock or the corporation. You would normally follow the same procedure as for incorporating a new travel agency, but there are several things you should look out for. For example, if you have been operating an agency as a sole proprietoship or as a partnership, you must satisfy yourself that you can use the same name under corporate status. Do not just assume that you can--check first. Also, when you incorporate an existing agency that has been operating as a sole proprietorship or partnerships, you are creating a new and separate legal entity. TI1is requires a new ming with ARC, lATAN, etc. ARC rules read: The fact that the shares of stock in the coproration are held by the persons who owned the business prior to incorporation is immaterial and does not release the new ownership entity of the requirement to obtain approval !for the change. Be sure to Study the rules in the Industry Agents' Handbook (for ARC) and the instructions sent to you by !TAN. lf anything is unclear, call or write to the appropriate conference and get clarification before you do anything
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The Physical Structure Choosing the Location
Real estate agents say that three things are important to remember when you buy a house- location, location, location. To a great extent, the same thing is true when you are deciding where to establish your travel agency. Experienced management, well-trained employees, adequate fmancing, and aggressive sales and marketing are all essential ingredients of a successful treavel agency. But no single factor (except staff) has as much influence on an agency's survival and growth as its location. So it is critically important for you to throughly research all the possible options of area, community and site selection. A large corporation usually does an extensive study before it chooses a new location, trying to select that location scientifically. You, as a small business entrepreneur, will not be able to afford a study of any kind. However, and common sense, you will be able to assemble some remarkably accurate, comprehensive, and informative data to help you decide on location. Selecting a location involves three distinct steps: l. Choosing the town or community. 2. Choosing the area within the community.
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3. Choosing the site within that area.
Choosing the Community The first and best choice of community would probably be your own hometown. It has may advantages. • It is close to your home, which means easy accessibUity in an emergency or if a good client needs :a ticket in a hurry or on a weekend. • You probably know this community better than any other. •
As a resident, it may be easy for you to get to know and
be on good terms with communtiy
an~
business leaders.
• Also as a resident, you can mount a strong public relations coampaign that projects both your professionalism and your hometown image. Use common sense, of coures. Are you sure that your communtiy can support another agency? A town of 30,000 people with four existing agencies should be avoided even if it is your hometown. In such a case it would be wiser to look farther afield, perhaps to an adjacent community which has only one agency-<>r beuer still, to a community that has none. Whether hometown or elsewhere, take a close look at the community and its population. Is the areas still growing; or has it recached its peak of development? Are new homes, apartments, and shopping areas under construction; or are they just in the planning stage? Are homes and building well maintained; or do they seem shabby? Is there a feeling of vitality; or.is the town worn out? What is the economy of the area? A community with only one main source of employmentwhether that is manufacturing or fanning-can suffer drastically when the economy slows. Will your agency suffer too? What about socioeconomics? How many people in the community have the meaf\S and the desire to travel? Check average age, per capita income, income per household and occupation. These will all affect your sales volume.
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Similarly, are there companies in the area for which the agency can handle travel business? What about grup potential, such as schools, churches, and clubs? Could they offer business for your business for your agency? Of there are other travel agencies in the community, try to; find out how long they have been around, what is their growth pattem and sales volume, and if they are operating in the black. Such information may not always be easy to come if by, but careful observation will reveal much. For instance, f an agency has been around five years but still has only tWo or three employees, it could mean that its sales have pea~Jed and that there is not much more business to be had. However, it could also mean incompetence and that people in the community are going elsewhere to buy travel. Some discreet detective work should tell the real story. Sources ofInformation /
When you are investigating a community, call on the local chamber of commerce first. This organization will be able to give you practically all the infonnation you need about this area, such as economy, population, income averages and occupations. You may also get important information about the future plans for the areas-perhaps the opening of a major plant, or construction of new housing developments and shopping plazas. If there is no chamber of commerce, then business development agency belonging to state govemment may know about local community sureys that provide the information you need. A local banker will usually be able to give you important economic infonnation about a commounity. Bankers alw11ys know what is happening in their own community as well~ in surrounding areas. Also, call on some of the local merchants and shopkeepers. These are the people who are usually the first to be affected by the ups and downs of the local or national economy. They can tell you best about the people who live and shop in the community and about local laws and ordinances. They may also know about rezoning, condemnation proceedings, and
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other matters which may influence your decision. Choosing the Aroa Within the Community
Once you have chosen the town, your next step is to pick an area within the community. A large city offers many options, but in a small town you will probably not have much choice. You will have to settle for the main shopping area, or wherever you can find satisfactory office space. In e~ther case, it is important to choose an area with a good traffic pattern, easy access, and good transportation if in a large city. Parking can be an important factor. If you are located where people depend on their c-J.rs---as in a small town with no public transportionyour customers will have to come by car. Adequate parking will encourage business. ~e
aware of changing or deterorating areas. If there are vacant stores and buildings, look elsewhere. Empty buildings are bad neighbours. They are a clear warning that the area is not a good one for business. Heed such warnings. Finally, think about your competition. Try to avoid locating your agency in the same block as another travel agency. If you are lo<;ating in a large office building, look for one that does not already have a travel agency. \
.
Choosing the Site Within that Area
Both ARC and IATAN have established clear (and enforceable) rules about travel agency location. Your must understand and remember then when you are looking for space. If you think that your chosen location might be marginal, call ARC and IATAN and ask for an opiJ1ion before you sign a lease. A call to a local airline district sales manager may also help you d etermine whether the proposed premises meet requirements. Your premises will be inspected ·as part of the overall conference approval process. If they do not meet the requirement, the agency will not be approved. You may not have wide choice of suitable p remises, but do take your time to investigate and consider every option open to you. Hidden away in a highrise? Located in a busy street. Tucked
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into a major shopping complex? There are advantages to each location, and no one kind is always the best. I have seen some eminently successful agencies that were ten floors up and with no identification other than a sign on the door and a listing on the office building directory. I have also seen agencies well-located in prime shopping plazas and on well ttafficked streets that failed dismally. A prominent location does not necessarily gurantee success. An agency with a poor location but with top-notch management and staff will always be a greate deal more successful then will a prominently located agency staffed by incompetents. A wellrun agency with a good reputation will not need a conspicuous locatatio-customers will eagerly seek it out. A location in a busy shopping center or on Main Street is sometimes more a hindrance than a help. People stop in to pick up brochl!res, to chat, to pick the travel agect's brains, or to ask myriad of questions that have nothing to do with business. In a thirty-minute visit to an agency located in a shopping complex I heard: "Where's the ladies' room?" ..."Is there a bank near here?" ..."why isn't the Ice cream parlor open?" ..."Do you have change for a dollar?" And so ti went. Such diversions from the business at hand use up much valuable time. Also, may of these drop-in shoppres have no itention· of going any where, or they already have a travel agent but your office is convenient for picking up a load of brochures. Thes drawbacks do not necesssarily recommed against such location. Many agencies in such places are extremely successful. Just be aware of what you may be getting into.· There are some other-perhaps more important--drawbacks to a shopping center location. Such locations are often difficult to staff properly. They require that all tenants stay open for business during the hours that the center is open. This usually means evenings and weekends, requiring working hours to be staggered so the agency is staffed at all times. That is not easy to do if you have only three or four people. On the plus side-and maybe a big plus you-large shopping
malls usually attract a large number of people from a wide
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area, not just the local community. Small, independent "strip" shopping plazas are locations to be casutious about. Many such sties could be and are acceptable, but many are not. A small complex that contains a pizza parlor, a shoe repair shop, a laundromat, and a small grocery store would probably not auract the affluent or those who might be good travel prospects. Know your area and do your homework. An agency located in an office builiding will not be exposed to walkins or spur-of-the-moment foot traffice. Practically everyone who comes in is a serious buyer. An agecy on an upper floor must have an especially good overall promotional campaign, because that is about the only way the public will find out about it. A sequestered location need not be a detriment--quite the reverse, in fact, if the manager is good at aggressive marketing. Making the Final Choice
How do you know a specific building, street, or shopping complex is a location good for business? Talk to the local tenants. Do not listen to a landlord, who is probably more interested in getting you to sign a lease than he is in your future. A turnover of tenants could mean that the location is not good for business. If other businesses have failed in that location, then your agency may run into problems also. Sites where other enterprises have failed should be avoided-even if the landlord offers attractive comeons such as the first three months rent-free, or below-average rent. Such gimmicks will not compensate for a questionable location. You may save a few dollars in the beginning, but in the end you will be the loser. Do not gamble with your future. And do not settle of attytbfrzg unless it meets your requirements. Should Your NBUY or Rent? Buying real estate (even a small building) takes a lot of capital. Even if you are unusually well-fmanced with plenty of
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spare cash, it is unwise to commit yourself to a permanent location early in the game. If you take a mortgage on the property, you will not just be saddled with mortage paymenst and interest (which are often much larger then rent payments for comprable space), there will be insurance, real estate taxes, upkeep on both exterior and interior, and other possible obligations that you would not have as a lessee. There are several other drawbacks to owning your own office building: • Limited Size. Unless the unit has plenty of room for expansion, you may outgrow it. • Location. If the area deterioates, you may get s tuck with undesirable neighbours. • Maintenance. If the furnace breaks down, or if the roof
develops a leak, or new plumbing in required, you- not the landlord-will bear the cost. It is wise to get your agency into operation deciding to invest in porperty. Four or five years in business should give you a good idea as to your agency's future growth expectations, and you will have the fell of the area before you buy. Even then, always lean toward conservatism. Success may breed recklessness. I have seen very successful agencies develop problems after they relocated to their own building. A recession hit, or a lucrative commercial account was lost, or some other busiiless calamity caused a serious cash flow problem~nd the agency was unable to make its mortage payments and had to sell the property to stay in business. Whatever location you fmally choose, be sure you have thought it through carefully and done your homework. Your agency will then there a much better chance of success. The Lease It should not be necessary to emphasize that you must read a lease carefully before you sign it. But reading a lease as thoroughly as you should might be easier said than done. Most leases are printed in type so smaU that it is difficult to see, let alone un9erstand. Howerver, do not let the small print
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and leagal terminology prevent you form not only reading but understanding the intention of each and every clause. Ask the landlord to clarify anything you do not understand. Better still, if possible, have your lawyer review the lease before you sign it. While your lawyer might not be able to change the provisions of the lease, he or she will at least be able to alert you to potential danger and problem areas. That will allow you to avoid possible hidden expenses and perhaps embarrassing misunderstandings with the landlord at some future date.
' .
Do not be pressured into signing until you understand everything about the lease and are completly satisfied with it. A three-year lease for, say $300 a month is a contract to pay $10,800 in thirty-six equal payments. A sicable sum, to say the least. Possible Pitfall:s
Avoid leasing premises where the rem is directly related to a precentage of gross business. It is quite normal retail stores to have their rents based on their sales volume, but such a method is impractical for a service business, especially a travel agency. A travel agency's income is so low that the operating margin is restricted. You will avoid unnecessary fmancial burdens in you consider only space that in leased on a ftxed cost-persquare-foot basis. If you contemplate leasing space in a development or building under construction, or space which the landlord finshies to the tenant's specifications, be sure the lease clearly specifies the type of space the landlord will tum over to you. The lease may require the developer to fumish only a shell-walls, roof, concrete floor, doors, glass, and a heating and air-conditioning unit. TI1e tenant is responsible for other construction and finishing expenses, which are then usually amortised over the term of the lease. Face the fact that such completion cost can be formidable-whether or not you have allowed for them. Specific Provisions ,
. .
Does the lease make clear who pays for utilities? It is one thing for the lease to state that head, electricity, and water are
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provided, but it is quite another thing to state who is responsible for installing all necessary units and equipment, and the tenant then pays, for actual usage. What about garbage pickup? And janitor serice'? In many large office buildings the rent includes normal office janitorial sevices. In most smaller buildings. However, the tenant must arrange and pay for such services. Find out who is responsible for maintaining the heating and cooling systems. The lease should also provide for any ~igns you may want to erect to identify your agency. Many 'communities have strict ordinances about the size and style of outside signs. And many office developments restrict tenants to a specific size an d style of sign so that uniformity is preserved throughout the complex. Check these regulations and possible restrictions before you sign a lease. Do not depend on someone else's word that you will be able to erect any sign you want. Oral promises will not always hold up. It could be both expensive and frustrating to discover, after you have signed your lease, that you cannot have the sign you want. Many tenants are unpleasantly surprised when they get a bill or an assessment they had not counted on or allowed for. The lease should specify which expenses can be passed on to the tenant. For example, if the landlord's real estate taxes are increased, can this increase be passed on to the tenants in the fonn of an assessment? What happens if a new sewer is installed ? or a road is repaired ? or a new sidewalk is constructed? Will the landlord be able to assess the tenants to cover the cost of these improvements ? What if the landlord decides to remodel or redecorate the entire complex ? Will the tenants have to pay a share of the cost based on the square footage of their leased premises ? Who pays for winter snow removal and summer lawn care ? or if the roof leaks ? or if the heating system needs repair replacement ? The lease should dearly cover and answer these and similar questions. Moving On
If it turns out that you do not like the space you leased, or if the location fails to generate the traffic anticipated, you may
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have to move ·to a better location. There should be a clause in the lease that allows you to sublease if you do want to relocate. Most sublease clauses provide that the landlord must approve anyone you want to sublease to. Problems can arise when you have found a likely tenant·but the landlord does not want that kind of business in the building, or the prospective tenant a poor credit risk. You will avoid many problems and possible conflict with the building management if you discuss the matter of sublease with the landlord or his or her representative before you start looking for a tenant. It is also quite possible that the landlord can help you fmd a tenant. It is a!so quite possible that the landlord can help you find a tenant. He or she may have sources that you would not know about. If you do sublease, bear in mind that you will be responsible for all rental and other occupancy costs in the event of a default on the part of the new tenant. To sum up:
a
• Never sign a lease until you understand each and every clause. • Read all the fine print. • Do not read a lease in the landlord's office-take it with you to some quiet place where you can read it uninterrupted. • Have your lawyer read a lease before you sign it.
Designing the Agency Premises The layout you decide on for your agency will be limited by two factors : the space you have to work with, and what the space has to do. A new agency certainly does not need-and usually cannot afford-huge premises. But neither should it be so cramped that everyone is on top of each other and there is no room for growth. If you lease only 400 square feet of space, where do you go in a year or two when the agency has grown to the point of needing more employees ? The ideal size for a new agency office is 500 to 700 square feet. This amount of space will take care of immediate needs and still allow adequate room for growth and expansion. It
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will not give you a wide choice of floor plans-that will be dictated by the shape of the premises, anyway-but it will allow you to divide the premises according to your needs. When you are deciding how to divide this space, analyse your needs. Your layout should give you two things : customer appeal and efficiency. You need a layout that is attractive, that welcomes the customer, and that allows your employees to work efficiently. Such a layout takes time and thought. You can begin by defining the separate areas you will need. The Entry and Wating Area
The entry and waiting area is the fust thing a customer sees. It should look comfortable and pleasant but at the same time it must be functional. Here is the minimum equipment a functional entry area should have: " A sofa and/or several chairs for clients who are waiting for counselors. • A low table to hold current travel magazines, the Sunday
travel section of the local newspaper, perhaps one or two of the better travel guidebooks, and at least one ashtray. •
A literature rack with brochures on some of the more popular destinations (kept strictly current !).
