Orange County’s largest travel agencies escaped 2008 with relatively flat overall sales as a strong start to the year buoyed overall numbers.
But the latter half of the year produced a sharp drop in business as the financial and larger economic meltdown slowed personal and corporate travel.
According to this week’s Business Journal list, which ranks the county’s 21 largest agencies by local 2008 revenue, the group posted an overall gain of 5% compared to 2007 with $867 million in sales.
Seven of the agencies posted gains in 2008,many double digit increases. Seven agencies saw declines. One was flat. Six were Business Journal estimates.
The 5% revenue gain for the group is a little misleading.
No. 2 Carlson Wagonlit Travel drove the growth. It reported a 52% jump in business in 2008 to $112 million. Without it, the remaining 20 agencies were relatively flat at 0.7% growth.
Most agencies saw a strong first half of 2008, only to see sales drop off after August.
The slump has continued into this year, with many predicting that a recovery won’t happen until the latter half of 2010.
Consolidation
The extended trough in business has led to some agency closures and consolidation. Costa Mesa-based Back Bay Travel, which was No. 20 on last year’s list, closed due to the drop in travel.
No. 14 Santa Ana-based World Travel Bureau Inc. is waiting until its office leases expire and then plans to convert the business into a wholly online “virtual agent” model. The company has its headquarters on Main Street in Santa Ana,which is staying put,and another three offices in Orange and Yorba Linda, as well as several other locations in California.
The agency’s three OC offices are expected to close by the end of the year.
“Our offices have principally been places for people to come and work, rather than for people to come and buy,” said Tom Jackson, president of World Travel Bureau. “With the vast improvements in technology and nearly 95% of our business done over the phone or Internet, it will help us be more flexible.”
Others are looking to the downturn as a chance to expand with acquisitions.
No. 6 Santa Ana-based Worldview Travel Management Co., which is on a buying spree, has picked up a smaller agency in New York and is eyeing several others.
“I’m in acquisition mode because smaller offices are finding it very difficult to survive in this current environment so I’m offering them business they can’t do on their own,” said Ricci Zukerman, founder and president of Worldview Travel.
Partnerships
For those that don’t buy or sell companies outright, striking partnerships with more stable companies is a way to stave off closure, according to local agencies. Affiliating with a larger agency can give both access to a different list of clients and cut down on technology costs.
Two OC agencies,No. 11 Irvine-based I.T.S. American Express Travel and No. 17 Huntington Beach-based Surf City Travel/American Express,partnered with New York-based American Express Co. and changed names, but not ownership. Becoming part of the American Express network allows members access to Travel Impressions, which is a worldwide wholesale travel agency.
“We are handling more global accounts where the business has been very good,” said Linda Sweda, global accounts manager at I.T.S. American Express Travel.
Counting only OC sales skews the data for large operations such as American Express, which leads the corporate travel industry nationwide but has only a small presence here. American Express and No. 3 AAA Travel Agency of Southern California, like other national companies, do not report OC sales separately from other Southern California operations.
Many agencies on the list saw leisure travel grow in 2008 and so far this year, officials said.
Travel spending in California inched up almost 1% to $97.6 billion in 2008 compared to a year earlier, according to Dean Runyan Associates.
In-state travel also increased by 6.4% in 2008, according to D.K. Shifflet & Associates Ltd.
Worldview Travel Management, World Travel Bureau, No. 16 Boulevards of Travel Inc. of Newport Beach, No. 18 Brea-based Dorel Group and No. 20 Huntington Beach-based Now Voyager Travel,said that 50% or more of their revenue comes from leisure travel.
The remaining 10 companies that reported a percentage breakdown of business rely more on corporate travel, which was hit hard last year by the economic meltdown and fallout over American Inter-national Group Inc. holding a $450,000 retreat at plush St. Regis Monarch Beach Resort and Spa just days after receiving an $85 billion bailout from the government last year.
No. 1 Boeing Travel Manage-ment Co. does almost all of its business in the corporate travel sector.
The unit of Chicago-based Boeing Co., which has operations in Huntington Beach and Seal Beach, handles travel for Boeing employees, as well as other companies. Its revenue from OC operations was down 2% to $169 million.
Despite getting 90% of its business from the corporate market, No. 2 Carlson Wagonlit was able to become the standout on the list, upping its revenue 52% to $112 million in 2008.
Ron Wagner, senior vice president of west region at Carlson Wagonlit Travel, said part of the increase was from a number of key client wins.
“It was mix of one or two big clients and a couple small- to mid-market clients,” he said.
The company also saw an increase in business from its corporate clients looking to the agency to provide travel plans for employee business trips.
“More transactions were being driven through a company’s travel agency, where companies are having employees book through the company, rather than independently,” said Wagner.
Companies want to be able to track spending and make sure the travelers get the negotiated rate, Wagner said.
Employment for the agencies on this year’s list was down by 7.5% to 629 from 680 workers last year.
Boeing Travel had the biggest worker reduction, cutting staff from 38 to 25.
No. 5 Irvine-based TravelStore Inc. posted the biggest increase, adding 10 workers to bring the total to 63.
