Publications
REPORTS ON THE SECTORS IN THE ACBC
SUMMARY AND CONCLUSIONS
1. PRESENTATION
The main aim of this report is to analyze the recent evolution, current situation and prospects of the travel agencies sector in the Autonomous Community of the Basque Country. In order to do so, it shall also include an overview of the sectorial situation in Europe and Spain so that the main trends of activity can be compared and explained. This report is an update of the one published in 1997, as this has become necessary due to the number of changes which have taken place in recent years both in tourist activity in general, and in the travel agencies sector in particular.
The study is divided into five chapters. Chapter 1, by way of introduction, describes and defines the object of study of the report, and the travel agencies sector is situated in the value chain of the structure of tourist activity into which it fits as an intermediary. Chapter 2 analyses the situation of the sector in the European Union, and Chapter 3 studies sectorial activity in Spain. Chapter 4 examines the recent evolution and current situation of the travel agencies sector in the ACBC (corporate fabric, main magnitudes, importance of the sector in Basque tourist activity, demand indicators, etc). Finally, Chapter 5 examines its competitive position and future prospects (SWOT analysis).
This report has been compiled using quantitative information provided by official statistical sources in each field of reference, and qualitative information provided by sector agents and specialist documents, reports, and articles relating to the sector with which we are concerned.
2. THE SECTOR IN THE EUROPEAN UNION
2.1. Recent evolution and main magnitudes of sectorial supply
In 1999, there were almost 48,500 travel agencies operating in the European Union, employing around 365,000 workers, with a turnover of 113,000 million euros and generating a gross value added of 14,630 million euros. The importance of the sector has grown considerably in recent years, as since 1994, the number of companies has risen by 37.5%, employment by almost 50%, and turnover by 48.5%. As a result, in 1999 the travel agencies sector represents 3.4% of the total number of companies in the tourist sector, 5.5% of employment, 27% of the amount of business and 9.2% of the generated value added.
In terms of the sectorial structure, companies employed on average 7.5 employees in 1999 (6.9 in 1994). Although the large majority of travel agencies are small-sized, there are also a high number of small and medium-sized companies and a series of large corporate groups in the sector which are active in all the key European markets, and which do not only have interests in this market but also in the tourist industry in general. Consequently, the market is characterised by its high competition from supply, and clients who are increasingly demanding and better informed.
As a result of this pronounced sectorial competitivity, extendable to the majority of European Union member countries (where the Spanish sector contributes 10.7% of companies, 9.4% of employment and 7.6% of turnover), also encouraged by aspects such as the increase in the number of franchises, the important entry of new competitors, liberalisation of the transport market and a progressive introduction and increase of the market share of large corporate groups, there has been a heavy price war which has progressively eroded margins and profitability of travel agencies. This situation largely explains the stagnation of sectorial productivity which has been observed in recent years.
2.2. Demand indicators. Evolution and trends of tourism
Tourism has been one of those activities with the greatest growth in recent years, making it one of the most important sectors in the economy. Between 1985 and 2002, there was a 121% increase in the number of international arrivals in the world to exceed 700 million international tourists (a figure which is expected to double within the next 20 years). In the case of Europe, the number of cross-border tourists practically doubled in the period 1985-2002 and continues to be the main tourist destination on a world scale (responsible for 57.5% of international arrivals), and is also the main area of origin of tourists (60% of the world total).
Within the EU, it is the inhabitants of countries with a higher per capita income who most go away on holiday. According to 2001 data, 80.2% of the population over the age of 14 in Germany spend more than four nights a year away from their normal place of residence, 73.1% in Luxembourg and 68.6% in Holland. On the other hand, countries with a lower per capita income, such as Portugal or Spain, have a lower vacation rate (34.2% and 38.5%, respectively).
There seems to be a positive relation between those countries with a higher vacation rate and those with a higher percentage of tourists who go to travel agencies to book their holidays. In Germany, for example, more than 45% of tourists visit travel agencies, 43.1% in Luxemburg, and 39% in Holland. On the other hand, the percentage of tourists who go to travel agencies is very low in Portugal (11.1%) and Spain (21.4%), most likely as a result of the important domestic tourism, preference for the car as a means of transport, and an important use of private accommodation.