•
A wastebasket.
Opinion is divided on whether a counter should separate the entry from the work area. Some agents have told me that they put" up a couner to keep customers out of the work area. However, a counter can have a negative psychological impact. By saying "keep out" it can make customers feel unwelcome, as if they are somehow intruding. You do not want to gain efficiency by discouraging customers. Iron or wooden railings, or perhaps planters, would be more subtle ways to achieve the same effect. The smaller agency does ~ot hav,e room for a counter anyway. Let clients feel that they are ~ithin the agency as soon as possible-the minute they walk in. A larger agency with heavy walk-in traffic may need to
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have a counter to countrol traffic; customers can sto p there first before being directed to a counselor. A counter can also be used as a sales area for fast ticket sales and ticket pick-up and distribution of sales literature. At the same time, it can be a storage facility with built-in file drawers or shelves, which can hold abundant literature. Whether or not you have a counter, be sure your entry area is arranged so that the door is not obstructed, and so that waiting customers are not in the direct path of traffic. Be sure, also, that any desks near this area are placed so that the least possible clutter shows from the entrance. The Work Area This is the hean of the agency. It must be pleasant, but above all it must be functional. It staff feel cramped and are placed to close to one another, they will not be able to work at top efficiency. Allow as much space as possible between desks. If you have the room for free-standing shoulder-height partitions between desks, try to stretch your budget to allow for them. They will cut down on the distracting noise of phone conversations and consultations with clients. Giving each counselor a private, defined work area, even though it is not a private office, can eliminate much of the interference and distraction from adjacent desks. Where you actually locate the desks will depend. on the floor plan. The most usual system is to place the desks with one end alongside the wall, the counselors facing the front of the office. Qients sit across from the counselors at the other side of the desk. While this does make the best possible use of available floor space, there are several disadvantages of close proximity to counselors in front and behind, and intrusion into client discussions and telephone conversation. If your floor space allows try several other methods and layouts. You might place desks parallel to the wall, with the counselor's back to the wall and the client seated opposite, but you need plenty of space for this system, since there must still be adequate space between desks. A commercial agen_cy could use the island concept, where
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four desks are placed together and the counselors face each other and share material placed in the centre. Automation brings other problems which influence layout. Many small agencies with an automated reservation system have only one display terminal (cathode ray tube) and one ticket imprinter to be shared among the entire staff. The ticket printer can be placed at the back of the office, but the CRT must be readily accessible and adjacent to the wo rk area. A larger ($2 million) agency would probably need at least four or five CRT terminals and two ticket imprinters, so the disk arrangement must be such that each counselor has easy access to the reservation equipment. Clutter is the enemy of both good appearance and efficiency. So unless there is a separate storage room, allow space for plenty of files and shelves or drawers in the work area. Fourdrawer lette r-size file cabinets are the most convenient. If you have space-and money-you may want to provide separate file space for each counselor. Otherwise, group your flles where they will be most convenient for all employees. (You may be able to use grouped file cabinets to defme individual spaces.) Locate office machines such as ticket printers, tele-ticket machines, photocopier, and water cooler to a back area where their operation will not interfere or intrude in the work area. If you can put them all in one completely separate room which can be dosed off, so much the better. Private Areas A private office. Even a small agency must have room for a
private office where the manager can meet privately with clients and where dearical functions such as bookkeeping can be done in relative quiet. If possible, the office should have a glass partition to allow a view of the general office or major work area. The arrangement and equipment of this office will depend on your own wishes and what you want the space to do. Are you expecting to meet with more than two or three clients at a time ? Then, obviously, you will need to provide room for adequate seating.
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A storage area. Somehow, arrangements must be made to
store the vast quantity of literature that constantly descends upon every travel agency. Some agencies do not have room for a separate storage area, so literature is put away in file drawers in or near the work area. Other agencies have room for floor-to-ceiling metal shelving. (Filing literature will be covered separately, but it is important to stress here that travel brochures must be filed so that virtually aPlyting can be located and retrieved immediately.)
Restrooms. Single-unit offices usually have a self-contained restroom. In a larger office building, men's andi women's restrooms are provided. Decorating the Agency
A great deal of thought and planning should go into the interior design of your agency. It must look professional, and it must provide a pleasant environment in which to work and meet with customers. A professional office designer or interior decorator can do a superb job-if your budget can stand it. You will end up with elegant and efficient premises. However, you can do the job yourself, and with limited funds. The Ideas you will see here are nothing more than suggestions to stimulate your own ideas and to guide you into designing a workable, tastefully decorated agency. Remember that people tend 10 retain their first impressions. Once the mind has registered the image, that image can be changed or erased only with difficulty. Too many travel agencies look like a disaster waiting to happen: piles of brochures waiting to be field; cluttered desks; noise; dull walls; dust; drab furniture and floors. All of this creates a bad impression and detracts from the professional look a client expects to see in a travel agency. How weU you design, decorate, and maintain your office will influence your sales. Take the time to do it well. And then do keep your agency neat and clean. Before you get into the problems of choosing a decorating style, you should remember that you will be working with four elements-space, light, sound and colour. They must be used correctly. The use of space has already been discussed;
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here are a few words about the other elements. light. Proper lighting , is essential for efficient work. Counselors do a great deal of paperwork; they spend many hours consulting the fine print of airline tariffs and other sales manuals. I have found that a series of flourescent ceiling lights provide the best lighting for the work area. The entry may need something special; perhai>s a hanging lamp in a style that blends with the office decor. Sound. The management of sound is important to the impression your clients get ou.t of your agency, as well as to the ease or difficulty with which your employees work. A busy travel agency is a noisy place, so use carpeting, soft furniture, and draperies to help absorb distracting sound. Colour. Especially in a small space, the rule of colour is less is more. Keep colours light and airy. A dark colour will make the agency look smaller than it really is; light shades can give the illusion of spaciousness. Stick with a. neutral colouroff-white, ivory, or beige-which will blend with practically anything. Use bright or inte nse colours for accents onlyperhaps chair coverings or lamps. Walls. Before you decide on what to hang on your walls, decide how to.cover them. Wallpaper is best. Attractive fabrictextured vinyl papers can be pleasing-grasscloth, perhaps, or burlap. Choose a texture that inatches your theme. If your budget is too tight for wallpaper, textured paints can add interest to the walls. There are many other possible wall treatments. For -instance, if you choose a garden them, 4' x 8' panels of lattice, stocked by lumberyards, can be painted white and placed against a green wall for an instant arbor effect. Or walls could be covered with adhesive cork panels; large v.:all maps; draperies; colorful rugs; tapestries or other such wall hangings; large photographs or wall murals of exotic places or well-known !andmarks. Even that old handyman's standby, pegboard, may find a place in certain setting. It offers the advantage of providing storage possibilities, by use of the range of accessories available with it. 0
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There are too many agencies where the only decorative trealment for the walls is to plaster them with travel posterssometimes framed often just stuck on the wall with transparent tape. If you must use travel posters, try to find old ones, or perhaps modem reproductions of old ones. Travel posters of another era or of ships long gone to the breaker's yard are conversation pieces. So are posters of the early days of aviation. And if they are worth hanging they are wor:th framing properly. Antique maps-perhaps a grouping of them-can make a handsome wall decoration. In a very different vein, a large dock-perhaps the kind that tells time in various time zonesmight be a good choice. You could also use original artworkoils or line drawings, for example. If there is an art school or community art league in the vicinity, or if the local college has an art department, the problem of locating original art can be solved quickly and inexpensively. You might even be able to make a deal-provide "gallery" space in return for allowing the artists to post their names and the prices of their works. Thereby you would assure yourself of a varied supply of artwork. But do not confine yourself to paintings and drawings. You may be able to locate community craftspeople who can provide handsome examples of work in textiles, such as weaving, or in other crafts, such as stained glass . Floors. The floor covering is more important than many people think. Wall-to-wall carpeting-the thicker the betterover heavy padding not only adds an elegant touch, more important, it helps to absorb much of the sound generated by the average b usy trael agency. A' bare floor such as wood or tile will reflect sound rather than absorb it. However, in a street-level agency, the entry area should not be carpeted because so much dirt will be tracked in. A hard-surfaced floor is best-perhaps quarry tile if you can afford, it or vinyl tiles or no-wax flooring can be used. Textures and designs are available in a!J of these materials to suit any decor. A flagstone design might suit a rustic look; a fancy tile pattem could set off a Spanish theme; a parquet design would go with colonial and traditional. Tn any event, whatever you. choose, keep it clean .
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range of styles and materials. Metal desks are not the drab items they once wee. Metal des.ks are now available in several standard fmishes other than black or beige. Metal furniture can also be custom finished to blend with the overall decor of the office. Wood, or even wood veneer, desks add a cetain elegance, but both can be expensive. You may be able to save money and get the look you want by having either wood or metal desks and other furniture refmished. One of the most attractive agencies I ever visited was furnished almost exclusively with refmished furniture. File cabinets are available in neutral colours, or you can have them custom fmished to match your decor. Even typewriters come in a choice of colours. Accessories. Once you have decided on a decorative theme, choose the accessories for the agency with care. TI1ey can provide a lot of impact for relatively little money, if chosen correctly. You may want a handsome lamp in the entry area-and perhaps some goodlooking ashtrays. Here, again, a local potter may be able to supply something more attractive than the usual motley collection. Plants are very popular today, and used properly then can be versatile accessories. But this will be true only if you choose the right plants for the right places, and take care of them. Large plants can effectively divide areas; smaller ones can add interest to bleak corners. But do remember that they are decorative accessories-tender heartedly nursing a spindley coleus on your counter may show your soft heart, but it will not improve the appearance of your office. If you decide to use plants in any quantity, do some research-read up on tl1e requirements of the plants you like. Or ask the local florist for some recommendations. And do stay away from plastic flowers and plants. Decorating Themes There is no one best style of decoration for a travel agency. It is even possible to have an agency without a single travel
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poster on the walls ! The style you choose should reflect your pesonal taste, not someone else's. Some of us like modem design; some may feel more comfortable in traditional or "colonial" surroundings some like a more exotic international theme-Oriental, Spanish, or Polynesian, perhaps. Any one of these, along with many other motifs, can be equally suitable for travel agency decor. Do pick something with which you are comfortable, and which is within your budget. A wellchosen theme, nicely carried, out will make a better impression on your clients, and on you, than a half-hearted attempt to be "in fashion." I once designed an agency with a garden theme. The
waiting area was a patio. We used imitation brick tiles for the floor and white wrought iron patio funiture for the waiting area. Large plants and window boxes fJ.lled with geraniums completed the image. Oriental motif dm make an elegant office. You might choose a grasscloth-textured wallpaper for this. A low bamboo table-available at import shops-could hold a well-chosen plant and a handsome ashtray in the entry area. Reproductions of Oriental prints are available in a variety of subjects and colours. Something like a three-foot-high print of an ancient mandarin would make an effective focal point for your walls. or a lamp styled like a Japanese lantern could be dramatic in the reception area. Another posibility for wall decoration in the Oriental mood might be a colourful large Japanese kite. An
For a Spanish or Mediterranean look, black wrought iron panels might define the entry. Dark furniture and some accents in a sharp, wann colour could do much to set Spanish mood. Or you could go Mexican with a tile floor, one or two goodsized cactus plants in handsome ceramic planters, and a pinata or two. Whatever theme you decide on, choose your elements with care, and make sure that everything is kept in pristing condition. This may well mean replacing certain items when they look tired. You will then have an office that appeals to your customers.
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Staffing the Travel Agency The growth, and therefore the success, of a travel agency will depend almost entirely upon the competence and ability of its manager and on the knowledge and experience of its staff. I have watched many well-financed and beautifully appointed travel agencies sink into oblivion. The secret of their failure was mediocre management and staff. I have also seen agencies be enormously profitable (for the travel business) with little mo re than a couple of desks and chairs in hole-in-the-wall locatio ns. The secret of their success was above-average management and top-notch employees. How Many Employ ees?
In most travel agencies there are probably several more categories of jobs to be done than there are employees to do those jobs. Ther new or small agency can usally afford no more than a manager and one other full-time person. Often th e "other" person in ·an inexperienced owner or the spouse of an absentee owner. In the small agency everyone has to be willing to do everything, and "everything" means for more than interviewing
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clients, booking space and writing tickets. Someone has to do the bookkeeping. Someone has to be reponsible for the ordering, maintenance, and control of airline ticket stock. Someone has to handle the countinuous flow of literature from tour operators, resorts, hotels airlines, and other suppliers that comes to even the smallest of agencies. Because rates and fares change frequently it is essential that old literature be removed and destroyed and n ew brochures filed away so they can be found and referred to quickly. Someone has to keep tariffs up to date : write letters; keep billing current; see that option dates are adhered to; plan and carry out promotional compaigns; ....the list is practically endless. In a large agency most of the houskeeping jobs can be handled by a trainee or a part-timer--or, at worst, be spread over the entire office. In the smaller agency all these chores must be handled by only two-at the most three-people. This detracts from valuable selling time. As the agency grows, new people can be hired to do bookkeeping, filling, and other such tasks. The skilled staff can then concentrate on sales. Many absentee owners are intrigued by the travel business and are often inclined to spend several hours a day or a week in the agency to "help out." Some owners also want their spouse involved is the agency to "keep an eye on things." A busy travel agency is no place for the inexperienced to practice their lack of skills. Inexperienced owners (for that matter inexperienced anyone) should never attempt to handle travel transactions by themselves until they have had the opportunity to get some fonnal training plus on-the-job exposure under the eyes and tutelage of a watchful manager or skilled counselor. An inexperienced person who gets involved in the sale of travel products will do more than good. The clients will quickly sense an amateur and rapidly move on to a more qualified agency. Job Categories 7be Manager The manager is the most important determinant of an
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agency's success. Therefore, you must be much more demanding and analytical when considering management job applicants than when you hire non-management candidates. There is a tendency for agency owners to hire as their manager someone who barely meets the basic requirements of experience as specified by the conferences. An applicant who only meets this criterion is nothing more than a qualifier (someone who meets the conditions necessary for the agency's accreditation). Because the choice of manager is so crucial to the agency's efficiency and growth, it is essential to hire someone who not only meets ARC and IATAN requirements, but someone who possesses all the other skills generally associated with the term manager, and other skills as well. This means that the ideal manger should be able to handle virtually any type of business the agency is likely to generate. Apart from the ordinary tragel transactions common to all fullservice agencies, the manager should be able to plan and implement a solicitation programme and an advertising and promotional compaign; to do public speaking; to make sales presentations to potential groups; to sell, process, and operate group tours; and to genrate business for the agency.. Not every manager has been exposed to all types of business, especially group tours. Neverthless, the manager must be able to grasp quickly the essentials of this type of transaction. All too many agencies lose group business because no one in the agency knows how to handle it prqperly. Experience is Important, but do not look at experience only, because it ·by itself does not necessarily guarantee competence. Nor does experience guarantee that someone possesses management capabilities , salesmanship, or professionalism. Look beyond the word on the job application or resume. Evaluate an applicant's background thoroughly and from every perspective, and check all references carefully before you hire. Superivisory repo11Sibilitfes. Even in the small agency the
manger will have to supervise at least one other person. The manager must thus be able to perform as a manager in deed
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and not just in word. That means to be able to hire, ftre, build and maintain morale, and do all the other things expected of a manager. It is not usually in the agency's best interest to have a manager bogged down with things like bookkkeeping functions. That takes away from valuable selling time. However, it is ideal, and even necessary, for the manager to have a working knowledge of the accounting system of the agency. If you are an absentee owner, or one who works in the agency but does not meet the criteria of the conferences to be carried as manager, then you would be wise to dearly defme exactly who is to be responsible for hiring, ftring, and the general supervision of the agency, as well as who will set policy. Misunderstandings often occur between owner and manager because the division of management responsibilities was not plainly and unmistakenly defined when the manager was hired. If the owner considers the manager to be nothing more than a qualifier, not someone who will handle staff and other administrative functions of the agency, then a letter of agreement should be discussed, agreed to, and signed by both parties before the managers is hired. This letter of agreement should clearly spell out what functions and duties are delegated to the agency manager and what responsibilities are reserved to the owner. Everything should be in writing. When disagreements arise, it is often difficult or impossible to recall exactly what was orally agreed to sometime back. MeetingARCand!ATANrr?quirement. Both ARC and IATAN are specific in their defmitions of what they mean by the term manager-or person who will appear on the record as being the qualified agency manager. It is important to understand exactly what ARC and IATAN demand. There has been a great deal of confusion over the phraseology in appointment applications, sometimes resulting in agencies being refused accreditation. Contrary to popular belief, two years' experience in a accredited agency is not always sufficient for someone to qualify a new agency.
