Current State of the Travel Industry in Singapore
- What I have learnt in the last three and half years (2002 to 2005)

SynergyWorks was hired by NATA as a consultant to work on a project called "Singapore Travel Industry Benchmarking" which started in June 2002 with the objective of understanding the travel industry better. As the principal consultant of this project, I had the opportunity to meet with many travel agents and therefore had in the course of it learned the common issues or problems faced by them.

I would like to share with you my opinions with regard to some of the issues that have been observed in the Singapore travel industry.

1. PRICE COMPETITION IS TOO INTENSE IN THE TRAVEL INDUSTRY AND GROSS MARGIN IS ERODING

   Price competition is inevitable and perfectly normal in any industry. It is not surprising that the price competition is extremely intense in the local travel industry where there are more than 500 travel agents (including tour operators). The number has remained rather stable over the last few years - while there are travel agents exiting the industry, there are also new players coming in at the same time. This indicates the availability of opportunities in the travel industry.

   To stand out among your competitors is not easy and yet not that difficult either. What is needed is a strategy and patience to see through the changes you would like to have. I always believe that focus should not be on price alone (the cause of the price competition) but also on providing good customer service. I am not advocating free and good service though it would be good if the business can afford it. In fact, good services do come at a certain price. Free service does not equate to good service. And here is my definition of good customer service:

   "It is about delivering what the customer needs at the right price. And the right price does not mean rock bottom price."

   
   

   "The ultimate goal of providing services is to help customers spend their time, effort/or money efficiently."

   
   

   Another definition on "Good Customer Service" Giving customers more than what they THINK they are paying for. Not charging customers based on exactly what they are getting.




Further Readings

Guidlines on Good Customer Services

Defying Expectations. How Good Customer Service Can Turn a Negative Into a Positive

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2. CUSTOMER RETENTION -- A NEGLECTED STRATEGY

   Travel agents who have been in business for some time should have collected a sizeable amount of customers details in their company databases. And most of them would have made use of the database to retrieve customers' information only when these customers return to purchase more goods and services. Unknown to these companies, the real value of this database is actually measured by what the company could do with it to profit the business. Instead, they made use of customer data to complete registration and fulfill administrative needs but totally missed the opportunity to inform their existing customers about current promotions offered on a regular basis. Travel agents need to realize that these previous customers are actually taking less risk to purchase from an agent whom they have purchased services before. Hence, getting more business by creating customer loyalty is definitely a cheaper and more effective means than general advertisement on papers and magazines. And also, bear in mind that existing satisfied customers are good referrals too, they help to bring in more sales.

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3. A SINGLE SALESMAN COMPANY

   There are a fair number of small travel agencies in Singapore that are run with only one salesperson, that is, the boss himself/herself. While this may be a normal way for these companies to start out, many amongst them have reached a point where their businesses growth is hindered by the fact sales is very much dependent on just the owner. In a situation like this, when making purchases, customers recognize only the salesperson or the owner and not the company or brand it sells. As a result, the owner cannot sell the business to another party. Sales simply cannot be effectively transferred to the new owner without also buying over the services of the existing owner.

   Similarly, owners of travel agencies which depend solely on the competence of a single salesman to sustain the business run into the same risk of being held ransom by the salesman. Should the salesman leave the company, he is also likely to bring all the company's customers along with him. To address this challenge, the company must seriously think of a way to build up the brand of the company so that the company can become an independent entity and its sales will not easily taken away by anybody.

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4. ABOUT OPERATIONAL EFFICIENCY

   In my analysis of the local travel industry, I noticed that staff salary has gone down significantly in 2003 and then started to climb up gradually. What happened was salary has increased correspondingly with sales growth. However, there has been no indication that the companies are making use of these staff more efficiently by increasing their productivity level. By that, I do not mean longer hours for the staff, but rather producing more work at a shorter period of time. Without this, the staff salary will continue to increase. In time to come, labour cost would become unsustainable and may cause the business to go into the red. And this also can happen in situations where sales are still growing. It is not strange for travel agencies to fold up their businesses even if the sales are good.

   To forestall that, business owners must make sure that as the salary of staff increases, the productivity of the staff also increases correspondingly. This ensures that staffs are adding more value to the business while their salaries increase.

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5. THE USE OF THE INTERNET

   I wish to highlight that Internet is a tool that has been unfortunately neglected by most of the travel agents. Interestingly, SynergyWorks website which publishes the names of participating travel agents of the NATAS benchmarking study has somehow attracted many surfers while they were searching for the websites of these travel agents. One reason is that these travel agents do not have a website of their own. If SynergyWorks was their competitors, we would have tried to convert these potential customers into ours. As more and more users become internet savvy, companies with good websites (can be found by the search engine) will definitely have an upper hand in increasing their market shares.

   PS: Take the test. Key in your company name in full (e.g. XXX (S) Pte Ltd) into google and see whether my company is ranked higher than yours.

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6. THE NEED TO HAVE A BASIC SYSTEM

   I discovered that many agents do not have a good system that they could rely on to monitor their businesses. Some of them could not even see the value of a good system. (Note: A good and suitable system does not equate to expensive system). As such, they are not able to evaluate their performance on a regular basis. They rely on their gut feel, which may not provide them with reliable information about their own businesses. This also means that they may not know exactly where their sales are coming from, unable to consolidate their businesses and develop on their key strengths. Neither would you be able to get repeated businesses from your existing customers. Evaluating your businesses based on sentiments is not accurate -- it is relative and cannot be quantified. Take for example, sales in November were very good, but in December, sales turned very bad. Based on gut feel, a travel agent might conclude that his business is not too good. However, the fact is that the high sales in November have actually more than compensated the poor sales in December.

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I hope the above provide you some insights into the subject matter. And if you have any opinion to share, you are welcome to register for a user name in this forum and share your views with the rest. You can remain anonymous in your posting but any objectionable comments could be removed from the forum. We welcome constructive feedback from you.

The above are my own opinions and do not represent the views of NATAS. They are based on my general observations and are not related to any discussions I may have with NATAS, or any specific travel agent or tour operator.