3. THE SECTOR IN SPAIN
3.1. Recent evolution and main magnitudes of sectorial supply
In 2001, the travel agencies sector in Spain consisted of 6,414 companies with 11,274 establishments, employing 44,820 workers. These figures are 23.1%, 22.9%, and 30.9% higher respectively than those corresponding to 1998. This important sector growth is confirmed with the favourable evolution of the main economic variables. Similarly, in 2001, the sector had a turnover of 11,466 million euros and generated a gross value added of 1,227 million euros, 33.3% and 32.7% more than in 1998, respectively. Nevertheless, in terms of results, the sector generated a gross earned surplus of 370 million euros in 2001, representing a growth of 16.3% compared to 1998, a rate slightly lower than the one recorded in terms of employment, turnover and value added. As a result, in 2001, the travel agencies sector represented 2.4% of companies, 3.9% of premises, and 4% of the total employment of the national tourist sector, an activity which in turn has a very important weight in Spanish economic activity as a whole. In addition, the importance of the sector has grown in economic terms, contributing 21.7% to the amount of business generated by the national tourist sector, and 6.4% in terms of the gross value added generated.
Regarding corporate structure, the travel agencies sector in Spain is characterised by its strikingly high level of atomisation (in 2001 there were on average, seven workers per company, and four workers per branch), with supply consisting mainly of a large number of small companies (many of these having only one branch). These do not carry much weight in terms of the generation of employment and turnover in the sector, and operate together with a small number of large groups of travel agencies, with a wide network of branches in the different autonomous communities, concentrating the main body of sectorial employment and particularly turnover (companies with more than 99 jobs generated 60.4% of the amount of business in 2001, against 51.7% in 1998). Looking at the territorial distribution of the sector, a considerable concentration of activity can be seen in the communities of Madrid and Catalonia with a joint weight in 2001 of more than 40% of the national total in terms of the number of branches, employment, amount of business and investment made. Some way behind, but with an important weight in national activity as a whole, are the communities of Andalusia, Valencia, the Balearics, the Canaries, and the Basque Country (5% of branches, 5% of employment, 5.9% of turnover, and 4% of the investment made); while the remaining Autonomous Communities have limited importance.
3.2. Demand indicators. Evolution and trends of tourism
In terms of the entry of foreign tourists, Spain strengthened its position in 2002 as the second most important destination for international tourists in the world (with 51.7 million tourist arrivals and a market share of 7.2%), second only to France. In addition, the important role of Spain as the tourist destination has grown in recent years, with a 50% increase in the number of international arrivals in the period 1995-2002 (against 27.2% in Europe as a whole, and 29.5% in the world), which reflects the important dynamism and expansion of the tourist sector in Spain. In this context, it is worth mentioning the high degree of geographical concentration of cross-border movements to Spain in the communities of Catalonia, the Balearics and Andalucía.
Concerning the tourist movements of Spanish tourists, there were a total of 43,834,685 trips in 2002 (a figure which is 5.8% lower than the previous year, but 0.5% higher than in 1999), of which around 90% were made within Spain, while the remaining 10% went abroad. In terms of the autonomous communities of origin of the Spanish tourists, Madrid was responsible for the largest number of tourist visits in 2002 (19.2% of the total), Catalonia (16.1%), Andalusia (14.4%), Valencia (8.9%), Castile and Leon (7.2%) and the Basque Country (6.1%).
Focusing the analysis exclusively on domestic tourism between autonomous communities, it can be seen that in 2002, the communities of Madrid, the Basque Country, Navarre, Catalonia, Rioja and Aragon were net issuers of domestic tourist trips (trips issued exceed trips received), especially in the case of Madrid and the Basque Country (which issued 2.8 and 2.6 times more trips than they received); while the remaining communities are net receivers, standing out in particular Cantabria and the Balearics.
Along these lines, it is worth mentioning that in 2002, 60.9% of the trips made by Spanish tourists were made with no prior reservation (63.5% in 1999), and 18.2% were organised directly by the traveller (17.2% in 1999); while 21% of trips were organised by travel agencies (19.3% in 1999), either by booking some tourist service in particular (10.3%, against 12.7% in 1999), or purchasing a tourist package (10.7%, against 6.6% in 1999). There is a greater tendency to resort to travel agencies in the case of foreign trips (52% of travellers in 2001) than in domestic tourism (18% of travellers in 2001).
4. THE SECTOR IN THE ACBC
4.1. The corporate fabric: establishments, employment and location
In 2002, the travel agencies sector in the Basque Country was made up of 178 companies with 563 establishments, employing 1,773 people. As generally happens in Spain and Europe, the corporate fabric of the Basque Country is characterised by the high number of small companies operating in the market together with a small number of large companies with a vast network of establishments (6 companies are responsible for more than half the total number of establishments, more specifically 52.4% in 2002).