At one time the conferences were not strict in enforcing
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their own rules about agency management experience. If ARC and lATAN were provided with reasonable evidence that a person had spent two years in a retail agency, the appointments were almost always approved-provided, of course, that all other criteria were satisfied. Such appointments are no longer automatic. The conferences, while not demanding anything more than they every did now are enforcing both they letter and the spirit of their regulations. The relevant phrase in the ARC application is: "The owner, a partner, an officer, or the manager of the applicant has had two years' full-time experience in creating, generating, and promoting passenger sales and serivces." Many agencies have been refused accreditation even though their prospective managers had more than two years' practical experience in ticketing and sales. What was lacking was two full yeras' promotional experience. ARC and IATAN want to be certain that a manager not only has ticketing and reservation experience, but also knows how to generate and promote new business. Make certain you read and understand the ARC and lATA."! application forms. If you are interviewing candidated for the position of agency manager, satisfy yourself about whether someone you are considering does meet all regulations. If in any doubt, get in touch with ARC and/or lATAN and seek advice-before you hire someone, not afterward. It is extremely costly to have to start the conference ftling process all over again in the event your application in turned down just because you were careless in hiring your manager. Another problem can arise if the prospective manager was involved with an agency that went bankrupt or into default during the manager's tenure. If your prospective managers was involved with either situation, it is possible that the agency application will not be approved. Other Salaried Employees To be succe.ssful, an agency will need the services of effectively trained counselors and sales representatives. Commerciol cou,rselor. Commerical counselors handle the travel arrangements of corporate customers almost exclusively.
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The job requires knowledge of the route structures and fares of virtually all the domestic airlines, plus a working knowledge of the simpler ir.temational fares and routes. A commercial conuselor must be completely familiar with railroads, hotels, motels, resorts, car rentals, and airport facilities. Good typing skill is important, plus the ability to work quickly accurately without close supervision. A commercial counselor's position is frequently considered to be a training position in some agencies, leading to the job of domestic counselor, and ultimately to the international desk. However, a commercial agency offers little opprortunity for advancement, and the counselor has to move to a more diversified agency to gain promotion and more experience. Domestic counselor. Those who handle domestic trnnsactions should have all the skills of the commercial counselor and in addition, be thoroughly familiar with all aspects of travel within the continental United States, Hawaii, Alaska, Canada, the Caribbean, Mexio. and Central America-all of which constitute "domestic" travel in the agency lexicon. This position requires a thorough knowledge of all tour programmes and packages, hotels and resorts, airlines, railroads, cruise lines, and car rental facilities throughout the area. Domestic counselors must also be knowledgeable about climatic conditions, currency, health regulations and precautions, and coustoms and entry regulation throughout the area. lntenzational cowzselor. Pive years' intensive on-the-job training is probably about the minmum time required to produce a good international specialist. There are those who will say that five years' experience is insufficient, even though .it is in adition to time spent on the domestic desk or as commercial counslor-positions tltrough which most intemational .counselors have progressed. The world is a very large place indeed, and the international counselor is responsible for the processing of all travel arrangements o utside the realm of domestic travel. In just one day an international counselor might be called upon to plan an independent tour through Scandinavia, set up a camera safari to Kenya, sell a cruise to the Mediterranean, work out a
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rail tour through E1,1rope, an process a package tour around the world. A great deal of time, work, and experience go into the proper planning and handling of international travel. That includes keeping courrent on passport, visa, and health regulations; customers and currency matters; and much, much more. An accomplished international counselor might not always have the answer to a client's question, but he or she must know exactly where and when to fmd the right answer quickly. Other positions. As the agency grows and it is necessary to add new employees, it is a good idea to assign new people to training positions before moving them into jobs of greater responsibility. A ticketing clerk is a definite asset in a busy agency by freeing counselors from much paperwork and processing, leaving them more time to concentrate on selling. A well-trained ticketing clerk could make air reservations after being trained to use the agency computer, could issue tickets, and could perform other behind-the-scene tasks, such as ticket and forms-of-value control, literature filling and updating, and so forth. After gaining a good grounding ticketing this person would be promotable to ~ more responsible position, such as a commerical o r domestic counselor. Other support positions include typists, bookkeepers, and perhaps part-timers who can do ftling and other miscellaneous jobs. There is no one satisfactory arrangement for efficient staff deployment. Each agency is different. Obviously the larger agency is better able to hire support and backup people than is the new or small agency. But the more time the professional counselors have for meeting with clients and selling, the quicker the agency will grow. Productivity There are mixed opinions on just how much volume one full-time person can comfortably and efficiently handle. A great deal depends o n whether the agency is automated, the type of business handled, and what, if any, back-up staff and/or other facilities are provided to sales staff. And of course, some people
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have superior sales ability, or they work faster, and have the capability of handing a large volume of business. In a nonautomated agency a counselo r processing all categories or business (domestic and international tours and packages, cruises, and point-to-point air tickets) should be able to handle $275,000 to $350,000 in annual sales. The same person in a fully automated agency should be able lto process a substantially larger volume-especially if back-up staff are assigned to assist with paperwork and ticket processing. But a survery conducted for this book did prove the case for automation. Agency managers indicated that after automating their sales capabilities increased from fifty to one hundred per cent. One manager said that if she eliminated automation her sales productivity would be cut in half. Automation does increase the potential for a substantially larger sales volume. The figures in the following table should not be considered as industry averages, but as basic guidelines to sales staff productivity. Commercial counselor All-round counselor DomeStic counselor International counselor
Nonauromeated agency
AuJomated age11cy
$350,000 to $400,000 275,000 lO 350,000 275,000 lO 350,000
$650,000 to $ 750,0000 550,000 to 650,000 450,000 tp 550,000
300,000 lO 375,000
450,000
to
550,000
What to Pay Too many agency owners hire as manager the person who is willing to accept the lowest salary, and they pay the other employees as little as possbile. Trying to keep operating expenses down this way can be very costly. Such agencies usually have a high personnel turnover, which in tum contributes to a turnover of clientele. Scuh staff change are very expensive for a small business. Unless everyone is well paid and enjoys a high level of job satisfaction, there are likely to be continual staff changes-to the detriment of the agency. A travel agency with good employees whose morable is high is a self-generating agency which will attract and hold business simply because of the competence and sale ability of its staff.
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I
The best advice is to hire the best people you can fmd and pay them as much as you can afford. They will reward you with good sales and loyalty. It is practically impossible to give any realistic salary figures. There are no nonns in the industry, and salary ranges vary widely from on.e area of the United States to another, and from city to suburbs. As might be expected, salaries in New York or Chicago are bound ·to be higher than salaries in rural areas of the Midwest or the South. Experience is an important criterion which influences a person's salary level. An international counselor with ftve years' sound experience and a good following of clients would obviously command a higher salary than someone who had been on the job for only a years or two. In the tr'avel business it is normal to compensate managers and fulltime employees by straight salary rather than by salary plus commission. A manager can always be given the opportunity to increase earning through incentive and profit-sharing plans based upon the growth and profitability of the agency. Other employees can also be included in incentive, profit sharing, and bonus programmes. These programmes are covered in more depth in may book 1be Travel Agency Personnel Ma11ual. The important thing to remember is that if the agency is to operate profitably, then payroll (always the biggest single expense in any agency) must be controlled.' It should never exceed 50 percent of total revenue. General Guidellnes MmUJger. A good manager-one who is highly motivated, sales oriented, and with good knowledge and supervisory skills-should be well compensated (according to industry standards). One leading travel industry consultant has suggested that agency managers should earn at least .015 per cent of gross sales. Although this is a good rule of thumb for smaller and medium size agencies (up to $2 million), it may get too costly for the larger agency. According to this formula, the manager of a $1 million agency should have a salary of $30.000. The same formula says that the manager of a $4 million agency
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should be paid $60,000. I know of no agency manager earning anything like $60,000-but it is possible, of course, that there are owners paying themselves this kind of salary. Managers should be paid a base salary and then given a good profit sharing programme which rewards managers in relation to the agency's bottom line rather than gross sales. TI1is will help to motivate the manager not only to increase the gross sales but to improve the agency's mix and to lbe diligent in cotrolling expenses in order to arrive at higher net earnings. The manager of new agency is going to expect a minium of at least $14,400 a year-probably more, depend!ing on his or her experience and the geographical location of t!he agency. Established agencies might be expected to pay their managers anything from$ 15,000 to $25,000, and up. Courzselors. An experienced counselor should be paid anything from S750 to abut $1 ,400 a month-depending on job function , degree of experience, sales ability, location, and following of clients. A commercial counselor would usually have a lower salary than someone who handles a complete range of travel products. Again, many smaller agency managers and owners underpay their staff and then wonder why people leave for greener pastures. To justify their existence, counselors most be required to produce revenue (commissions) at least three times their own salary. This means that a counselor earning $10,000 a year should earn of the agency a minimum of $30,000 in revenue. Entry-level positions. Trainees should be brought into an agency at a salary in the $650 to $80 range and then be given increases commensurate with their learning ability and job performance. If you fmd a highly motivated beginner and then invest time and money in training that person, it would be wise to protect you investment by providing regular salary increases-say every three months or so, based on progressuntil the employee reaches the going rate for the job in your area. If you do not bring a new employee along, he or she will quickly become discouraged, and you will fmd that you have been training your employee for a competitor..
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Support Staff My own theory of support staff is that people hired as ftling clerks, typists, bookkeepers, and so forth, should have the potential for training and growth into a more responsible position or into travel sales. But this might not always be possible. Entry-level support staff should be paid something between the· minimum wage and $6 per hour, based on skills and experience and the job itself. Skilled typists and secretaries will want from $6-$9 per hour. For an accounting staff, an accounting clerk will expect $6 an hour and up; an experienced bookkeeper, up to $ or $9 per hour. How and Where to Find Employees
'
Good travel people are much harder to fmd now than they used to be. TIJ'ere are several reasons for this situation. First, as the industry expands and travel agencies proliferate, the demand for top-notch employees also grows. Secondly, although the industry is growing, a gr~t many superior employees are leaving because they can earn. substantially more and can move ahead faster in other fields. Thirdly, with the advent of automation, the airlines now recognize that well trained travel agents are worth pursuing, and pursue them the airlines do. There is no way an independent travel agency can compete with the airlines in terms of salaries and benefits. If your agency is located in a small or rural community, it is often next to impossible to find experienced help at any level. About the only options open to you are either to bring in new people and train them from scratch, or hire them away from another agency-if, indeed, there is another agency in the vicinity. Finding good employees in a larger city is somewhat easier. There are several ways to locate travel staff. But do not assume that you will be lucky enough to find exactly who you want when you want them. You may come close, however, and be able to compromise and hire someone who with a little training will make an ideal employee. Some of the resources available in many cities are described below.
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Travel Schools Never assume that a tavel school graduate can walk into your office and right away start handling all sorts of arrangements. If you assume this, you are laying the groundwork for costly errors and innumerable other problems. The travel school does not tum out a full-fledged travel agent. What a good school will do is prepare the student to handle tl1e many basics or elementary functions of an agency, such as domestic and foreign air tickets, car rentals, railroad tickets and hotel, motel, and tour reservations, and perhaps automated reservation system training. Exposure to the more complicated travel produas must come later. Travel school trairlirlg is at a relatively unhurried pace and ir1 a protected environment. The student is not exposed to a strirlg of telephone calls, impatient clients, the frustration of being unable to get telephone calls through to the airline reservation desks, faulty computers, and all the other pressures and harassments of the busy travel agency. For these reasons you should consider a travel school graduate to be an advanced trainee-nothing more. Supplement the trainee's knowledge with on-the-job training, tariff and ticketing seminars, and familiarization trips. Virtually all schools have a placement director who will jump at the opportunity to introduce likely candidates. It there is no travel school in your area, then by all means write to schools which have resident programmes and to correspondence schools and inquire about whether they have any recent or prospective graduates in your vicinity. CoHeges and Universities Graduates of four year college travel and tourism programmes generally ask for (and are entitled to) salaries well above those that most travel agents are able to afford. These graduates usually look for positions with airlines, the larger travel corporations, or hotel and motel organizations. However, graduates from travel and tourism programmes of two-year colleges are ideal candidates for the retail travel agency. Most of them are well trained and eager to find an opening that will give them
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the practical experience they need. Once again, just remember that these young people are still only trainees and should not be let loose on unsuspecting clients without additional training. You may also want to consider hiring on a part-time basis a travel and tourism student who is still in college. The student then has the opportunity to gain on-the-job experience, which may even be allowed some credit in the school programme. Call your local community college to fmd out if travel and tourism courses are taught there. also consult such references as Lovejoy's College Guide and Barron 's Guide to the Two- Year Colleges, Volume 2 for information about courses offered by specific schools. Lovejoy's Barron's and similar reference works can be found in most public libraries. A number of community colleges also offer non-credit courses in travel agency techniques. Such courses are usually offered under an adult education and/or an adult vocational training program and are often taught by a local travel agent. TI1e training usually does not go beyond the basics., but often it is sufficient to qualify the student for a trainee position. The depth of training may be on a par with that of a proprietary travel school, but do not assume this to be the case. You should investigate the curriculum carefully before you commit yourself to hiring someone. Help Wanted ADS
The travel industry trade press is an excellent source for locating job applicants. All of the trade journals have classified sections that will accept your help wanted ads. The classified section of such publications as Travel Age East, Travel Age \Vest, Travel Age Mid America, and others, are often very productive in generating applicants because they are regional publia!tions read by almost everyone in the business. At the national level, Travel \Veekry has the best classified advertising section. Keep your ads brief and to the point, and avoid the use of box numbers. Most travel agents, especially at the managerial level will not respond to a box number. Give a telephone number where you can be reached during business hours and also in the evenings. Reme mber, many prospective applicants are already employed and cannot call during working hours.
