Travel Agencies Report Less Business in Second Quarter; Navigant No. 1
Despite a slowing economy, cutbacks in corporate business travel and caution on the part of vacationers, Orange County’s largest travel agencies were able to grow their revenue by 8% for the 12 months ended June 30. But that pace of growth was slower than last year’s 10% increase, and most agencies said that the economic slowdown didn’t show up in their local business until the second quarter this year.
“Our transactions are off about 6% in Orange County now,” said David Buskirk, regional president of No. 1 Navigant International, which,like most agencies on the list,relies on corporate travel for more than half of its business.
“We started to feel the slowdown in about April,” he said. Companywide, Buskirk said, transactions now are down about 12%.
“You can’t perfume the pig,” he said of the slowdown. Buskirk said local clients like Fluor Corp. and some financial clients help offset a drop in business from technology clients.
“We have a nice balance in Southern California,” he said.
Total Orange County revenue for the 18 agencies reporting figures for the Business Journal list grew to $754.2 million, compared with $700.1 million for those agencies last year. The revenue for two agencies, No. 2 American Express Corporate Services and No. 7 AAA Travel Agency of Southern California, are Business Journal estimates. Another, No. 20 The Travel Store, did not have an Orange County office last year.
But there are signs that next year’s figures may tell a different story.
Mergers and acquisitions accounted for part of the local revenue growth. And the six that reported a drop and two that were flat total almost as many as the nine agencies that reported growth. That’s in marked contrast to last year, when no agencies reported a decline in revenue.
In a sign that Orange County has weathered the downturn better than other areas, the positive financial results in OC also are in contrast to companywide revenue, which grew a scant 1% in the past year for the companies on the list.
Meanwhile, the county’s largest travel agencies have employed other means to sustain or grow their businesses, including an increased focus on leisure and incentive travel, Web-based services for corporate clients and even leasing agents to corporate clients.
Mergers and acquisitions, too, continued to affect the OC travel business, as agencies attempt to achieve economies of scale in an increasingly competitive environment.
Last fall, OC’s homegrown Sundance Travel International was acquired by Coral Gables, Fla.-based TraveLeaders. Sundance took on the TraveLeaders name and is No. 4 on the list.
Maritz Travel, too, completed a merger and is now known as TQ3 Maritz Travel Solutions. It is No. 19.
Eight agencies on the list are now privately held, Orange County-based agencies, down from a dozen a few years ago.
Leading the pack for the fourth straight year is Navigant International,Southwest Region, which posted a year-to-year gain in gross OC sales of 9%, to $175 million. American Express posted an estimated $166 million, up from $158 million last year. According to other sources, American Express companywide air travel revenue was flat over the past year.
Navigant’s Buskirk said that, despite the recent slowdown in corporate business, leisure travel is doing well, the meetings business is still strong and the agency has been able to pick up new business.
“It’s not doom and gloom,” Buskirk said.
The biggest growth was posted by No. 5 Uniglobe Group, which moved up from No. 7 last year on the strength of a 30% increase in revenue to $61 million.
Company CFO Tracy Bartram attributed much of the growth to “an aggressive mergers and acquisitions strategy” that has added more agencies to the Uniglobe fold.
“Southern California is a very strong area for us,” she said.
Bartram said the agency also has focused on building its leisure business.
“Our cruise center is up 200% to 300% this year,” she said.
Boeing Travel Management Co. climbed to No. 3 this year with a 26% increase in revenue to $100.6 million. Dennis Hextel, vice president of business development and vendor relations, attributed some of that growth to the company’s acquisition of Hughes Aircraft, which meant more business for the travel company.
Hextel, too, said there was some downturn in May and June.
“We’ll hold steady on Boeing business,” he said, “but I expect we’ll be soft on our non-Boeing business (through this year).”
TraveLeaders, the former Sundance, matched Navigant’s growth rate of 9%, partly due to new clients like Broadcom Corp., according to President Scott Shadrick.
“You can offset corporate decline with clients who understand value-added services,” Shadrick said.
TraveLeaders also counts Huntington Beach retailer Quiksilver Inc. among its corporate clients.