There has been a remarkable, almost uninterrupted increase in the number of establishments over the last decade (rising from 302 establishments in 1993 to 563 in 2002), an increase which has occurred both as a result of the incorporation of small companies mainly with a single branch outlet and also of the increase in the network of establishments of large companies. For its part, the employment generated in these establishments has also followed a steep, upward trend, rising from the 1,158 people employed in this activity in 1993 to the 1,773 people in 2002, which supposes an increase of 53.1%.
Examining the activity segment of establishments, in 2002, 89.7% of these were mainly involved in retail activity, 7.6% in wholesale activity, and only 2.7% in receptive tourism. Of particular note is the high number of establishments in the retail segment, noted for its fragmentation and dispersion, this being considerably reduced in the wholesale segment, in a context in which there are establishments in the ACBC belonging to the main corporate groups of the sector in Spain on a national level. Similarly, we should mention the limited presence of establishments involved in receptive activity in the ACBC.
Regarding the territorial distribution of activity, in 2002 54.5% of the establishments were concentrated in Bizkaia, 32.3% in Gipuzkoa, and 13.1% in Álava; a distribution which has remained practically unchanged over the last decade. In terms of employment, the participation of Bizkaia rose to 60% in 2002, against 26.5% for Gipuzkoa, and 13.5% for Álava. In this case, it can be seen that Álava and particularly Gipuzkoa have generated a relative weight in the sectorial employment total (13% and 23.9% of the total in 1993, respectively) to the detriment of Bizkaia (63.1% in 1993).
4.2. Evolution of the main economic variables and analysis of the profit and loss statement
In recent years, there has been appreciable growth in the sector of travel agencies in the ACBC both in terms of turnover and value added generated. In this respect, turnover reached 676,025 thousand euros in 2001, a figure which is 33.5% higher than in 1998, and which supposes 5.9% of sector turnover in Spain as a whole. For its part, the gross value added generated by the sector reached 74,511 thousand euros in 2001, a figure which is 34.1% higher than that recorded in 1998, and which in this case supposed 6.1% of the national total.
In terms of investment, as occurs with the Spain and Europe, the ACBC travel agencies sector is not noted for its high investment effort. In particular, investment has remained at around 4 million euros in recent years, representing approximately 1% of total turnover.
Regarding the structure of the sectorial profit and loss statement, it is worth mentioning that the gross value added at market prices generated by travel agencies in the ACBC represented 10.4% of total turnover in 2001, a figure which has remained stable since 1998 and which is similar to that observed in the sector on a national level, although considerably lower than that recorded in the Basque tourist sector (slightly higher than 36% in 2001), mainly due to the elevated importance of the consumption of goods and services made by other companies in travel agencies, arising from their own role as intermediaries.
In this way, in a context in which the personnel expenses of ACBC travel agencies represented 9.1% of turnover in 2001 (against 7.5% for the travel agencies sector in Spain and 20.7% for the Basque tourist sector as a whole), the gross earned surplus represented 1.9% of turnover (1.1% in 1998), a rate which is slightly lower than that recorded for Spain as a whole (3.2% in 2001), and well below that of the Basque tourist sector (15.5%).
4.3. Contribution of the sector to tourist activity
In addition, as happens on a national level, the importance of the sector has grown in economic terms, contributing 25.6% to the amount of business generated by the Basque tourist sector, 7.8% in terms of gross value added, and 7.7% in the case of investment made.
4.4. Demand indicators. Evolution and trends of tourism
In 2002, there were a total of 935,259 international arrivals in the Autonomous Community of the Basque Country, a figure which is 11.3% higher than in 1997, and a slightly lower rate than that recorded for the whole of Spain (30.8%). Consequently, in 2002 the ACBC received 1.8% of the total number of cross-border movements to Spain, against the 2.1% which this represented in 1997.
Concerning tourist movements of Basques, there were a total of 2,695,645 trips in 2002, a figure which was 6.1% lower than that recorded for the previous year, although for the entire period 1999-2002 there was a 5% increase, a rate which was slightly higher than that recorded in the whole of Spain (0.5%). In this way, the proportion of Basque tourist departures in the total number of tourist movements made in the whole of Spain has increased from 5.9% in 1999 to 6.1% in 2002. Looking at the destination chosen by tourists, 90% of trips are to the rest of Spain (domestic tourism), while only the remaining 10% travel abroad, a structure which has not changed since 1999 and which is similar to that observed in Spain as a whole.
Analysing Basque tourism within Spain, in 2002 the community of Castile and Leon received the most Basque tourists (18.5% of the total). Interregional tourism between the different Basque provinces is also important (10.6%), and that of the Valencian Community (the destination for 8.8% of Basque tourist trips), Cantabria (8.7%), Andalusia (6.9%), and Catalonia (6.9%).