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The lead time necessary for travel industry trade journals requires that you allow at least two to three weeks after you submit your ad for it to appear. Ads in local or suburban newspapers will not usually generate many qualified applicants. More often then not your telephone will be tied up with people who want to get into the business but who have absolutely no practical experience. But if you are located in one of the larger cities, an ad placed in the help wanted section of a local large newspaper will often produce results. An ad run on Sunday gets better results than one in a midweek edition. To avoid being inundated with callers who are totally inexperienced, you should include a phrase such as •experienced only" in your ad. Airline People Airline sales representatives, district managers, and passenger sales managers are sometimes excellent sources for le.ads to experienced staff. For some inexplicable reason, an airline sales rep is often a father confessor to a dissatisfied counselor or manager looking to move on to bigger and better things. Make your sales reps aware of your job openings and ask them to be on the lookout for likely candidates. The airlines might themselves have potential candidate. Airline jobs are not always as secure and as exciting as one might imaging them to be. Under the seniority system of most airlines, the last to arrive are the first to go in the event of a layoff or furlough-and airlines are notorious for layoffs. Often a reservationist must work strange hours, or some awful shift which ends late at night when ttie fun of the evening is over. Some airline employees are less than happy with their lot in life. They will often be responsive Lo an inquiry as to their interest in a possible change of allegiance. Feel perfectly free to put out feelers to a competent airline employee when you have a job opening to fill. The Cocktail Circuit In all but perhaps the largest cities the travel community is close knit. One sees the same faces at travel industry cocktail parties, where peope are likey to relax after what may have
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been a particularly bad day at the office. Inhibitions lessen, and certainy many transfers of allegiance have been initiated, ,- if not actually cemented, around the hors d'oevre table. Take a batch of your business cards when you attend social functions and be prepared to pass them out with a discreet "call me if you're interested in making a change.• Do not, however, blanket every cocktail party you attend with business cards, unless you want to antagonize other travel agents. But do be prepared to discuss job openings seriously with someone who interests you. Employment Agencies Private employment agencies in the United States are as old as the country itself, and "broker• advertisements appeared in Boston and New York newspapers more than 150 years ago. All employment agencies must be licensed by the state in which they operate and must conform to rigid rules and regulations. A reliable employment agency will carefully interview, evaluate, and screen applicants. A professional recruiter spends about eighty per cent of his or her time interviewing and evaluating applicants. The recruiter's livelihood depends on the ability to evaluate applicants and place them in the right job. An experienced recruiter makes very few mistakes, and his or her judgement is usually to be trusted. Unfortunately, very few employment agencies specialize in travel industry placements. The few such agencies that do are located in places like New York and San Francisco. Run-ofthe-mill employment agencies should be avoided because their staff will know virtually nothing about the travel agency business. A good employment agency will expect its fee to come from the employer and not the applicant. If you do use an employment agency, be sure to ask for a copy of the agency's rate schedule and terms and conditions. Know exactly what your responsibilities are before you hire someone. You should also get some type of guarantee, which will provide either for a refund of the fee or a credit if the applicant leaves your employment within a specified time period.
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Representatives Sales representatives who work outside the agency on a commission basis are another kind of employee. An outside representative can solicit and introduce business which the agency would probably not otherwise receive. The sales rep is paid according to an agreed-upon division of earnings on the business generated. Qualifications for the Job Hiring a commissioned sales representative is just as important as hiring a full-time experienced counselor. You should do a thorough interview and reference check. The appropriate person can be a big asset to your agency. The wrong person could damage the reputation of your agency through carelessness, negligence, .or unpleasant p ersonality traits. Of cou~e, the same point applies to counselors who work inside the agency, but you would discover the problem much more quickly. Careful screening will help you fmd the applicant who has the best characteristics and skills for the job.
Like other positions in the travel field, a good sales rep should be friendly and outgoing-someone others will like and trust. Look for a self-starter who is sales oriented and
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interested in building a clientele and good income. In other words, check the motives of applicants. Weed out those who seem to want to get into the business in order to gain cheap travel. Such people will not produce much business for the agency. The job does require determination and an investment of time if worthwhile reults are to be achieved. Preferably, the applicant will have done some treaveling and be able to demonstrate that he or she has the time to give to selling travel. It is absolutely essential that the person you hire feel comfortable about making sales calls on local clubs, businesses, churches, and so forth to solicit convention and meeting and other kinds of group travel as well as individual travel amngements. If the applicant comes with conneaions to groups that might provide travel busjness, all the better. If the candidate does not already possess the necessary technical knowledge about tr'avel, he or she should be capable of teaming quickly. Training
Some agencies simply will not hire salespeople who do not have previous travel experience. Whether or not yours is one, when you do hire a sales representative, you should not expect that person to immediately go out and corner the travel market for you. Your new rep must be trained at least in your office procedures. The more thorough the training, the less the rep will require of inside people, and the more professionally the rep will handle busir,ess for the agency. Usually 'the agency manager educates the new outside salesperson, just as the manager would a new inside counselor. Alternatively, the new ·person can be apprenticed to a more experienced travel counselor before being allowed to sell. The schooling must include all office procedures, traiffs and manuals, travel brochures, the agent/client relationship, and various travel products, such as airline tickets, package tours, cruises, etc. Be sure to give the new rep a calendar of industry seminars and encourage attendance . Remember, your agency will reap only benefits from a
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more effective and efficient outside sales representative produced by your putting time and effort into a good training programme. Establish a probationary period for a new sales rep of from three to six months. At the end of that time you and the rep should evaluate job perfonnance and goals. Do remember that in travel sales there must always be "lead time" from. establishing client contact, to booking transactions and generating a flow of business into the agency. Allow the rep adequate time to be able to do this.
Job Description To prevent later misunderstanding, be sure to discuss and agree upon all terms of employment at the time of hiring. Draw up a written contract or letter of agreement which defines the working conditions and reponsibilities, including the approximate number of hours to be worked each week, the type of business to be solicited (individual, commercial, or group), probationary period, and method of compe nsation. The whole idea of having commisioned salespeople is that they work outside the agency to solicit and introduce business the agency would not otherwise receive. You should establish dear guidelines regarding what constitutes new business at the very begining. Distinguishing a "house account" from a "seller's account" can be trickly. If a sales rep brings in travel business from a past customer who has not recently booked with the agency, whose account is itJ In ma!ly agencies, the rule .is, "Once a house account, always a house account." Some agencies stipulate that if a coustomer has not boolked for five years, an outside sales rep may recapture the business as a seller's account. Other agencies use three yeares as the yardstick. At least one agency goes so far as to say that if an outside rep can turn ~~ sporadic cus10mer into a regular one, the rep is welcome to receive a commission. My own feeling is that if a rep brings in someone who
used to be a client of the agency but then we nt to another <1gency fo r ;l co uple of trips, you should pay the rep the
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commission. You will gain the friendship and trust of your rep, and the agency will have a . client back. Do not become embroiled in disputes about whether the rep introduced a specific client. That will waste a lot of time, and the amount of commission will usually not be greate enough to make a noticeable differency to the agency anyway. Give your rep the benefit of any doubt, and do it graciously. Of course, if it becomes evident that your rep is cheating, straighten the matter out immediately. Another tricky situation occures when a sales rep intercepts business as it comes into the office. Some agency managers allow their commissioned reps to sit in the agency and answer telephone and counter inquiJ:ies. Such a policy defeats the principle of commissioned selling. If you do use a sales rep to · fill in, it is best to pay the person on an hourly basis for the work done in the office. Cetainly a commissioned rep will need to use the office to meet with dents, process ftles, collect, literature, write air tickets, and acquire supplies. Whether or not the rep is responsible for doing in-office processing of his or her accounts depends on your arrangement. Do locate the rep at a desk as far away as possible from the general office. A commissioned rep should not have to answer telephone inquiries o r service wial in customers. Sometimes friction can develop between outside sales people and inside personnel. Inside people sometimes resent having to do backup work for the ouiSide people, and they may envy the latter's tosser working arrangements. One way to increase coorperation is to assign each outside person to an inside employee. Then convince both that they need each other--that they are a team. The inside person provides backup information and services to the sales rep, while the sales of the outside person are credited to the inside person. I behooves them to work together. Communication between the office and sales rep is important. An active outside rep should call the office three times a day to pick up messages. This insures that the outside person is
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kept up-to-date and that clients are called back within a reasonable time period. And do remember to include your outside rep in staff meetiqgs, office memos and industry functions. Backup and Support Services A part-time rep will need desk space and a telephone as well as backup staff to handle files and reservations. A full-time rep needs complete facilities, including desk, phone, and CRT. If your rep works at home, you might what to supply him or her with a typewriter. If a great deal of business Is generated, consider a telephone tie-line direct from the agency to the rep's home so that clients can call the agency mumber and be connected to the rep immediately. The agency should provide the rep with a supply of all materials. Current tariffs, business cards, agency, stationery and envelopes are all necessary to do the job. You will have to decide whether the agency will pay for these to will split the cost with the rep. Other expenses you may want to consider sharing are postage, parking, home phone, and client entertainment. If a rep wants to use promotional flyers or letter campaigns which include the name of the agency, you must app,rove the contents beforehand. Unless a cost-sharing agreeement is worked out in advance, the sales rep is reponsible for the cost of the promotional materials. The agency should be prepared to provide assistance and backup when the rep is making sales calls or when the workload becomes too heavy. If the volume of business becomes consistently too much for the rep to handle, it may be necessary to assign another employee to help out, or to hire another employee to be shared by the rep and the agency. The cost of such help should be shared on a pro-rata basis between rep and agency. just keep track of the hours the assistance works for the rep and then charge the employee's salary to the rep accordingly. Developing a Marketing Plan An outside sales rep needs to know what agency
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management expects. Some training in professional selling techniqes should be provided to the rep, including the following guidelines: Establish with the sales rep a goal of a specific number of sales calls to make each week on clubs, businesses, churches, and so forth , to solicit for convention anq meeting business as well as individual travel arrangements. Once a week the rep shuld report to the agency manager on the accounts called and the leads obtained. Effective sales calls are planned ahead of time. The rep should be familiar with the needs of the potential account and should plan an approach to the client. Of course, it is very important for the rep to be on time for appointments and to project a professional status when communicating information. That should include reasons why it would be advantageous for the organization to do business with the agency me rep represents. Unless the client has specific projects to discuss, a rep should not stay longer than twenty minutes, and should be sure to leave a business card and any pertinent travel information. After each sales call, the rep should make some brief notes on the important points of the meeting to help secure the account on the next follow-up call-and decide when that follow-up call should be made. Every good sales rep has a following of individual clients from friends and acquaintances. All business and social contacts should be considered when that following is being developed. Special interests and avocations may offer an oppqrtunity to put together a travel package to sell to people who share such interests. Compensation
Compensation is based upon a division of earning on the business the sales rep produces. Since this causes more confusion and misunderstandings than anything else, the commission structure must be established and agreed to by both parties prior to hiring and then set down clearly in an employement
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contract or letter of agreement. Both sides must be completely comfortable and satisfied with the arrangement The agreement with a commissioned sales representative is a partnership, so the dvision of earnings must be equitable if the partnership ts to be mutually beneficial. The commissioned sales representative m~t of necessity work through an accredited travel agency. The agency manager must bear in mind that the business generated by the commissioned sales representative is new business the agency probably would not have received had someone not solicited it. When determining the c,ommission structure, the manager must evaluate the worth of new business to the agency. It would be wise to have a sliding scale ·that incresases as a rep gains experience and proficiency and achieves higher sales volume. The scale should take int consideration the necessary training and backup staff the agency must provide for an imexperienced sales rep. If-these cost factors are not taken into account, the agency will realize little real profit on the arrangement. In the case of the experienced rep, lettle or no backup is required so the agency can afford to part with a larger portion of the total cqmmission. Figure 16.1 suggests some guedelines for an equitable commission structure for outside sales reps. Three degrees of experience coupled with independence from agency assistance are defmed, with three commensurate commission percentages. While tenns are usually negotiable with newco111ers to the industry, it is often impossible to bargain wi!h someone who has been at the job for years, who processes all his or her . own transactions, and who controls a great deal of business. A veteran commissioned sales representative with a large following is usually in an ideal position to dictate the terms under which he or she works for an agency. The agency manager will have to evaluate what effect on the agency's sales and earnings the additional business would bring. Commercial Accounts
The profitablity of commercial business has changed substantially since the mid-seventies. If (as in most cases) the
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agency staff handles a commercial account which was obtained as direct result of solicitation by the commissioned sales representative, than the rep should be entitled to a minimum of 25 per cent of all commissions e:lmed on that account, either for as long as the agency handless it or for a specific period of time. (Some agencies pay the commission for only three years). Suggested Remuneration for Outside Sales Representatives. Product sold
Pttcent of commlssion paid by ~~gcncy to sales rep A"
B"
C'
35
50
40
50
40
Commercial account
25 25 25 25 25 25
40 35 25
50 50 50 30
Groups
35
45
50
Point-to-point air dckets C!Ulse Tours and packages tOurs
HOleIs Car rental~
a Inexperienced rep with less than six months on the job. b Experienced rep with more than one year of experience; agency staff handUng all transaalons. c Experienced rep handUng aU transactions of own files. d See dlscus.slon In text. Figure 16.1 Commpensatlon to commissioned representatives V2ries widely throughoout the Industry. The flgures suggested here will serve as guidelines for establlshing an equitable commission structure.
If the rep is e>..'tremely experienced and personally handless reservations, ticketing, and so forth, then the rep should be compensated at SO per cent of commissions eamed for those bookings. Group Business
Sooner or later every commissioned rep comes across potential group bookings. Many of these are extremely lucrative. If the agency has a group department, groups can be handled with ease. Sometimes the division of commission is based
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directly on the conunission the agency receives for handling the group. For example, if the agency earns 15 per cent per person on a $1,250 tour for thirty-five person, or a total of $6,562.50, then it can afford to part with 40-45 per cent of the commission. Another way to arrive at a fair division would be to have the agency deduct its actual expenses for a group tour-brochure, advertising, and so forth-from the total commissions, and then divide the remainder with the rep in agreed-upon proportions.
