Japan Travel Trade Weekly News
Keeping you abreast of what's going on in the
Japanese travel and tourism industries.
News consolidated by Travel Vision, Inc. updated every week.
Travel Agencies Should Head for Conglomerate or M&A Soonest, Says Mr.
Morisawa of Nomura Research Institute
March 2008
Toru Morisawa, a senior consultant at Management Consulting Dept.
of Nomura Research Institute, stated that conglomeration beyond
industry sector or merger and acquisition of other businesses would
become key measures for travel agencies to survive the existing tough
circumstances.
He warns that keeping the status quo with no drastic measures
taken would lead to devastation of the whole travel industry in the
long run. He made this statement when he was invited as a commentator
to the session meeting "D" of JATA Management Forum held on February
26 under the title of "Look into what travel agencies alone can
offer."
Mr. Morisawa elaborated on the analyzing method of "five forces"
that management consultants often use to assess competitive factors.
It is an approach to examine interactive influences of five market
factors of (1) intrinsic rivalry among travel agencies, (2) new
entrants, (3) alternative services, (4) buyers (consumers), and (5)
sellers (suppliers).
Travel industry faces heavy competition within and without, as
web travel agencies establish themselves as new entrants, diversified
leisure activities become available as alternative options for
travel, and consumers get a host of information on the Internet,
every one of them giving a strong impact to the industry.
Airlines and hoteliers have become much stronger as suppliers
after a series of shakeout and have got the upper hand over travel
agencies in bargaining power. He made a comment which goes: "Travel
industry is structurally ailing with the work of these forces. There
seems little room left to improve profitability, which is quite
unusual in other industries."
He notes, however, that some attractive resorts with distinctive
features or new enterprises offering unique services are emerging in
the market as powerful suppliers, and travel agencies can find a way
out through collaboration or amalgamation with these strong players.
He takes up TUI in Germany as a successful example in such a case
but also reminds that it needs huge amount of money to follow suit.
Consequently, he advises that merger and acquisition would be one of
the best solutions for Japanese travel agencies of limited means and,
for that matter, preemptive action would produce greater effects.
MLIT Survey: Experienced Overseas Travelers Opt for Europe,
Australia, Hawaii, While Unexperienced People Pick Up Australia,
Europe, Hawaii (in Order of Preference)
March 2008
Ministry of Land, Infrastructure, Transport and Tourism (MLIT)
made a survey earlier, as one of its activities for the fiscal year
2007, on consumers' attitude toward overseas travel. Hideyo Hanazumi,
director for Tourism Industries Division at Policy Bureau of MLIT,
disclosed part of the results at the 2008 JATA Management Forum's
session meeting "H" held under the title of "Can we achieve the goal
of 20 million overseas travelers?"
The survey was conducted from February 8 to 13 with 3,000 people
who had made an overseas trip in the past three year, plus 600 people
who had not in the same period.
The top five countries or areas that these experienced people
wanted to visit were - in the order of preference - Europe excluding
France and Germany (support rate: 25.4%), Australia (10.2%), Hawaii
(9.0%), France (7.3%), and the U.S.A. (6.7%).
With 600 people with no track record, the most preferred
destinations were Australia (16.7%), Europe excluding France and
Germany (16.5%), Hawaii (8.3%), France (6.7%), and Germany (5.0%).
It is noted that Europe was popular among experienced travelers
in all ages and so was Hawaii among those in twenties to forties.
Australia was favored by those in twenties (10.5%), fifties (12.4%),
and sixties (12.3%), but not by those in thirties and forties.
With regard to the unexperienced 600 people, 19.7 percent of them
replied that they have no specific country in mind for a visit. By
age group, the same answer was obtained from 24.4 percent of those in
twenties, 19.6 percent of forties, 23.4 percent of sixties, and 20.5
percent of seventies. It is assumed that these people are most remote
from the chances of going abroad.
The above figures are preliminary and digested. MLIT is expected
to sort out the details of the results by the end of March.
Travel Agencies' Operating Margin Stood at 0.55% in FY 2006, Record
High in 10 Years, As Operating Profit per Agency Rose 81%
March 2008
"Management Analysis of Travel Agencies" compiled by Japan
Association of Travel Agents (JATA) revealed that operating profit
ratio on sales at 539 travel agencies of Category One rose to 0.55
percent in the fiscal year 2006, a record high in the past 10 year.
It is a new peak exceeding 0.53 percent in FY 2004 and shows a
comeback from 0.30 percent in FY 2005. When picking up 368
profit-making agencies alone, the ratio of operating profit comes to
0.70 percent, up from 0.47 percent in FY 2005 but dipping slightly
from 0.71 percent achieved in FY 2004.
Operating profit per employee was 549,000 yen, falling short of
552,000 yen in FY 2004 that had been the highest in the past 10
years. Revenue per employee was 99,201,000 yen, further down by
680,000 yen from the previous year that had narrowly missed the 100
million mark.
Revenue per agency fell 0.3 percent from the previous year to
12,920 million yen, operating revenue declined 6.5 percent to 1,383
million yen, so did operational cost by 8.9 percent to 1,311 million
yen, while personnel cost was down 2.7 percent to 630 million yen; as
a result, operational profit surged 81.2 percent to 71 million yen.
Personnel cost had swelled considerably from FY 2004 to 2005,
entailing a growth of revenue and operating income, but ended in a
decline of operating profit. In FY 2006, however, operating profit
grew substantially.
* Business Travel Agencies Rank No. 1 in Operating Margin at 14%
In an analysis of 106 companies that are fully devoted to travel
business and fall typically into any of the classified travel
categories, 88 agencies reported profits.
Those profit-making agencies include: all of seven full-line
travel agencies, nine of 10 merchandising/ distributing agencies,
nine of 13 media-supported or non-store agencies, 16 of 21 retail
agencies, five of nine web agencies, all of 10 business travel
agencies, 15 of 16 package tour wholesalers, 11 of 13 overseas travel
distributors (or travel component wholesalers), and six of seven
overseas ground operators.
These 88 agencies posted 5.5 percent operating margin all in all
(vs. 4.6 percent margin of 106 companies combined). Operating profit
per employee was 651,000 yen at 88 agencies against 550,000 yen of
the total. The highest ratio of operating profit on sales was
achieved by business travel agencies registering 14 percent, followed
by overseas travel distributors at 10.8 percent.
Turnover per employee was topped by package tour wholesalers with
159 million yen, followed by web agencies with 134.9 million yen and
business travel agencies with 134.3 million yen.
* Ratio of operating profit on sales by year at 539 Category-One
travel agencies 1995: 0.07%
1996: 0.20%
1997: 0.12%
1998: -0.17%
1999: 0.21%
2000: 0.41%
2001: -0.03%
2002: 0.07%
2003: 0.24%
2004: 0.53%
2005: 0.30%
2006: 0.55%
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