In this context, in relation to the role played by Basque Country travel agencies in the organisation of the tourist trips made by Basques, it is worth mentioning that although no statistical data for the different Autonomous Communities is available, it is possible to consider that the results presented for the whole of Spain (where in 2002, 21% of travellers booked through travel agencies, a percentage which rises to 52% in the case of tourism abroad and falls to 18% in the case of domestic tourism) suitably reflect the behaviour of Basque travellers.
In terms of the situation of the ACBC as the destination for tourists from the rest of Spain, it is worth mentioning that these accounted for 940,130 trips in 2002, 19.2% more than in 1999, representing 2.3% of the tourist visits made in the whole of Spain. Examining the main communities of origin, Castile and Leon stand out (21.2% of the total), Madrid (10.9%) and Catalonia (10.2%), jointly representing 42.3% of tourist visits to the Basque Country in 2002.
4.5. Relevance and impact of the new technologies on the activity
The new information and communication technologies are seen as an indispensable work tool for the travel agencies sector. The intermediary role of travel agencies necessitates a constant exchange of information with suppliers and end clients for which the ICTs have represented a breakthrough when it comes to reducing time and financial costs.
In terms of ICT investment by travel agencies, it is clear that there is a relation between the size of the travel agencies and investment on new technologies (in particular, computer and data transmission applications, and to a lesser extent, basic computer equipment and Internet). In this regard, in a context of the high competitivity which exists in the sector, generally speaking, travel agencies have been able to adapt quickly to technological change; and this in turn has facilitated important modifications in client behaviour.
In terms of Internet, despite this involving large advantages for the sector, the fact that the communication of any component of the tourist distribution channel has been made more readily available to the end client is also endangering the intermediary function of travel agencies, thereby facilitating the appearance of new competitors. In spite of this, there does not seem to be any serious threat to traditional establishments for the time being. Even so, the training of people involved in sales, customer service, new technologies, and in the specific product offered will constitute a main factor to differentiate these from online services.
4.6. Quality in the sector
The growing importance of tourism has meant that quality has become a key factor in Spanish and Basque tourist policy, in order to distinguish between products with similar prices and features in an ever increasingly competitive environment; and in a context in which the perception of quality is largely subjective and therefore quite difficult to measure, particularly in the subsector of travel agencies where there is no kind of universally accepted parameter. In 2000, therefore, the Institute for Spanish Tourism Quality (Instituto para la Calidad Turística Española) was created in an attempt to homogenize the different structures of quality which exist within the tourist sector. Its hallmark is the "Q for quality", which is perhaps the most well-accepted for tourist companies in general, and travel agencies in particular.
In spite of the change in trend which has occurred in recent years, there are still very few travel agencies who have been awarded a certificate of quality. In particular, in 2002, only 15 travel agencies had been awarded the "Q for quality" in the whole of Spain, of which two (13% of the total) are located in the Autonomous Community of the Basque Country, beaten only by Cantabria and the Valencian Community, which in both cases have three certified travel agencies. For its part, the Basque Administration, aware of the importance of quality in the tourist sector, has set up a series of research and training programmes together with other institutions in order to promote and achieve excellence in the Basque tourist sector, in order to improve customer expectations and win clients.
5. DIAGNOSIS OF THE COMPETTIVE SITUATION KEY. FACTORS AND SWOT ANALYSIS
From the quantitative and qualitative analysis of the evolution of travel agencies sector activity and of the main trends characterising the market, a series of key factors can be selected which affect the competitivity of companies and which act as motors for the activity development and change. These factors assume a special importance at a time characterised by the important transformations which have helped shape the sector and lead it to rethink its future position. In this regard, we should mention the following factors:
- the pronounced rivalry-competition facing sector companies, in a context of progressive concentration of activity in large corporate groups vertically incorporated along the tourist value chain
- the relation with suppliers, and more specifically the observed tendency to reduce or eliminate travel agency commissions
- the impact of new technologies in sectorial activity
- the increasingly greater importance of quality and staff training
- demand characteristics and trends In this context, the competitive
position of the sector is determined by its strengths and
weaknesses, while in the development of its activity, a series
of threats and opportunities can be discerned which, depending
on the initiative capacity of the sector itself and of external
factors, will determine the strengthening/weakening
of its competitive position in the value chain of tourist
activity. In this way, the table below details the main
strengths, weaknesses, opportunities and threats of
the Basque travel agencies sector. Table 0.1 Strengths, Weaknesses,
Opportunities and Threats..
| Strengths | Weaknesses |
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| Threats | Opportunities |
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