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Training This chapter discusses several kinds fo training. First there is the kind of on-the-job informal training that is always going on in every agency. lfnot, it should be. It is especially important whenever a new employee joins an agency if the manager is to get that person started on the job correctly. Even if a new counselor has sound travel industry experience, as a new employee, he or she will still need to learn how you do things in your agency. For example, your invoicing and other bookkeeping functions may be vastly different. So may be the manner in which your clien t ftles are organized and maintained. A newcomer to the industry would do well to get some formal training before trying to get a job too. Private trade schools, correspondence courses, and evening courses in basic travel agency techniques and procedures are available for the totally inexperienced. There should always be onging training and instructing of experienced employees in new skills. A mistake that many managers make is to assume that because an employee has years of experience, that person is operating effectively and efficiently. Older does not always necessarily mean better. Some people do tend to get into a rut, and unless training and updating sessions are held regularly, people who are inefficient
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Training 243 and nonproductive will probably remain so. Some ongoing training can be informal in-office training conducted by the agency manager. Also, for those already employed in the industry, the airlines conduct regular tariff and ticketing seminars and other training sessions. The Institute of Certified Travel Agents, the ASTA School at Sea, and dozens of seminars all offer advanced training in excellent and highly professional programms. There is formal structured training available for virtually everyonefrom the rank beginner to the ten-years veteran travel agent. Owners and managers are not to be forgotten either. One of the major causes of business failure is the inadequate and improper training of owners and managers. Furthermore, untrained owners and employees are a danger to their clients. Even if you will not be active in your agency, you should be willing to learn something about the industry in which you are investing. The training facilities and textbooks now available allow no excuse for an owner not to learn at least the fundamentals of the business. We will deal Hrst with informal in-house training and then discuss the formal, structured programms that are available. In-House and Informal Training
It is not necessary to make a big production out of training. 1\ll too many managers think of training as a formal affair held in a classroom environment with books, training manuals, slide presentations, and. other such training tools. While there is certainly a time and place for structured training sessions, training is sometimes best handled in an informal and relaxed manner. It is not difficult for a good manager to slip in and out of
the training role. Take Arlene Davis for example. Like any good manager, she knows her people and knows in advance where she is likely to find problems. She has six peoples in her office. She keeps a close, though unobtrusive, eye on ]one Roberts in particular. Arlene hired and trained joan, and Arlene knows that Joan has not completely mastered the job. Arlene
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noticed that Joan was having trouble with an FIT routing. It was nothing major, but joans's results did not measure up to what Arlene expected of her. That afternoon Arlene stopped by joan's desk and said:How's it going, joan? Are you getting that itinerary worked out OK?~ "Slowly," )oan replied, "but I'm getting there." "Good, but you'd better be careful with those train schedules because they change about the time your clients will be in Europe. Here, let's take a look at the winter timetable and compare those schedules with summer." For the next ten minutes or so Arlene and joan concentrated on working out the problem train schedules. Over. the next few weeks Arlene dealt with each of joan's weaknesses in very much the same way she handled the FIT problem. Arlene knew that by using a "this-is-not-a-training-session" approach she was able to instill confidence in joan. Soon joan was as good at her job as anyone else in the agency, thanks to Arlene's patience and informal training. Know your employees, and know their weaknesses and strengths. Make a point of going through the office occasionally to see how each employee is getting along and who needs help. When someone does need correcting, do it in a casual manner right on the spot. Follow up (informally) within a day or two to ensure that your message got across. A new employee needs frequent follow up. If you handle everything informally,. you will soon are see a gradual impro.vement in the employee's performance and an increase in knowledge and self-confidence. The Trainer-Trainee Relationship
crust how well to trainee learns will depend to a great extent upon the trainer's knowledge, the trainer's ability to import that knowledge, and the level of respect the trainee has for the trainer. There is an axiom that says: If the trainee hasn't learned then the trainer hasn't taught
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Whether or not this is true in every case, in most cases where the trainee has failed to learn, generally it is because the trainee did not get the p roper skilled instruction. Many of us carry around a great deal of knowledge, bu we lack the ability to communicate it well to others. In other words, we are not teachers. It is all too easy for a manager to blame lack of progress
on a trainee's dullness of mind. But in most cases the fault lies with the instructor, who (1) lacked tha ability to assume a training role; (2) did not give sufficient thought to the training curriculum; (3) assumed that the trainee could learn at a quicker pace. To the uninitiated, the business side of travel is incredibly complex. ·If the trainer moves too quickly and assumes too much, the trainee will soo become confused and frustrated. Failure to learn requires that the manager or trainer look at himself or herself to be certain tha fault is not there. Be frank with yourself and with your trainee. Try to pinpoint the problem If you are proceeding too fast, then slow down. If the trainee indicates that your instruction is not clear, then try to make it more understandable. If you are not a good teacher-and many of us are not-you will be better off assigning the bulk of training functions to someone else in the agency. A new employee may often relate better and be more at ease with nonmanagement trainer-perhaps an eXperienced counselor of about the same age. But be certain that you meet with trainee and trainer (separat~ly) at leasst once each week to measure p rogress. The following guidelines will help to establish and maintain a good teacher-pupil relationship: 1. Reflect even temper, firmness, fairness, friendless,, patience. and understanding. 2. Lead the trainee; do not be autocratic. 3. Progress at a pace the trainee is able to maintain. 4. Maintain enthusiasm. 5. Maintain posture, neatness, and poise.
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6. Always avoide ridicule and sarcam. 7. Avoid profanity and vulgarity. 8. Bring in a little humor (there is a place for it) but avoid
frivolity.
9. Praise good work in public, but handle poor work privately.
10. Insist on punctuality, attention, and industry. 11. Always follow through.
New-empldyee Orientation In the case of experienced travel staff joining the agency, this is not strictly "training" so much as time taken by the manager to indoctrinate them to the agency. Even experiencd employees will feel awkward for the ftrst few days on a new job, so they should be schooled in their new reponsiblities and helped to become familiar with their new surrounding the first day on the job. The manager should introduce new employees to all the other employees and explain each person's function and responsibity in the agency. If the agency has a policy and procedure manual, time should be taken to go over it to ensure that its coments are understood. Other topics that would normally be covered in an orientation session would include: • Working hours • Payday • Lunch and coffee breaks • Vacation, holiday, and sick pay • Policy on airline passes and familiarization trips • Invoicing and accounting system • Literature and filing system
I I
• Tariff and manual distribution
I
• Autom:Hion procedures
• Clie nt file set-up
I
I I
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On-the-job Training Before starting on-the-job training, the manager should ftrSt identify the specific job or activity the perSon has to be trained for. For example, a different approach would be needed for training a domestic counselor to sell international travel than would be needed for training someone new to the traovel industry. FirSt set the overall training goal, then establi.~hee the specific steps and subjects a perSon must learn to achieve the overall goal. Use the one-step-at-a-time mothod. For example, if you were training someone to sell cruisses, you would normally assume that the trainee is a neophyte to cruse products and would structure the training programm accordingly, as follows: 1. Introduce various steamship and cruise brochures. 2. Teach shipboard and cruising terms. 3. Explain the cabins, pricing, and best locations on board ship. 4. Cover meals, dress, and tipping.
5. Discuss all other available shipboard activities. 6. Explain shore excurSions. 7. Show the trainee how to make a reservation using the telephone and how to make a written reservation request 8. Explain how to discuss cruising with the di.ent; let the trainee sit in on counselor-client meetings. Although this examples is somewhat simplified it does illustrate how one might progress from the introduction to the product to the final closing of the sale. As soon as the trainee has mastered one step, to on to the next-but always make it a habit to review each previously covered topic and to ensure that the trainee has mastered it. 1. Cover one function at a time.
··..~·
2. Review the trainee's work and ensure that trainin·g· assignments are being can·ied out properly. 3. Test the trainee by giving a written assignment at each
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stage. For example, if you are teaching domestic ticketing, let the trainee work out itineraries using the 0/fldal Airline Guide. Progress from very simple routings and fares to those of more complexity.
4. Frankly discuss progress, emphasizing the importance of proper work habits.
5. Set part of each training session aside to discuss subjects covered in previous training meetings. Ask the trainee to summarize what was learned at the previous meeting. Training Meetings
Training sessions, held regularly, are an essential part of the training process. Such meetings will be more effective if they are structured in such a way that there.is sample time for the instruction itself as wen as for a question-and-answer period. A one-way lecture by the trainer will not guarantee that the trainee will assimilate the knowledge offered. There must be a two-way exchange~ free flow of questions and answers to ensure that every topic is covered and understood. Bear in mind that any meeting is an investment in timefor both the trainer and the trainee. It is important for you to structure training so your objectives can be fulfilled in relatively brief sessions. Long, drawn-out, one-sided sessions become tedio~ , and people do not learn well. Thus, much of the time spent will be wasted. To maintain a good pace in training sessions, use the following guidelines: l. Know your training objectives and write them down. 2. Prepare for your meeting. Decide if it will be at a desk,
in the office, or in a meeting room. Decide what aids you need: will you use a blackboard? handouts? what Everything should be prepared ahead of time.
3. Announce the meeting ahead of time to give the participants at least one or two days to think about the agenda.
4. Set a time limit for the meeting let the employees know what it is.
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;. Start your meeting on time, and lead off by outlining the objectives. Many good training sessions fail because the leader failed to communicate the objectives.
6. Follow your prepared outline. If you do not you will not be .able limit.
to
accomplish your goals within the time
7. Allow ample time for questions, answers, and discussion. 8. Control the meeting. Bring discussion back on track if it wanders. Make every minute count.
9. Firmly bring your meeting to a decisive conclusion at the predetermined time. 10. Always follow up. Role Playing Role playing can be extremely productive and instructional to everyone involved. While some people may be self-conscious at first, they will soon enter into the spirit of the thing.
If some employees are not used to role-playing exercises, introduce them to the concept gradually by selecting tthe players in advance. Let them prepare themselves so that when acting out or simulating diem customer situations they will fell cornforJble doing so. After the employess become used to role playing, yor can assign roles at the beginning of the meeting so you can see how they perform without advance notice. Make certain that everyone has the opportunity to play all roles. At the conclusion of each role exercise the leader should review it and lead a discussion on what took place so all participant can evaluate it. Let other employees comment on their colleagues' performances and give examples of how they might have handled the situation better. Famillarlzation Trips
The sole purpose of familiarization trips is education. The are intended to introduce the agent to areas no previously visited or to acquaint the agent with a new tour p roduct, air service, hotel, or resort. Often "fam" trips are sponsored jo intly
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by a carrier, tour operator, hotels and a government or state tourist board. Unfortunately, many travel agents feat fam trips as junkets. Fam trips should be encouraged, and they should be an important part of every employee's training and development programme. They are a spliendid means of improving knowledge at little or no cost to the agency. If each employees participates in at least one fam trip each year, the agency will very quickly be staffed by competent and knowledgeable people, and it will be recognized by client and the community as a professional agency. Treat all fam trips as educational experiences by requiring employees to prepare a written summary report upon return employees relate his or her experiences to everyone in the agency. Fam trips can thus be used as training aids for the entire staff, not just the participant. I once met an agency manager who always carried a battery-operated tape recorder wherever she went so she could record her experiences and opinions while they were fresh in her mind. When she returned to her agency, she called a staff meeting and used the tapes as a supplement to the training session. She encouraged each of her employees to travel with a tape recorder too. Her agency employed extremely efficient. This manager recognized that fam trips were an extremely valuable method ot training her staff, and so took advantage of them as much as she could. F9~T~
More emphasis is placed on formal training to day than at any other time. Virtually all the trade associations sponsor seminars. The American Society of Travel Agents has a, correspondences course. The Institute of Certified Travel Agents offers a certification programme. It is the most advanced course for those employed in the ravel industry. There is something for everyone- from the newcommer to the agency manager or owner. Some formal training is, or should be, part of the growth
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and dev~opment of ev~ agency employee, owner, or manag~. The travel industry has undergone drastic change in recent years. It is countinually evolving. Participation in fonnal training programmes takes time and it takes money. But the end result knowledgeable employees and petter managed agencies. It may al;so mean survival. Increased competition, deregulation, inflation, and recessions have all taken their toll of the independent travel agent. Today's agency employee and manager must be smarter and more aggressive than were their counterparts of even a few years ago if they want to survive. Those who are unwilling to improve and shapen their skills and change with the times probably will not be around long. Take the time to flnd out what seminars and courses are available for both management and nonmangement travel people and evalutate them carefully as to their content, the time involved, and the cost. The following resources offer many training programs, book and other publications to travel agents. Because new seminars and books are always being introduced, you should contact each of the organization for up-to-date infonnation. (Consult the list of organization at the end of this book for addresses.) American Society of Travel Agents
ASTA offers a corrpondence course that covers the basic skills of the travel business. It is an ide~ ~rog:ramme for someone new to the industry. A lack of training classes in your area is thus, no reason to forgo training. Correspondence couses are not the ideal way to learn the travel business, but they are still sources of training, and they permit you to work at your own place. -• ASTA also offers a series of seminars on various aspeCts of travcl agency management and operation. These seminars are given in major cities. ASTA also publishes a number of helpful pamphlets and tnlining aids. Contact ASTA for details of these and other training material. The ASTA School at Sea is conducted in cooperation with
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various steamship and cruise line. Shipboard instruction covers all subjects relative to cruise and steamship transportation. Assodatioo of Retail Travd Agents ARTA sponsors a number of excellent semmare in key cities. Contact ARTA for infonnation on their progranunes. InStitute of Certified Travd Agents ICfA offers a managerial travel comperhensive and thorough couse leading to accreditation as Certified Travel Counselor. The letters ere after a graduate's name testify to an advanced level of professional training. All travel agents are encourage to apply as ere certificiation candidates if they have at least three years' full-time experience. Study groups are .formed throughout the United States. Ideally, groups consist of not more than fifteen candidates and are coordinated by a volunteer. After a candidate completes each section of the four-part course, he or she must then take an examination supervised at a cooperating local university. ICTA allow a candidate to have three years from the date of enrollment ot complete all academic requirements. In addition to the sonsors seminars.
