Skift Take

Many travel agents will have the benefit of selling a wider variety of packages from one distribution channel because of this deal, but will this industry giant really want to give travel agents, and their clients, the best rates if agents don't have anywhere else to turn? Time will tell.

Fresh off Apple Leisure Group’s merger with Mark Travel earlier this month, Apple Leisure Group CEO Alex Zozaya said combining both businesses will only bring good news and firm footing for travel agents.

Zozaya spoke to Skift at the World Travel & Tourism Council Global Summit in Buenos Aires, Argentina, earlier this month, where issues such as tourism employment and automation were hot topics during various panel discussions.

The deal is expected to close during the second quarter of 2018, and Zozaya said it will allow travel agents a much wider product offering to sell, at a time when technology increasingly threatens some aspects of travel agents’ roles.

“The type of experiences where the travel agents actually add more value, that’s exactly the type of product that we have now with both of our companies, Apple Leisure Group’s as well as Mark Travel,” said Zozaya.

Zozaya said shared technology from both companies will create better packages for travel agents, particularly with airlines. “The number one is of course with the commercial airlines, and the merging of United Vacations and Sandals vacations, which are both growing internationally and in the packaging world.”

But both companies already had strong relationships with many airlines, said Zozaya. “This also gives us the capability to go back to add charters,” he said. “When we were separate companies, it’s very difficult to maintain charters because of the lack of volume. It’s very difficult to maintain certain flights from point to point.”

Travel agents typically no longer don’t make money from selling airline tickets, but the merger will help boost agents’ overall commissions from selling overall packages rather than piecemeal parts of a trip. “I think that’s a win-win proposition for the travel agent,” said Zozaya.

Fragmentation in the packaged travel sector in recent years has hurt travel agents, said Zozaya. “They can not only rely on selling cruise ships and we believe that the consolidation of these two large groups would allow us to have number one, everyone under one platform, which from the technology side is super important to make sure that we provide better tools than the ones we have,” he said.

The reality for agents is probably a bit more complicated than what Zozaya suggests, though. While this consolidation will allow them to access more content in one place, it will also likely reduce their ability to negotiate for reduced prices or free add-ons for clients. Agents routinely pit suppliers against each other in order to get the best deal for their customers, and this could reduce their ability to do so.

U.S. Growth

Some 75 percent of Apple Leisure Group and Mark Travel’s business comes from travel agents, said Zozaya. The United States holds more opportunity for agents because many Americans are inexperienced international travelers or still lack passports, he said.

“If we look at the U.S. market versus the mature markets like Canada or Europe, when it comes to sending tourists out of the country the United States is still in diapers,” said Zozaya. “It’s a super small player.”

Fewer than 40 percent of Americans have passports, but the U.S. issues about 15 million new passports each year, which includes eight million first-time passports. “That means eight million every year, and 80 million in 10 years,” said Zozaya. “That’s a lot of people traveling outside of the country and we believe that our business model of packaging in this part of the world will be a tremendous opportunity for the travel agent, more so than with Europe or Canada because those markets are already mature.”

Caribbean Competition

Some Caribbean islands won’t benefit as much as others from U.S. outbound growth, said Zozaya. “I think there are some islands in the Caribbean that have not grown precisely because they’ve stopped delivering value and they can’t compete,” he said.

“Number one is they can’t compete against the cruise ships,” said Zozaya. “Then you have places like the Dominican Republic, many places in Mexico, Costa Rica, and Jamaica that are growing very fast,” said Zozaya. “But the other old style part of the Caribbean has pretty much stopped and they’re gonna have to change their approach a little bit to continue to bring investment and make it profitable and gain market share.”

The Caribbean Tourism Organization announced last week that it plans to launch a $20 million marketing fund this year to help destinations across the region both impacted and unimpacted by last year’s hurricanes to convince travelers they have the lights back on. It will take more than throwing cash at the problem to change travelers’ perceptions, but it was necessary to help level the playing field with the region’s competitors.


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Tags: apple leisure group, mergers and acquisitions

Photo credit: Travel agencies like this Liberty Travel store in Warwick, Rhode Island, will be better positioned with the Apple Leisure Group-Mark Travel merger, Apple Leisure's CEO argues. JJBers / Flickr

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