June 19, 2021

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Just Do Travel

How devastating has the pandemic been to travel agencies?: Travel Weekly

2 min read
Mark Pestronk Q: I have a nonlegal question: Will anyone ever be able to quantify...
Mark Pestronk

Mark Pestronk

Q: I have a nonlegal question: Will anyone ever be able to quantify the terrible losses suffered by the travel agency community because of Covid? How many billions of dollars in sales have been permanently lost to the community, and how many per agency?

A: ASTA has filed an excellent friend of the court brief in the lawsuit brought by the state of Florida against the CDC to try to overturn the Conditional Sailing Order issued by the CDC last October. Although the suit may become moot by the time the judge is ready to decide it, ASTA’s brief shows the magnitude of the losses to the agency community in cruise sales alone.

U.S. agencies sold $13 billion in cruises in 2019, according to the Phocuswright survey cited in ASTA’s brief. The brief also notes that the average cruise commission is 15% of the gross, so cruise commissions were about $1.95 billion.

Let’s assume that agencies would have sold at least that much during the one-year period from March 2020 to March 2021. According to Travel Weekly’s 2019 Travel Industry Survey, about 36% of the average agency’s revenue comes from cruise commissions; if that’s the case, $1.95 billion is 36% of $5.4 billion in total agency revenue.

There are about 15,000 retail agency locations in the U.S. and about 60,000 home-based advisors. According to the Travel Weekly survey, about 70% of home-based advisors have hosts, so let’s count only 30% of the home-based advisors to avoid double-counting sales. This means that there are about 33,000 separate business locations selling cruises.

If we divide the $5.4 billion by 33,000, the average agency location lost about $164,000 in all commissions through March 2021. Agencies are obviously continuing to lose sales, since overall travel is down and cruise revenue is still almost nonexistent, since cruise commissions come in long after today’s cruise sales.

So, I would add at least another third to the $164,000 loss, yielding a total loss of at least $218,000 in commissions per location due to Covid. No wonder 73% of ASTA members predicted last August that they would be out of business in six months.

Not much of this has been recouped through the Paycheck Protection Program. Assume that the average location has about four employees and that it applied for both the first- and second-draw loans, thus getting about five months’ of 2019 payroll in PPP proceeds. The typical agency’s payroll is about 60% of revenue, so five months’ payroll would be about 25% of revenue. Even assuming that both PPP loans get entirely forgiven, PPP has not made much of a dent in agency losses.