ere certification programme, ICfA also
For complete infonnation on their activities, write to the Institute of Certified Travel Agents. (ihe address is in the Appendix). Other Training Programmes
At the local level, many of the airlines offer automation courses and tariff and ticketing seminars at the beginner, intermediate, and advaned levels. These and similar programmes are designed as ongoing education and instruction intended to upgrade the skills and knowledge of current travel industry management and employess. They are available only to those who are actually employed in the industry. Textbooks and Training Materials
Merton House Travel and Tourism Publishers specializes
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exclusively in publishing professional texts and booklets for the travel the books in The Travel Management Library series are used extensively in many travel industry seminars as well as colleges and travel training schools. Write for their current catalog and ask to be placed on their mailing list Travel Training Schools A good travel school is probably the best form of training for someone who is new to the travel industry. Most of these schools provide excellent baslctraining for may of the industry's entry-level positions. There are those who say that anything as detailed and as complicated as the travel business cannot be learned in a classroom-but only through on-the-job experience and inoffice training and instruction under the direction of a competent manager. However, other insist that the training provided by a good travel school, where the courses are expertly taught, is invaluable and, in fact, necessary if a growing industry is to be supplied with steadly flow of new employees. Would-be travel agents often find that many agency managers will not hire anyone without either agency experience or some basic travel training. These are probably the managers who just do not have the time, patience, or ability to prepare and administer a comprehensive can do an excellent job of teeching students the fundamentals. These can then be the basis for their learning other, more advanced skills through on-the-job training. Seminars and course available to people actually employed by travel agencies can offer still more learning opportunities. A good travel undoubtedly fills a gap by providing the industry with people who have the basic skills. No school, no matter how good it is can be expected to turn out a full-fledged travel agent competent to handle any transaction that comes into the ageny. The world is a bit place. The travel industry is in a constant state of change. It takes many years of eiperience and training to acquire the skills of, say, an international counselor. Five years' experience would be about the minimum bat one would need to become thoroughly proficient in the international field. What a travel
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school can do is prepare the student to handle many of the basic agency functions, such as sb:nple domeStic and international air ticketing. Computer training, car rental, hotel and motel reservations, and ·easy chapter bookings. Exposure to more ·complicated products, such as tour packages, independent tour planning, course, group travel, and incentive travel will come much later. If you are seriously considering a specific school, you should first fmd out if it is properly accredited and licensed. Virtually all states require that any establishment charging a fee for vocational or business training must be approved and licensed by the state. Unlicensed facilities certainly do exist, and it has even been known for enterprising travel agents to operate unlicensed, back-room travel-training programmes. Some agents have gone on step further by offering to trainees eager to learn the travel business basic training in return for an agreed-upon number of hours of unpaid work. Consider only a propely licensed travel school, or other accredited programme, which has a record of good training and placement of its students. Avoid unlicensed operations as well as the 1'11-train-you-if-you-work-for-fee schemes. Both of these are niegal, and you will not get proper training anyway. Tuition fees vary. The school with the highest tuition fee may not necessarily offer the best course for you. Compare school catalogs, curricula, and the number of hours of instruction. Some schools include a lot of unnecessary subjects in their curricula. These may be courses which are often too advanced, hence worthless, for the average beginner. Look for a school that offer in-depth training in the basics of the business. The best way to check out a travel school is to attend on or two sessions of a current class. Then you can .s ee at firSt hand the school facilities and the quality of instruction. Several school invite would-be students to monitor an actual class before they enroll. Also, fmd out the percentage of srudends actually placed in travel-related jobs after graduation. No reputable school gurantees employment upon gradua.tion, but it should be willing to provide placement statistics.
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Particular things to look for include the following: • 7be Instructors. Who are they? What are their credentials? Instructors should have a professional travel background and be able to teach other. • Textbook. Are the necessary textbooks, manuals, airline timetables included in the cost of tuition or must they be
purchased separately? If they must be purchased, what is the cost? • Employers. Ask the schdol to give you the names of
employers who have hired graduates. Then ask these employers how they rate the school. Also check with airline and travel agency managers and other travel employers in the area. • Graduates. Ask the school to give you the names of recent graduates whom you can contact. The most objective opinions about the school would be from is graduates. • 7be contract. Read and understand the contract 'before you sign it. Know your rights regarding cancellation and refunds. Read all the fme print
If these suggestions sound overly cautions, remember that these schools are private profit-marking enterprises. Most travel schools are ethical and reputable, but every field seems lo have l ess scrupulous operators with more concern about their profit than about proper instruction and placement of their students. Preinvestigation may save you a great deal of time and many dollars. Be certain the school be pressured into signing any contract until you have studied it thoroughly. 'College5 and Universities
Many two-year programs are offered by community colleges. The titles of the course vary from collage to collage, but generally are called, Travel Agency Management; Travel and Tourism; Travel Industry; Transvortation; and similar names. The most comprehensive kind of 'travel training is in a four-year college or university, here the curriculum is part of a
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business management courses Oeading to a degree in business with a travel and tourism major). Such programmes are offered by about a dozen universities in the United States. Other programmes lead to a bachelor's or an associate's degree. These are full-time credit course and are not to be confused with noncredit course. They are somewhat outside the scope of this book but are mentioned to show how far trav·e l industry training and development have progressed. Other Classroom Training
A number of community collages now offer .noncredit courses in travel agency techniques. Such Courses are usually offered under an adult education and/or vocational training programme, and are often taught by a local agent. While many of theses courses are well planned and expertly taught, some of them are incomplete or the quality of instruction is poor. As with a private school, investigte such a course before you enroll. Even though the tuition cost may be considerably lower than in a private school, you still have to invest a gr,e at deal of your time. Spending valuable time on an incomplete course will not be you time. Spending valuable time on an incomplete course will not do you much good.
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Emplyees and the Low An employer must be familiar with a variety of federal and
state halth and safety regulations, wage and hour laws, and prohibitions against certain discriminatory practices. Violation of any of these laws, rules, or regulations can make the employer liable to criminal sanctions. Such an employer may also employer liable to criminal sanctions. Such an employer may also be liable to civil action on behalf of the employee who has been harmed. Wage and Hour Requirements
Both federal and state laws control minimum wages, overtime pay, and compensatory time off. The wage and hour law statutes cove·r such things as the number of hours worked, rate of overtime pay, minimum wage, and when an employee must receive overtime pay. There are many stuations in a travel agency that may be affected by the wage and hour laws. TI1ese include the questions of overtime pay while the employee is participating in a familiarization trip, escorting a tour, or auending a seminar. Even a cocktail party can call for overtime unless the agency owner makes it unequivocally clear that such attendance is purely voluntary.
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Overtime: Minimum Wage
The Federal Fair Labor Standards Act establishes regulation with respect to overtime and minimum pay. The act applies to any travel agency having gross sales of more than. $362,500. Most states also have minimum wage and overtime statutes; they are often stricter than federal requirernetns. These laws usually exempt executive, professional, and administrative workers from provision of the acts. The law provides that any covered employee is entitled to overtime pay equal to one-and-one-half times the employee's regular pay for any work over forty hours per week. Even if the employee is paid by weekly, the calculation for overtime purposes is based on seven consecutive twenty-four hour days. The hours worked in two successive weeks may not be averaged to avoid payment of overtime. The act establishes as mini!Jlum rate per hour for covered employees. Employers cannot pay less than the minimum hourly rate even if the employee agrees to accept a lower rate. In many instances, the basic work week of a travel agency is greater than foty hours, but the employee's pay is stated in terms of a flat amount. This type of situation can cause problems for the travel agency if the hourly rate of pay is not spelled out. For example, Leanne works seven hours a day, Monday through Saturday, for an agency; her salary is $250 per week. The question is whether Leanne is paid for forty ihours at a certain rate per hour, plus two hours of overtime at one-and one-half times the regular rate, or is sh:e being paid the same hourly rate for each of the forty two hours she works? The federal act requires that all work over forty hours per week be paid for at the overtime rate. Therefore, if Leanne is being paid the same rate for each hour worked, she is not getting the pay she is entitled to under federal law. This situation can be avoided by specifically spelling out· the hourly rate that she ·is paid, including the overtime rate. Aslo, remember that although federal and most state laws require a minimum of one-andone-half times the regular rate for overtime, the rate can be higher if agreed to be the employer and employee. In the area
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of wages and fringe benefits, it is best for even the smallest agency to have all details spelled out so that disputes can be avoided. Of course, if the employee signs an employment contract, all of these datails should be set forth in the agreement Also bear in mind that any provision in an employment contract that violates the Fair Labor Standards Act will be · deemed invalid. For example, jack signs an employment contract that contains a clause waiving overtime pay for work in excess of forty hours per week. This clause is not only illegal, it will subject the employer to possible criminal and civil sanctions for violating the act. In addition, the employer will still be responsible for time-and-a-half for overtime hours, regardless of what appears in the contract. Also, while federal legislation does not set forth specific paydays, many state statutes require employers to pay their workers at specific times- for example, every two weeks or twice monthly, except for administrative, executive, or professional personnel. Again, it must be emphasized that you should verify what specific laws are in effect in your own state that might be more stringent than federal requirements. Compensatory time off Some travel agencies give their employees compensatory time off in lieu of overtime pay. Although this is not prohibited by the act, several requirements must be met to ensure that the employer will not be in violation of its provision. Any compensatory time off provided employees who have worked overtime must meet the following requirements: • The employee must receive one and one-ha'lf hours off for each hour of overtime worked. • The compensatory time must be given and used during the same pay period during which the overtime was worked. • The employee must arrangements.
voluntarily agree
to
these
Problems in this area will arise most frequently when a disgruntled employee files a complaint after leaving the agency.
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The best way to avoid such problems is to follow the letter of the law and make certain that all employees understand their rights and obligations. Familiarization
trips and tour coJlducting. Familiarization
tirps and tour conducting constitute a potential problem area for travel agency employers. It is clear that agency employees traveling as tour managers are performing their duties as employees of the travel agency. However, the employee should be advised, before the group departs, that he or she is to work only forty hours per week if at all possible. Although it might be impossible to avojd working some overtime hours, the employer should make it clear that overtime is to be kept at a minimum. to familiarization trips, is an employee on such a trip performing an employee's duties, or is the person off duty? The educational nature of a familiarization trip favours an interpretation that the emplyee is working at the time of the trip and therefore subject to the provisions of the act. As
If an employee signs an employment contract, a clause can be inserted stating that each employee is eligible for a specified number offamiliarization trips each year, but that the trips are voluntary and vacation time must be used for them. Even if the employee is not under contract, the above understnadings can' be agreed upon, verbally or in writing, before the employee.leaves on the trip.
Seminars and cocktail parties. Yet another potential problem area for tavel agency owners concerns employees' attendence at seminars, trade shows, lectures, and cocktail parties and dinners. Are employees attending these or similar activities "on duty" and therefore subject to overtime pay and other provisions of the Federal Fair l.abor Stadnards ActJ If the following four criteria are met, the employee is not cons id red on duty while attending any such event: 1. Attendance is outside the employee's regular working hours.
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2. Attendance is voluntary. 3. The activity is not directly related to the employee's job. 4. The employee does not perform any productive work while at the activity. An employee's attendance is considered involuntary if the
employer requires it or if the employee is told that Ws or her job is at jeopardy or the working conditions will change if he or she does not attend. Training will be conseidred directly related to the job if it makes employees more efficient in their present positions as opposed to providing new skills. However, if a travel agency employee attends courses outside of working hours, if the employer pays for the schooling. Remember that an employee has to be paid for overtime work only when the hours exceed forty per week. Therefore, if attendance at an event outside of business hours is required, allow the employee an equal number of hours off during regular working hours to avoid liability for overtime pay. Also, any voluntary attendance outside these activities should be discussed fully with the employee so that the employee understands that attendance is not required. previously mentioned, executive, administrative, and professional employees are exempt from the federal act and usually from state wage and hour laws. As
In most, if not all, travel agency situations, the manager will be the only employee fitting these categories. Under the act, and executive is a person whose duties include management of the enterprise or a part of the business; who has the authority to hire, frre, and supervise; who has discretionary powers; and who supervises two or more employees. The employer must distinguish between an employee who is given the title of an executive and one whose duties fall w ithin these guidelines. Even if an employee is called an executive, that employee will still be subject to the act if his or her duties are not similar lo those just mentioned.
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262 Tourism and Tr:avellndustry It is essential that every uavel agency employer have a
general knowledge of the laws and regulations that affect th~ employeremployee relationship. Good employee relations are essential for the success of the business as well as fo{ avoiding any problems, civil or criminal, that may arise if the law's requirements are ignored. Un~ployme~t ~pcnsa~oA
Unemployment compensation benefits to the employees and costs to the employer vary from state to s~e. The funds are derived through a payroll tax levied on each employer in the state. The tax is based on the employe('S experience rating, which in turn is based on wages paid and benefits charged to the employer during the previous three years. Most states require unemployment reports and taxes to be f~ed and paid quarterly. The fewer employees of an agency who collect unemployment insurance, the lower the agency's experience rating will be. The taxes paid by that agency will also be lower. Each state sets its own benefit levels, as well as eligibility standards for employees. Generally, an employee must meet some or all of the following conditions to collect benefits: • Not have been fired for misconduct on the job • Not have resigned without ~use • Not be unemployed because of a labor-management dispute • Have registered with the local unemployment office and generally be available for work • Have worked the required minimum time period as specified by state law • Have been unemployed for the required minimum waiting period • Not have refused an available position that is within his or her abilities and skills· The minimum period of employment and the waiting period
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after employment ends help the state avoid paying benefits to seasonal or temporary employees. If an employer fires an employee, the employee will collect unemployment compensation unless the firing was for cause. This will cost the employer in the fonn of highe( payroll taxes in future years. It is better for the employer, therefore, if the employee resigns. ~or-~~ Com~nsadon
Workers' Compensation laws provide a remedy for the orker against the employer for work-related injuries. An employer cannot be sued for negligence by an employee for a work-related injury. ln most states, businesses are required to obtain workers' compensation insurance or show their ability to self-insure. While benefits vary under federal legislation and from state to state, workers' compensation insurance generally provides temporary benefits to employees while they are recovering from the work-related injury as well as full medical coverage for the injury, usually for life. As with any other type of insurance, the more claims paid, the higher the premium cost for the travel agency. Also, the ligher the potential benefits to the employer under the law, the ·higher the premium. However, the professional nature of the travel industry results in lower premiums than charged for many other occupations-for example, construction work. Regardless of the requirements of state law, no travel agency should open for business untill it has workers' compenasation insurance in effect. S~l
Security
Every employer must pay into the Social Security system as a fonn of payroll tax a sum equal to a certain percentage of the employee's inco me. An indentical percentage is deducted from the ernployeee's gross pay and also remiued to the federal government.
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The percentage applied to the gross income and the maximum amount of income subject to the tax have both risen considerably in recent years in attempts to keep the system solvent. This payroll tax can represent a significant portion of an employer's payroll budget. There is no way to reduce this expenditure without eliminating positions within the agency. The federal government requires that Social Security, in<:ome tax withheld, and employer contnbutions be remitted either montlhy or quarterly, depending upon the amount of money due. In either case, the travel agency must have this money available and must remit promptly to avoid the penalties and interest which accrue to late payments. There are, of course, substantial criminal sanctions for an employer who does not remit or who converts the employees' withheld tax to his or her own purpose. Employment Dlscrlminatlon Title VII of the Federal Civil Rights Act of 1964, as amended by the Equal Opportunites Act of 1972, prohibits an employer from discriminating against any person as to compensation, benefits, or conditions of employment because of race, religion, color, sex, or national origin of that person. This law, with some exceptions, applies to all employers having fifteen or more employees. The Federal Anti-Age Discrimination Act prohibits age discrimination for persons between the ages of forty and seventy. Many states have similar laws applying to employers with fewer than fifteen employees. An employer cannot ask questions about an applicant's race, age, sex, or religion because such questions may indicate a bias against the applicant Questions concerning family history, health, or other sin1ilar areas can be asked for insurance purposes afterthe person is hired. A travel agency employer should consult witl1 his or her attorney to determine what type of questions may be asked of job applicants and what qualifications may be imposed. Even if an agency does not have enough employees to be subject '
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to federal or state discrimination laws, the last thing it needs is
the publicity accompanying a discriomination lawsuit, even if the suit is successfully defended. Competition by Former Employees
If an agency employee leaves, can that employee take clients along? Can the agent take a list of clietns from :a former employer? can the employee contact existing clients and solicit business while still working for the original employer? Questions such as these are important to the owner as well as the ~mployee.
