Travel and tourism agency market prepares for shake up

There are more than 2,500 travel and tourism agencies registered on the Romanian market. Around 1,000 of them are not active at the moment or are just reselling the packages the other agencies put on the market. In sum, there are around 20 travel and tourism operators in Romania that are really making money out of the business. The turnovers of the agencies in the big league are between EUR 5 and 40 million, says Nicolae Demetriade, president of Happy Tour, the biggest company in Romania in terms of turnover, according to 2006 data from the Finance Ministry.
“There are five agencies with significant turnovers, between EUR 20 and 40 million, and another group of 10-15 agencies with turnovers between EUR 5 and 20 million. I am trying to understand how the others are actually surviving on the market,” said Demetriade.

Top agencies brace for impact of international entrances
Opening a travel and tourism agency can be highly tempting as the start-up costs are relatively low. According to data from the National Association of Travel Agents (ANAT), opening a travel and tourism agency costs around EUR 10,000, while for a tour operator around EUR 30,000 is needed. Some agencies can recoup their initial investment in six to 12 months.
“Although it is tempting to open such an agency, as the initial costs are low, the problems come along the way, when one finds out there is not enough qualified personnel, or the agency doesn't have direct access to important service providers, which require significant guarantees,” says Demetriade.
The top travel and tourism agencies in Romania are set to see big changes soon. Some of the players managed to perform well in the first nine months of the year; others received a helping hand from abroad to boost their business.
J'Info Tours, with a EUR 21 million turnover last year, has managed to increase its nine-month result to EUR 29 million. Paralela 45, a company in the top three agencies last year turnover-wise, accounted for a EUR 22 million turnover in the first nine months of the year, according to previous statements. This has upped its turnover estimates for this year from EUR 30 to 34 million, according to Alin Burcea, head of the agency.
The competition between the top players is very tough. “In the next few years, the large tour operators will consolidate their positions on the market through the distribution of their packages through re-sale agencies, some agencies will disappear, and online sales will increase,” says Cristina Irimia, marketing manager with J'Info Tours.
“The agencies on the market will make more effort. The market will evolve to a peak. I am curious to see when this maximum will be,” said Florin Tancu, general manager of Alto Travel and Tours. He tips online sales to play an increasing role, and Alto prefers to invest in increasing its IT capacities rather than opening new branches.
This view is shared by Demetriade of Happy Tour.
“Nowadays it's not that necessary to be present on every street corner as plane tickets and tourism packages can easily be sent in electronic format anywhere in the world,” he says. Other agencies still go the classic way of opening new branches, however.
Tancu's company has recently teamed up with a Danish investment fund which invests in travel agencies, Weco. The fund has bought 25 percent of Alto Tour and might increase its stake in the company, allowing it to continue expansion through acquisitions. Alto Tours bought Tiriac travel last year and will continue the acquisition plan with the next two steps of this plan to take place next year, says Tancu.
“In the next two to three years it is likely that the number of travel agencies will increase. At a corporate level, the effect of globalization will be felt on this market segment as well, and the contracts signed at international level between large corporations and agency networks like American Express, TQ3, Thomas Cook and Carlson Wagonlit will have to be respected on the Romanian market as well,” says Andreea Mihai, marketing manager with Carrefour Romania. The retailer added this year a travel and tourism service for its customers, Carrefour Voiaj, and has plans to increase its network to serve all the Carrefour stores.

Luxury demand set to rise
Travel and tourism agencies are now taking advantage of Romanians' increasing appetite for vacations abroad, incoming tourists, the numbers of whom should rise once Romania becomes better known as tourist destination, low cost airlines increasing their flights to Romania and business travel. Most of the agencies not focusing either on leisure or on business travel see their future business as divided more equally between the two.
“We expect an important increase in leisure travel, which now brings 40 percent of our revenues – mainly cruises and exotic destinations. The increasing trend is naturally due to an increase in purchasing power and Romanians' desire to visit destinations further afield than the nearby area,” said Demetriade of Happy Tour.
Others believe that business travel will also gain more importance. “Business travel is set to boom as more and more companies are looking for well known travel and tourism brands as these brands offer them the guarantee of very good services for their employees,” says Irimia.
Luxury travel is also a growth area. “Sometimes people come to us asking for the most expensive package,” says Irimia.
While for Carrefour Voiaj, the sale of luxury packages makes up only 3 percent of total sales, for Happy Tour it is 14 percent, for J'Info Tours the percentage of overall sales is 20. For Alto Tours, the luxury sector makes up 80 percent of leisure sales, but the agency is focused more on business travel.
The price of travel and tourism packages will increase, say some operators, even though transport tariffs are decreasing due to the competition between low-cost airlines. This increase in travel traffic will create more demand for the holiday destination thereby pushing up prices, believes Demetriade.
Others expect a decrease in price for some packages. “It depends on what kind of packages we are talking about. The cost of some deals are falling, but there are components of these packages that are not. The cost of oil determines the price of plane trips, both for regular flights or charter ones. Meanwhile, there are market segments that are not as flexible in price, in which case the quality of services is important and not the price,” says Andreea Mihai.
The competition between agencies on the market should increase the quality of services and not necessarily dramatically cut costs. “Tourists should understand that a very cheap service in 99 percent of cases is a trick; there are no secrets in the industry and a cheap package of services means low-quality services,” says Demetriade.

Franchise, hotels and regional expansion are on
While selling travel and tourism packages is the core business for agencies, there are some which decided to go beyond this activity but in a connected market segment. They have started to invest in hotels in an attempt to host some of the clients in their own properties.
Paralelea 45 has recently acquired Hotel Stil in Bucharest and has built an aparthotel in the Neptun seaside resort. The company has also started construction of a 32-room hotel in Snagov.
The agencies also try to increase their business by offering their brand for franchises like Paralelea 45 and Eximtur, for example, or by reselling their packages through smaller agencies around the country. Expansion to other countries is also an option some consider. J'Info Tours plans to set up in Bulgaria, Spain and Hungary.

Corina Saceanu

Read more about

Gabor Olajos assumes the role of Country Managing Director for Pluxee Romania and Bulgaria

read more