NATAS BENCHMARKING REPORT FOR THE TRAVEL INDUSTRY
QUARTER 1, 2003

This is an excerpt of the industry report:



Company
Industry
Ticketing
78%
Inbound
9%
Outbound
13%
Surface Transport
0%




Chart Analysis

The chart above is divided into four sectors by the industry averages for Gross Margin and Net Margin.

Travel agents located in the top right sector has higher gross margin and net margin than the industry. The value they added to their basic products and services help them generate a relatively good gross margin. They are also able to generate sufficient volume for their products and services to cover the operating expenses or maintaining their operations in a more efficient manner and as a result, they are able to generate a positive net margin. There are four travel agents in this sector for the 1st quarter of year 2003.

The top left sector of the chart is occupied by another four travel agents who are generating a higher gross margin than the industry. However, they are not getting a net margin above the industry average because of low sales volume and/or operating inefficiency. This group of travel agents would be able to move to the right of the chart with higher sales volume while maintaining their operating cost or reduce their operating cost accordingly to match their sales activities.

Travel agents with air ticket sales as a major contributor to their sales receipts experience lower gross margin than other travel agents. They are however able to maintain their net margin above the industry average because of the sales volume or their ability to maintain a lower cost of operations.


Commentary

The industry averages for the 1st quarter report (Jan - Mar 2003) were computed from a total of 16 travel agents and their sales receipts represented more than one quarter of total receipts from the travel industry (source: Economic Surveys Series 2001 from the Singapore Department of Statistics).

The 1st quarter report showed that the average net profit for the industry had decreased from S$12,949 to negative S$4,027, representing a 131% drop from the same quarter of the previous year. The net margin decreased by 0.3 percentage point from the previous year. Average gross profit for the industry increased by 6% due to the average prices increase of 5% for air ticketing and 13% for outbound packages. The increase in average gross profit is partially offset by the reduction in sales volume from 10,952 to 10,701 passengers, representing a 2% drop from the previous year.

Operating costs have increased significantly by 9% from S$462,000 to S$505,000. This 0.7 percentage point increase in operating costs as a percentage of sales has offset the increase in average gross margin of 0.5 percentage point, resulting in the reduction of the average net margin by 0.3 percentage point. The increase in operating cost is partially contributed by the increase in average salary which has increased by 0.3 percentage point.

Average sales staff salary had increased by 4% from S$7,975 per quarter to S$8,277 per quarter. Travel agents paid an average of S$2,759 per month for each sales staff including CPF, commission, allowances and any other remuneration. Despite the increase in salary, the sales generated decreases by 8 times of the sales personnel's salary (from 75 times to 67 times) or 11% lower than the previous year.

Note

SynergyWorks is commissioned by the National Association of Travel Agents Singapore (NATAS) to conduct this benchmarking study.

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