Despite the increase in agency sales, it’s a good time to be a salesperson: Travel Weekly

Marek Pestronek

Q: What are your latest observations on the travel agency M&A market? Is there an unusually large number of agencies for sale? If so, why? Is now a good time to sell? If I want to sell my agency, how can I get the best price? Additionally, if I sell my agency, is it realistic to expect that I will be able to remain an independent contractor (IC) while focusing on selling travel services to a small number of older, high-value clients?

Answer: In the second half of this year, a very large number of travel agency owners want to sell their company and retire or work part-time. The owners are generally aging baby boomers who started the business about forty years ago.

In the early 1980s, there was an explosion of new travel agencies due to several changes. First, airline commissions, which at the time made up the majority of the agency’s revenue, were generally raised to 10%. This has made selling both leisure and business travel profitable, perhaps for the first time.

The second reason for the boom was a 1981 decision by the Civil Aeronautics Board, which regulated airlines and travel agencies, to allow discounts on company accounts. Before this decision, commission rebates were illegal. As a result of this decision, many, if not most, American companies have decided that using a travel agent for business trips makes sense because such use can be a source of revenue as well as good service.

So if you were a 30-year-old entrepreneur in 1980, today you are over 70 and thinking about retirement. Fortunately, now is a good time to sell.

Agency acquisition prices are largely based on multiples of past earnings, and the last few years have been profitable for most agencies. Generally speaking, the higher the yield, the more buyers are willing to pay.

If you are a baby boomer and are thinking about exiting your business, the most important step you can take is to maximize your profits for the year before you want to sell. Do this by selling your preferred suppliers, minimizing unnecessary expenses, and taking any other common-sense steps you can probably think of.

Contrary to what you might expect, the fact that a large number of agencies are for sale does not seem to have the effect of lowering sales prices. On the contrary, it awakened potential buyers outside the industry to the possibility of good acquisitions.

After the sale, most buyers will require you to remain an employee or associate for several months to a year to ensure a smooth transition. If you are unable or unwilling to do this, it may reduce the purchase price.

If you want to work full-time or part-time as an IC travel salesperson after retirement, most potential buyers would be happy for you to do so by using a buyer’s agency as a host. Otherwise, you should not expect to be able to continue to sell your travel services in competition with the buyer as a supplier of travel services to another host.