It is generally accepted that an employee cannot solicit his or her employer's customers on behalf of a new employer while that employee is still working for the fli"St employer. However, after leaving the employer, the employee is free to compete with his or her former employer in the same way as any other person. The key area of controversy is whether former employees can use client information ascertained during their prior employement to further their new jobs. If the customer list is a trade secret or confidential, an employee cannot use such infom1ation, whether the customer list is a trade .s ecret or confidential is a question that can be answered only after a review of each specific situation. For example, if LSJ Travel Agency has a list of customers that consits of area business concerns, the list would usually be available through building directories or telephone lists. However, if LST's clients do not come from the general area, perhaps the list could not be gathered from public sources. A co urt would also enquire whether an agency left the customer list out for all employees to see and inspect or kept it under lock and key with only certain people having access to it. In the former situation, the court might allow its use by the ex-employee; in the lauer case, the court might be more restrictive. If employees have developed their own clients while working for an employer, a court will be reluctant to disallow contact with those persons-especially in the case of commissioned
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salesperson who has been responsible for generating new customers for the agency. The proper method of preventing an employee from contacting clients is to seek a court injunction. If a court issues an injunction prohibiting contact with clients of the former employer, the ex-employee can be in comempt of court and subject to fines and imprisonment. While there are ·no specific conclusions that can be drawn on the subject of customer lists, there are general guidelines that can be followed. These guidelines ,include: • No employee can contact clients of an existing employer concerning the employee's new employement until the employee has left the agency. • After employees have left the agency, they can contact clients they have develped. • Ex-employees are in a stronger position if no lists have been copied. • Ex-employees can send general announcements to clients of their former employers without directly contacting them. If the clients then contact the ex-employee, there has been no solicitation, and hence minimal exposure to a lawsuit by the former employer.
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•
Professional Tools: The Reference Library and Association Memberships Of most immediate importance to the successful operation of your travel agency are the right professional tools and a supporting professional environment. A well-rounded collection of tariffs, manuals, trade journals, and other reference materials are the primary tools every travel agency needs. The collection of reference materials may vary somewhat, depending on the needs of the agency, but even the two-or three-person agency will have to invest several hundred dollars each year to get the right tools to conduct business efficiently. The complete travel agency library should include three kinds of materials: 1. Tariffs, manuals, timetables, maps.
2. Trade journals. 3.
Management books and training guides.
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l!ach kind ftlls a different need. The first category provides you with the information necessary to service your clients. The second keeps everyone in the agency up to date on travel trends and what's happening in the industry. The third helps you-and your staff-improve your own professionalism. 1. Tariffs, Manuals, Timetables, Maps
The tariffs, manuals, timetables and maps are the cornerstone of your collection. Without up-to-date material you cannot quote correct fares, rates, schedules, or work accurately with air ticketing and hotel charges. If you use outdated information, you will soon run into problems, and your clients will quickly lose faith in an agency that dispenses incorrect rates and schedules. After all, information is really a great part of what you are selling. What publications you subscribe to will be dictated by your budget and your needs. An agency with an automated reservation and ticketing system may be able to get by with the monthly adition of the OAG-Nortb America. An agency that is not computerized will need the twice-monthly subscription. Hotel aud Travel Index is published quarterly; you will have to balance its lower cost against the more expensive but more detailed and more current O.ffical Hotel and Resort Guide, which comes in a loose leaf format and is updated regularly throughout the year. Everyone in the agency should understand how to use every resource in your cellection; if they don't, you are wasting money, and. time, and quite possibly irritating your clients. Instruction in proper use of this material should, of course, be routine for new employees. For efficiency's sake, try to keep the office copies of these manuals and tariffs in one place, easily accessible to everyone, and designate one person responsibl for updating all looseleaf tariffs and destroying any outdated material immediately. The staff who have personal copies should update their own. Make it a practice to update the materials on tbe same day the replacements arrive. Require that all new materials be stamped
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with the date of receipt. This may help to keep the· reference tools current. Below is a list of reference materials from which you can select the ones that seem best for you. Sofue you may be able to do without. At least one (Amold's European Fares and Rates Manual) is necessary only for an agency that handles its own FITs. Bear in mind that you may need more than one copy of some. Two counselors may be able to share one copy of OAG-Nortb America; one copy for three counselors will not work. Subscription rates as of the publication date of this book are given, but they are all subject to change. For additional information, write to the publishers. American Sigbtseeing Intemationa/ \Vorld Tariff(American Sightseeing International, 1270 Avenue of the Americas, New York, 1\!Y 10020). Free to travel agents. Lists all American Sightseeing International companies, along with tours, services, and tariffs. Amold's Europea 11 Fares and Rates (order from Forsyth
Travel Library, P.O. Box 2975, Shawnee Mission, KS 66201). Annual, $95. This manual is used for handling and pricing Foreign Independent Tours (FITs) and groups. Includes transportation, transfers, and sightseeing costs as well as rates to more than 5,000 hotels in Europe. An essential reference work for tour operators and travel agents who want to handle their own FITs. Ford's Deck Pla11 Guide (P.O. Box 505, Woodland Hills, CA 91364) $50. A comprehensive series of deck plans in a large format for over 13S major passenger ships. An ideal sales tool that is easy to use and includes much useful information on the ships themselves. Ford's Freigbter Travel Guide (P.O. Box SOS, Woodland Hills, CA 91364). Quarterly, $30 per year. Packed with information on passenger crusies wordwide. Includes a comprehensive list of ships with photographs and details of each, itineraries, fares, ports of call index, pier information, and a calendar of cruises from botI) coasts .
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Gray line Official Sightseeing Tarifi(Gray Line Sightseeing Companies Associated, 7 West Slst St., New York, Ny 10019). Free to travel agents. Lists all Gray Line Sightseeing member companies and their tours, services and tariffs. Hotel a1uJ Motel Red Book(716l North Clcero Ave., Chicago, IL 60646). Annual, $45. A directory of more than 8,500 hotels and motels in the United States and overseas. Includes information on locations, facilities, air distances, tool-free numbers, and visa and travel information. Incorporates a resort and condominium section and a meeting planners guide. Hotel arzd Travel Index (P.O. Box 5820, Cherry Hill, NJ 08034). Quarterly, $70 per year; discounts available to travel agents. A one-volume directory with worldwide listing of over 30,000 hotels, motels and inns. Contains basic booking information and over 4,500 hotel advertisements that provide additional information on rates, services, facilities, accommodations, and much more. Also includes city area maps and a section listing the toll-free reservation numbers. 7be New lntemational Atlas (Rand Me Nally & Co., 8255 Central Park Ave., Skokie, IL 60076. Also available in many bookstores)., $79.95. Every travel agent should have a good atlas, and this one is considered by many to be the leading atlas. It has over 300 pages of full-colour maps and charts and includes over 160,000 place names. 7be International Reception Operator's Source Book (fhe International Reception Operators, Inc., 8530 Wilshire Blvd., Beverly Hills, CA 90211). $5. Lists all members of the International Reception Operators, Inc. Covers the services offered by each reception operator, including transfers, sightseeing tours, guide services, and so forth, along with net rates for both individuals and groups. jax-Fax Travel marketi11g Magazine (280 Tokeweke Rd.,
Darien, CT o6820). Monthly, SlO per year. Lists charter programmes, tour programmes, and booking infom1ation. Widely used as a reference throughout the travel industry. OAG- lntemati0110l(TI1e Reuben H. Donnelley Corp., 2000
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C learwater Drive, Oak Brook, TL 60521). Monthly, $150 per year. Complete city-by-city listings of all worldwide scheduled flights to points outside the North American continent. OAG-Nor1b American (The Reuben H. Donnelley Corp.,
2000 Clearwater Drive, Oak Brook, IL 60521). Monthly, $150 per year. Complete city-by-city listings of all worldwide scheduled flights to points outside the North American continent. OAG-Nortb American (The Reube H. Donnelley Corp., 2000
Clearwater Drive, oak Brook, IL 60521). Monthly, $ 126; twicemonthly edition $167 per year. Includes flight schedules and fares of scheduled carrieitrs in the United StateS, Canada, and the Caribbean. OAG- Travel Plamwr arzd Motel/Hotel Guide (The Reuben H. Donnelley Corp., 2000 Clearwater Drive, Oak Brook, 11 60521). Quarterly, S70 per year. Lists over 15,000 hotels and motels, airport diagrams, ground transportation, and much more.
Official Hotel mtd Resort Guide (P.O. Box 5820, Cherry Hill, NJ 08034). Updated regularly, $210 per year. Worldwide coverage of more than 30,000 hotels and resorts in four large loose-leaf volumes provide accurate data on rates, rooms, facilities, commissions, quality ratings, and many other essential facts. Also included are regional maps, city m.<tps, and destination sections. The best hotel reference tool for the travel agent. Official Meeting Facilites Guide (One park Avenue, New York, NY 10016). Twice yearly, S30 per year. Over 1,000 important worldwide meeting facilities are describe d. Listings include meeting room dimensions, ·seating capacities, support services, facilities, acconm1odations, and off-premises attractions. 71Je Official Railway Guide( 424 West 33rd St., New York, l\TY 10017). Eight issues, S52 per year. This guide to rail travel in the United States, Canada, and Mexico includes essential facts on schedules, fares and tariffs, equipment, on-board accommodations, route maps, and a complete index: of railroad stations. OAG Cmise. a11d Sbiplilll! Guide (One Park Avenue, New
York , r\Y 10016). Six issues, $63 per year. Provides updates
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on sailing schedules, dates, intineraries, and fares for steamship travel worldwide. PattAm World Gufde(Available in many bookstores). $10.95.
Includes complete travel facts on more than 140 countries, including weather, customs, hotels, sightseeing, currency, and much more. Very popular with many travel agents as a simple but comprehensive reference book.
Russell's Official Bus Guide (P.O. Box 278, Cedar Rapids, lA 524o6). Monthly, $60.60 per year. Contains the bus schedules throughout the United States and canda. 71Jomas Cook bzternattonal Timetable (Order from Forsyth Travel Library, P.O. Box 2975, Shawnee Mission, KS 66201). Monthly, $175 per year by air, $140 per year by surface mail; casual subscription (five issues), $74.95 per year; single copies, $15.95 each. A comprehensive timetable (not fares) of European rail service and the Europabus system plus a summary of world wide rail schedules. Includes passenger shipping and ferry services throughout Europe. This timetable is essential for every travel agency, and everyone in the agency should know how to use it. Most agents find that the casual subscription of the five major issues is adequate.
Travel 800 (11411 Cumpston St., North Hollywood, CA 91601). Quarterly, $25 per year. Lists all toll-free telephone reservation numbers of the travel industry--airlines, cruise lines, hotels, car rental companies, tour operators, and others. A very useful book. Tbe Trawl Industry Personnel Directory (2 West 46th St., New York, l\TY 10036). Annual, SlS per year. A comprehensive directory of airlines, tour operators, cruise and steamship lines, hotel reservation services, car rental companies, and many others. Lists key staff. 2. Trade journals and Newsletters To keep up to date on happenings in the travel industry, it is essential that you subscribe to one or more o f the trade jo urnals published for travel agents. It may not be possible to read them all from cover to cover, but you and your staff
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should make it a habit to read at least one of the major trade magazines each week. Most trade journals offer far more than travel industry news coverage. For example, Travel Wookty includes in its subscription such special issues as its Annual Travel Agency Profit Guide and an issue devoted to group travel. A subcription to the weekly Travel Trade includes the monthly Business Travel, a semiannual personnel directory , and many special issues. 11Je Travel Agent Publishes many supplements also, as well as special issues on such things as the economic outlook for the travel industry, commissions update, and so forth. Because of the different format and companion publishing programme of each publication, it would be a good idea to subscribe to all of the national trade journals. If you ftnd this too much reading, or are not sure which publications meet your needs, subscribe to all for the first year, then choose your favoritcs for renewal. ASTA Tmvel News (488 Madison Ave., New York, t\'Y 10022). Monthly, SlO per year. A magazine directed prin-u"lrily to members of ASTA, but any travel agent may subscribe. It carries membership infom1ation and indepth articles on domestic and foreign destinations, as well as many useful articles on travel agency management. 7be Travel Agent (2 West 46th St., New York, NY 10036). Twice weekly, $9 per year. Apart from current industry news, it has a regular column on "agency operations,» contributed by various writers, covering all aspects of travel agency administration, marketing, and management.
Travel Management Daily (888 Seventh Ave., New York, NY 10016). Daily (five issues per week), $330 p er year.. Newsleuer foramt with concise, up-to the-minute reporting of travel industry developments for managers and executives in travel, transportation, and tourism. Travel Mauagemc11t Newsletter ( 888 Seventh Ave., New York, NY 10016). Twice-weekly, $177.50 per year. All the imporLant news in TratX!l Management Daily Condensed into a convenient, quick-reading summary.
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Travel Marketing a,d Agency Managerrumt Guidelines ( P.O. Box 2781, Culver City, CA 90230). Bimonthly, $35 per year. This excellent newsleuer for the professional travel agencyowner and manager covers various aspects of agency management, including suggested promotions, sales activities, legal updates, industry trends, and so forth. Travel Trade ( 6 East 46th St., New York, NY 20027). Weekly, $8 per year. Includes many special inserts, supplements, and marketing editions. Annual subscription includes all supplements as well as the monthly Business Travel and the semiannual Persomwl a1zd Sales Guide. Travel Weekly (One Park Ave., New York, NY 10016). Twice-weekly, $24 per year. Includes annual sections on travel agency management, group travel, and other topics of interest to agency owners and managers. Commissions the Louis Harris Study of the Travel Agency Market. Regional Publications
These regional publications cover not only import.-mt industry news, but events in their particular parts of the country. These include seminars, familiarization trips, new agencies, staff changes, and items of interest to all travel agency managers and employees. Subscriptions are free to all travel agency personnel. Travel Age East (888 Seventh Ave., New York, NY 100~6). Weekly. Tmoc>/AgeMutAmerica(2416 Prudential Plaza, Chicago, IL 60601). Twice-monthly. Travel Age Sorttbeast (888 Seventh Ave., New York, NY 10016). Monthly. Trawl Age West (582 market St., San Francisco, Ca 94101). Weekly. 3. Management Books and Training Guides.
