Introduction
Industry attractiveness and profitability depends on many varied factors. Change in the business environment or industry trends necessarily affect a company’s profitability and consequently the future of the company (Macclintock, 2010, p. 48).
This report looks into changes that have been happening in the airline industry and how the same are likely to affect the future of Relaxing Travel or any other travelling agent in Britain. From discussion in this report, on the changes in the travel industry, it will become clear that the travel agency has to work hard and re-invent self or be faced out of the industry.
Changes and How they affect the Future Relaxing Travel Agency
Relaxing Travel relies on other companies to provide charter flights for its customers. The company leverages on block bookings of hotels and resorts to make its money. Secondly, the company thrives on charter flight discounts enjoyed.
Resulting from economic downturn in the UK, the fortunes in the sector have plummeted as buyers and suppliers seek out new avenues of saving on their meager resources or cost cutting.
For instance, rather than customers or travelers using travel agents, they personally book their accommodation via the internet and seek cheaper travel options while personally engaging budget airlines. Although, this has resulted from the economic downturn and need to save on costs, customer turned competitor of sorts is a likely result of this new development (Gitman &McDaniel, 2008, p. 111).
Through trial and error, as customers seek cheaper options and thus create their own packages, there is every threat that some of them could plunge into the travel agency business having learnt the ropes of finding best packages.
Based on Porter’s five forces model of industry attractiveness and profitability, the fact that customer’s can create their own package means the threat of new entrants in the sector is very high. What the agency should brace for, even when the economic prospects or fortunes of Britain are to become brighter, the firm would still have to contend with increase competition posed by new entrants or customers charting their own packages.
Increasingly, as well, scheduling flights has become a challenge that travel agents have to contend with or handle. This scenario has evolved due to increasing industrial relations related problems in airlines and environmental challenges. Airlines have faced numerous employee related problems.
News of British airline customers striking or threatening to strike has been a common feature. Environmental related challenges have also made air travel uncertain in many ways. For instance, the volcanic ash last illustrated clearly how environmental challenges can impact on and inconvenience travel agents due to airlines not operating. Going into the future, with threats of global warming and climate change being evidenced, the climate is likely to continue affecting heavily the operations of travel agencies.
The impact of the environmental challenges does not only remain at the level of affecting airline schedules but also impacts heavily on travelers’ destinations. Reports of tsunamis, cyclones and flooding of ocean beaches are more pronounced in the now (Gautam, 2008, p. 123). This points to the likelihood, that traveling agents would have to make stopgap consideration or put in place more risk management plans. Such like plans would necessarily result into higher operation costs and less profits for travel agents.
In the recent past the Euro has not be performing well internationally. This was because of problems or challenges in some European Union member countries (Lannoo, 2008, p. 22). The economic slump in Greece for instance influenced very negatively on the demand for the Euro. Due to drastic changes in world markets, exchange rates are becoming harder to predict over time. The travel agents like Relaxing Travel depend on currency exchange rates when it comes to setting prices.
Fluctuation or lack of predictability in exchange rates means firms cannot have a stable price for long enough. Moreover, the fluctuations pose the risk of profit loss due to exchange rate changes. The fluctuation in prices due to unstable currency exchange rate impacts negatively on the business of travel agents because it is difficult to come up with a satisfactory pricing strategy.
Given the entry, barriers are not very many, there are many competitors in the travel agency industry and more are likely to enter. The entry barriers as well as exit barriers in the industry are few making this a very dynamic sector. This is not a good sign going into the future. It means that as people learn more about destinations and mechanisms involved in travelling, competition can only get stiffer and stiffer.
Recommendations
Based on the impacts the changes are likely to have on the industry, Relaxing Travel or any other travelling agency for that matter will have to ride on economies of scale to make it cheaper thus attracting customers who would otherwise create their own package. This calls for Relaxing Travel seeking ways of expanding its span through either integration or partnership to enjoy economies of scale (Hill & Power, 2002, p. 67).
This, based on extrapolations of Fredrick& Hegarty (2006, p. 14), would give it cost leadership over any other package that competitors can come up with or that can be developed by customers. The second recommendation for Relaxing Travel is in line with fluctuations in currency. Relaxing Travel has to adopt a dynamic value based pricing strategy early enough. Based on value, despite currency fluctuation related changes, customers will remain loyal and will always appreciate the agency for its quality services.
Finally, Relaxing Travel has to take into account the fact that it operates in an industry or sector with less entry and exit barriers. Therefore, they should focus more on value addition on their services. Value addition will ensure that their services have added advantage thus hooking customers despite stiff competition and challenges.
The value addition should also take into account environmental challenges that people are concerned about. For instance, by engaging in environmental awareness programs, the travel agency will not only attract environment conscious customers but also keep its customers given they will be well versed with environmental risks affecting operations.
References
Fredrick, H. and Hegarty, C., 2006, Sources of Funding for Ireland’s Entrepreneurs. London, Lulu.com
Gautam, B., P., 2008, Opportunities and Challenges of Tourism Financing: A Study on Demand and Supply; Status, Structure, Composition and Effectiveness of Tourism Financing in Nepal.NSW, Universal-Publishers
Gitman, J., L and McDaniel, C., 2008, the Future of Business: The Essentials, New Jersey, Cengage Learning.
Hill, E., B and Power, D., 2002, Attracting Capital From Angels: How Their Money And Their Experience Can Help, You Build A Successful Company, New Jersey, John Wiley and Sons.
Lannoo, K., 2008, Concrete Steps towards More Integrated Financial Oversight: the EU’s Policy Response to the Crisis, New York, CEPS.
Macclintock, S, 2010, Business Administration, Vol 4. London, General Books