Only one other agency managed to climb more than one spot on this year’s list. First Class International, Foothill Ranch, moved up from No. 10 last year to tie with another local travel product,Santa Ana’s World Travel Bureau,and Irvine’s Carlson Wagonlit Travel at No. 8.
First Class counts 85% of its business in corporate travel, which has been responsible for much of the slide in travel business in recent months. But the agency posted revenue growth to $35 million from $34 million last year.
President Steve Sedgwick said, “Sure, lots of clients cut back, but we got lots of new ones in the past six months, too.”
Sedgwick said the company did lose some dot-com business. But St. Joseph Health System, Orange, and ICU Medical Inc., San Clemente, were among clients the company picked up. Healthcare is one sector that has remained a bright spot in the downturn.
“Sometimes diversification of your client base is just luck,” Sedgwick said.
With the acquisition of Sundance by TraveLeaders, First Class and World Travel Bureau are Orange County’s largest locally owned agencies. That begs the question of whether they might be the next to be acquired.
“I’m happy to be privately owned and I’m not looking to merge,” Sedgwick said.
World Travel has been in Santa Ana since 1938, when current president Tom Jackson’s father bought it for $150.
The biggest drop in revenue was posted by smaller agencies that rely heavily on corporate travel. TQ3 Maritz Travel Solutions,whose local business is 100% corporate,saw its revenue drop 37% to $7.2 million from $11.4 million.
Vice president and general manager Connie Thrasher attributed part of the decline to the loss of one onsite location in OC last year.
Also suffering a big drop was No. 18 Business Travel, which saw its revenue fall 34% to $8.1 million from $12.3 million. About 61% of the agency’s business consists of corporate travel. Company officials did not return calls seeking comment.
Other agencies suffering double-digit drops in revenue were Carlson Wagonlit; No. 13 Travel Connection, No. 16 Presidential Worldwide Travel and No. 14 the Dorel Group. Among those, only Dorel has less than half its business in corporate travel.
Gene Koch, chief executive of Newport Beach-based Travel Connection, said the economy has caused “significant gyrations” in business in the past six months.
“People were a little timid earlier in the year,” Koch said. “But it’s coming back stronger.”
Koch said his agency reduced its office space commitment in an effort to shave expenses and is targeting new accounts to replace the revenue.
“When business is down, you have to turn business around,” he said.
Employment among the largest agencies was down for the second year in a row,this year by 1% to 1,320 from 1,362 a year ago, compared to a 4% drop last year.
No. 13 Travel Connection and No. 18 Business Travel, Newport Beach, were two of the 11 agencies with the biggest drop in employment, at 20%.
But No. 12 Worldview Travel in Costa Mesa grew its revenue to $26 million from $24 million and still had a 20% decline in employees.
Worldview President Ricci Zukerman dismissed the discrepancy, saying the number of employees isn’t a good indicator of agency business. Part of Worldview’s drop, she said, came because a couple of agents retired.
As for revenue growth in the current market, Zukerman said specialization is the key.
“I have a room for cruise-only (agents); a room for corporate only and a room for vacation travel only,” she said. That way, she believes the employees can be better in tune with trends in their specialty.
Zukerman dismissed the specter of weak business travel, too.
“Every year something happens that the newspapers put us to death,” she said. “But there’s never going to be a demise. We’ll always be needed.”
No agencies dropped off the list this year, but there was one addition: Travel Store, based in Los Angeles. The company opened an Irvine office near the airport last November. Branch manager Bryan Caldwell said it was the company’s first venture into OC.
“We’ve made some strides,” he said. “It’s a bit slow, but we expected that as the new kid on the block,” he said.
Before opening the Irvine branch, Orange County business accounted for only about 5% of Travel Store’s business. But one of its big accounts is Irvine restaurant franchiser Prandium Inc.
Jewel Pugh, vice president of sales and marketing told the Business Journal last fall that it was “prime time to open in Orange County.”
Since that time, the company also acquired Diamond Travel in San Clemente, expanding its presence here.
Travel Store specializes in handling corporate accounts with under $1 million per year in air travel. n