Management is a complex and e ver-<:hanging phenomenon . To do it well is essential for success in any business. The more you (and your staff) know about marketing, dealing with customers, and running a business efficiently, the more profitable your business will be. Make it dear to your staff that you
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consider continuing study in this area an important aspect of their careers. Relatively few books deal with the complex art of travel agency management. A modest amount of reading will inform you about the various aspects of travel agency management Most books currently in print are !~eluded in the lists b elow, but new ones appear regularly. Merton House Travel And Tourism Publishers, INC.
Merton House specializes exclusively in books on travel agency management and travel and tourism. Their travel'agency management books are published in a series called The Travel Management Library. Their books are used extensively in mangement seminars and workshops, in colleges, and in many travel agency training schools. Ask them to put your name on their mailing list so you will be kept up to date on new books. The address is: 2100 Manchester Road, Wheaton, IL 60187. The following books are published by them.
Budgeting for Profits a11d Managing by Goals by Laurence Stevens. 36 pages; SS. From managing by goals-the concept and its practice-to preparing a realistic budget, this liule book has big significance for every travel agency owner and manager. Covers the whys and haws of setting attainable profitable goals; how to gather the infom1ation you need to prepare a b udget to meet those goals; and tips on reaching the final goal of every good business; increased profits. Complete Guide to TratJcl Agency Automation by Nadine Godwin. 160 pages; 512.95. An authoritative and impartial disc~tssion of travel agenc;y computerized reservation an~ accounting systems. Written in clear terms, the author explains how computers work, how to evaluate the various systems available, how to train staff, how to estimate the cost of automating, and how to avoid the problems and pitfalls · of automating. An essential book for both the automated and the nonautomated agency. Should be read by everyone in the agency. 71Je Did ionary of Tourism edited by Charles J. Metelka . 91
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pages; $9.95. A necessary book to understand the language of tourism. More than 1,300 tenns of travel, transportation, tourism, hospitality, recreation, aviation, and related fields are included. An essential learning as well as reference tool. Group Travel operatimJS Manual by Martha Sarbey de Sou to, ere. 324 pages, $22.95. Incorporates a complete group travel operating· system. Covers planning and establishing a group department, tour designing, brochure production and copywriting, negotiating with supliers, costing and pricing groups for profit, marketing the tour, client handling, financial procedures, tour finalization, escorting the tour, and posuour wrapup. There is also a chapter covering incoming group handling and another with tips for the experienced group handler. Includes sample letters, forms, costing procedures, brochures, legal contracts, and more. An essential reference for anyone who wants to learn the art professional and profitable group handling. Guide to Travel Age11cy Secun·ty by Laurence Stevens. 36 pages; $6. What you need to protect what you have. What locks, safes, burglar alarms to buy. How to survive a holdup, theft, or burglary. How to prevent theft or embezzlement by employees. How to protect ticket stock. And how to practically eliminate bad check and cridit card losses. Haudbook of Professional Tour ll!anagement by Robert T. Reilly. 152 pages; S19.95. Explains ev<.:·rything necessary to professionally escort tours anywhere in the world. TI1e author explains the psychology of dealing with people and handling the many diversified perso nalities found on any tour; how to stay in control; dealing with airline and cruise staff, hotel and restaurant personnel, guides, drivers, customs officials, and other professionals; and how to cope with many special situations such as delays, strikes, political s ituatons, and illness. Offers an accurate and fascinating insight into tour management.
by Louis and Nancy Mercurio. 48 pages; S15. This unusual book of clip art contains more than 100 cameraready nautical designs ready to be pasted into position. C:~n be used to produce attractive professional ads, /nsta11t Trawl A t1; C!uiscs
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flyers, mailing pieces and posters. Also includes ads with blank areas for copy and agency name, and complete ads requiring only agency's name and address. An invaluable addition to an agency's advertising resources. Legal Aspects of Travel Agency Operation by jeffrey R. Miller.
208 pages; $21.95. A definitive and thorough treatment of the legal aspects of running a travel agency by a leading travel industry attorney. Discusses the legal concepts of the agencyprincipal relationship, contracts, insurance, wage and hour laws, advertising, buying and selling travel agency, and many other topics designed to protect the travel agent in today's litigious and consumer-oriented society. LegalFonnsfor Trawl.ABerrtsby jetfrey R. Miller. 124 pages;
$29.95. Model contracts and agreements cover almost every situation; alternative clauses allow creation of documents that suit individual situations. Forms include employment agreements for salaried staff, commissioned salesperons, and tour escorts; corporate and partnership forms; agency buy/sell agreements; promissory notes, retainer agreements, sample collection letters, disclaimers, releases, power of attorney; commercial account contracts, hotel supplier contracts, and many more. An indispensable book for travel agents, their attorneys, and for anyone who expects to be on either side of a contractual agreement.
1be Trawl Agency Personnel Manual by Laurence Stevens. 90 pages; $ 21.95. Discusses all aspects of travel agency personnel management, including interviewing, hiring, reference checking, training, motivation, and evaluation. Includes two profit-sharing and incentive programmes as well as a self-test to help you discover how good a manager you are and what you can and should do to improve your management skills. Travel a11d Tourism Marketing Tecb11iques: A Ha11dbook of Travel Age1zcy Advertising and Promotion by Robert T. Reilly.
216 pages; $21.95. An outstanding reference book packed with practical step-by-step instructions for planning and implementing a total travel marketing campaign. Covers direct mail, print advertising, TV and radio advertising, newsletters,
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public relations, copywriting, and most other aspects of travel advertising and promotion. Its concepts can be applied by both small and large travel agencies.
Other Publications CIJA Travel A,gents Manual (Cruise Lines International Association. 17 Battery Place, New York, NY 10004). Approx. 300 loose-leaf pages; $ 14.20. An essential reference tool for every agency. Covers information on twenty-eight cruise lines and ninety ships. lncludes destinations, embarkation port maps, ship profiles, sales policies, available promotional materials, WATS telephone numbers, and other useful information. Instant An for Travel Promotion (Forsyth Travel Library, P.O. Box 2975, Shawnee Mission, KS 66201). $ 14.95. A collection of camera-ready drawings suitable for print ads, flyers, newsletters, and other promotion pieces. Preventative Legal Carefor Travel Agents by Alexander Anolik. (693 Sutter St., San Francisco, CA 94102). $ 75. This is a sixhour seminar on cassette tape recorded by a leading travel industry attorney. Comes with a booklet containing sample contracts, forms, and disclaimers. Tbe Low and the Travel Industry by Alexander Anolik (Alchemy Books, 693 Sutter St., San Francisco, CA 94 102). 294 pages; $40. A well-known lawyer specializing in the travel industry explains the legal status of the travel agent; the impact of the antitrust laws; plotting a course to pay less in taxes; preparing for an ARC/lATAN inspection hearing; and other useful legal guidance. Tbe Source / (Travel Marketing, P.O. Box 278 1, Culver City, CA 90230). Bimonthly; $60 per year, sample copy $5. Includes news items and features for vacation travel newsletters, written specifically to assist travel agents publish their own vacation travel newsletter. Copyright included with subscription . Tbe Source I/ (Travel Marketing, P.O. Box 2781, Culver City, CA 90230). Bimonthly; $60 per year, sample copy SS. News items and features for business travel newsletters, written for travel agents who want to publish their own business
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travel newsletter. Copyright included with subscription.
Travel Agency Training Manual by Armin D. Lehmann (Travel Marketing, P.O. Box 2781. Culver City, CA 90230), $120. This two-volume series of fifty lessons is a complete selfstudy course with test questions and answers. Travel and Tourism by Armin D. Lehamnn (Published by Bobbs-Merrill and available from Travel Marketing, P.O. Box 2781, Culver City, CA 90230), $21.95. A comprehensive and up-to-date manual for the new travel agent. Covers basic airline ticketing; steamship, freighter, and cruise; hotels, motels, and resorts; worldwide geographical data, city and airport codes, and much more. Highly recommended for anyone interested in studying the basic functions of a travel agency. Assocation Memberships
The right professional environment for your agency is created by the many business and social organizations with goals that support your own. A new travel agency needs to become acquainted with them. There is something for everyone. Besides the trade associations, there are consortiums of travel agents, organizations for black and ethnic agents, for women, and social and fraternal organizations. Just some are discussed here. An abridged listing of these organi7.ations will be found in the Appendix, while a complete listing is in the Travel Industry perso1me/ Directory, published annually be Tbe Travel Ageul, 2 West 46th St., New York, NY 10036. There are two trade associations which represent the interests of travel agents. These organizations are· not at all reticent about taking on the government, the airlines, the press, or anyone else who might threaten the interests of travel agents. Both trade associations offer substantial benefits to their members, such as educational programmes, bonding, accounting systems, insurance programmes, lobbying, and many more. American Society of Travel Agents
The American Society of Tr".lvel Agenl<> (ASTA), the older and larger of the two trade associations, was founded in 1931 to foster programmes for the advancement of the travel industry,
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to promote professional ethics, and to provide a public forum for travel agents. It considers safeguarding the traveling public against fraud, misrepresentation, and other unethical practices to be among its responsibilities. The organization, originally named the American Statemship and Tourist Agents' Association, adopted its present name in 1944. In 1982 the soiety moved its headquarters from New York to 4400 MacArthur Blvd., Washington, D.C. 20007, where it believes it can betJter administer its services and establish closer contact with the federal government, as well as continue to protect the legitimate interests of travel agents. Many of ASTA's Services to travel agents also benefit the public. It sponsors frequent conferences on travel matters involving airlines, steamship lines, agents, government officials, and other interested parties. The society holds discussions with :;.irlines on fare structures and travel destinations. It conducts research into traveler preferences. It also works in close cooperation with various city, state, and government agencies across the country in travel-oriented matters and with all levels of government departments concerned with consumer affairs. ASTA is decentralized into local chapters in the United States and overseas, each with its own elected officers and appointed committees. Policies of the society are established by a national board of directors composed of four national officers, an immediate past chairman, eleven area directors, and four directors-at-large. A chairman of the society is elected every two years from and by active members. Day-to-day activities of ASTA are handled by a professional staff in die Washington, D.C. headquarters under the supervision of a salaried president. A consumer relations and industry ethics
department acts on consumer relations and industry complaints by expediting settlment of major and mirnor business misunderstandings referred directly by consumers or by ASTA chapters. The society requires all members to adhere to its principles or professional conduct and ethics. ASTA has two membership classifications; active and allied. Active mebersbip. A travel agent must meet Lhe following
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requirements before being accepted as an active ASfA member: • An applicant can apply for active membership immediately upon receiving the appointment of the Airlines Reporting Corporation (ARC) and/or the International Airlines Travel Agent Network (IATAN). • An applicants must meet specific requirements of financial responsibility and conform to ASfA's high standards of business practice and ethics.
There is an initiation fee of $35 plus dues based on the agency's annual sales volume. For example, an agency having sales of less than $ 1 million pays dues of $ 280. An agency with sales of S5 milion would be assessed $680. .Allied membership. The allied membership category is for airlines. Steamship and cruise lines, hotels and other suppliers. The annual dues are $250. Association of Retail Travel Agents
The Association of Retail Travel Agents (ARTA) is the smaller of the two trade associations. Its voice and influence in travel industry affairs are, neverthels, important. ARTA has always made its voice heard on matters of importance to travel agents, and it actively campaigns for the individual travel agent's rights. ARTA is administered by a president from its headquarters at 8 Maple St., Croton-on-Hudson, NY 10520, and by a board of officers and directors from the roster of active members. ~
Membership is restricted to retail travel agenCies, and any retail agency can apply for ARTA membership as soon as it receives iLo; conference appointments. The anuual agency membership fee is $150. Benefits include; • Reduced registration fees at ARTA seminars, workshops,, . and mettings. • Low ARC bond rate. • C..ommission refund collection srvice. • Access to Travel Helpline, a 24-hour service for after-
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hours emergency travel assistance for preferred clients. Consortiums
Consortiums (usually called cooperatives, or co-ops, in the uavcl industry) consist of independent travel agencies which have banded together for the common good of their members. The first major consortium was GIANTS (Greater Independent Association of National Travel Services), formed in 1968. In the early 1970s disenchanted members broke away and created SPACE (Selected Professional Co-ordinating Enterprises) and BETA (Building of Earnings for Travel Agents). The apparent success of these early consortiums prompted others to follow. Other major consortiums now operating include -· MAST (Midwest Agents Selling Travel), TAABS (Travel Agency Association for Better Services), The Hickory Association, and the Woodside Management Systems, inc. Most consortiums require that potential member travel agencies have a minimum sales • volume; abide · by a high standard of ethics; be well financed; have experienced and skilled management and staff; and be willing to support the programms and goals of the consortium. Joining one requires the purchase of one share of stock, which investment entitles the member to one vote. The policy, direction, and goals of the consortium are established by a nonsalaried board of directors elected from among the members. Consortiums claim that they are able to offer a variety of benefits and advantages that no independent agent could expect to match. These include bulk ·purchases of travel products (resulting in override commisions), joint advertising and marketing programs, marketing technology, and education and training programs. The ultimate success of a consortium lies in its abili\Y to offer suppliers a high volume of business and in return gft higher commissions or lower prices. I
But consortiums are also controversial. Their opponents claim that consortiums flirt with the antitrust laws when they exert pressure on suppliers to pay higher commissions than would be paid to a noncolisortium agency. Some consortiums
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have run into trouble by directing business to one supplier in preference to another, with resulting claims that they were engaged in boycott and perhaps restraint of trade. But consortiums appear to be a permanent feature of the . travel industry, and it is likely that the number of consortiums will increase in the future. Other Organizations
Other travel agency associations are the World .Association of Travel Agencies (WATA) and the Universal Federation of Travel Agency Associations (UFTAA). WATA is an international association of retail travel agents which restricts memberships to one agency per major city. It publishes a tariff of services offered by each member and primarily provides a referral service between members. UFTAA is an international umbrella organization for travel agency associations, not individual agencies. There are also organizations for tour managers, group travel executives, travel marketing executives, incentive travel executives, travel writers, travel and tourism educators, and so forth. Among the ethnic travel agency organizations are the Black American Travel Association, Association of Latin American Travel_Agents, Irish Travel Agents Association, and the Society of Polish American Travel Agents. Of the social organizations, perhaps the best known is SKAL Club. ~ntemational in scope, there are SKAL dub chapters in major cities around the world. Membership is limited to travel industry executives. Bon Vivants welcomes to its functions anyone employed in the travel industry. Just three of the numerous organizations of women in the travel industry are the 41°, 74o dub in New York, the Chicago Travel Women's Club, and Travellarians of Los Angeles. M~y Other cities have similar travel women's dubs.
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Dr. K. K. Sharma has been teaching in
Londorr for long. He has had associations with NCERT and Delhi Government as an officer. Dr. Sharma holds. M.A. and M.Ed. degree in education and is at present situated in Fortworth, U.S.A . He has several other books on this subie<;t to his credit.
ISBN : 81- 7625-106-2
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($) Sarup & Sotlf _____ I PUBLI S HERS I_ _ _ _ _ 4740/23, AN SAAI ROAD, DAAYA GANJ, NEW DELHI-110002
