ENTR FPX 5412 Assessment 2 Feasibility of a New Franchise

Student Name

Capella University

ENTR-FPX5412 New Ventures and Entrepreneurship

Prof. Name:

Date

Introduction

Technological advancements and global cultural shifts have drastically reshaped the travel industry. The rise of online travel platforms has made do-it-yourself (DIY) travel planning more accessible, reducing the need for traditional travel agencies. However, despite the declining demand, travel agencies still play a crucial role in offering personalized and specialized services for particular customer segments. The following feasibility and competitive analysis explore the reasons to consider starting or franchising a travel agency.

Macro Environment Analysis

According to Statista, travel and tourism are among the fastest-growing sectors, with an annual growth rate of 4.42%, increasing projected revenue from $854 billion in 2023 to $1,016 billion by 2027. The Global Business Travel Association projects even higher growth, forecasting business travel to reach $1.4 trillion in 2024 and $1.8 trillion by 2027.

Political Forces: Government policies can have direct and indirect impacts on tourism. Political stability promotes tourism, while instability deters travelers. For instance, countries rich in cultural heritage, like Syria and Iraq, could be top destinations if not for safety concerns. Since tourism is a global industry, disruptions in one region often lead to increased demand in others. Isolated political issues rarely pose a major threat to the overall travel industry.

Socio-Cultural Forces: Humans have an inherent desire to explore. While modern technology allows people to virtually experience different cultures from their homes, physical travel remains essential for authentic experiences. As global connectivity increases through education, commerce, and digital platforms, travel is becoming more comfortable and essential. Without any major global catastrophes, travel will likely become more frequent for the general population.

Economic Forces: Despite rising living costs and inflation, we live in an era where disposable income, particularly among younger generations in technology-driven fields, is increasing. The Gen XYZ cohort grew up in a world where air travel and cruising are common, and shared services like Uber and Airbnb have expanded travel options. These factors contribute to more travel opportunities and demand.

Technological Forces: Technology has revolutionized travel, making it more affordable and easier to plan. Travelers can now search for the best deals, view destinations through pictures and videos, and read reviews. This access to information has made travel more predictable and accessible. With Wi-Fi and widespread connectivity, travelers never have to fully disconnect from their families or support systems.

Global Forces: While regional political, economic, or socio-cultural issues don’t typically threaten the global travel industry, major global crises can. For example, the COVID-19 pandemic brought the entire industry to a halt, threatening millions of jobs and contributing to 10% of global GDP losses. Other global shifts, such as Britain’s exit from the EU, also impact the purchasing power of travelers, particularly in Europe.

Value Proposition

Planning travel can be complex and time-consuming, especially for business trips, family vacations, and special events. While online platforms provide tools for DIY travel, more complicated trips are often best handled by professionals, such as travel agents. A skilled travel agent offers three main benefits:

Expertise and Trustworthiness: Although the internet offers a wealth of information, it can sometimes overwhelm travelers, leading to confusion and indecision. A travel agent filters through this information and provides customized recommendations based on the specific needs of the traveler. Unlike online platforms, agents are not tied to any particular airline, hotel, or tour operator—they work solely for the client.

Convenience and Accountability: Coordinating a trip can be a complex task, especially for those managing multiple travelers’ needs, preferences, and restrictions. A travel agent provides the convenience of handling all the planning details, allowing clients to focus on enjoying their trip. This service also includes accountability, as agents ensure that all aspects of the trip are executed properly.

Consistency and Relationship: Over time, a good travel agent becomes an extension of the traveler’s team. Repeat clients benefit from an agent’s understanding of their preferences, ensuring that each trip meets their specific needs. This personal touch fosters long-term relationships and repeat business, as the agent consistently delivers tailored experiences.

Main Customer Segments

Travelers generally fall into two categories: necessity-based and leisure-based. While business travelers offer more consistent repeat business, leisure travelers, particularly those booking group trips, often have larger budgets and generate higher commissions. The primary target demographic is affluent middle-class travelers seeking professional, expert services for special events. This customer base values convenience and is willing to pay a premium to avoid the time and effort of coordinating logistics.

Key customer segments include:

Honeymooners: These young, single professionals, typically between their mid-20s and mid-40s, are planning destination weddings or honeymoons. With a combined annual household income of at least $80,000, they value convenience and are used to paying for subscription services.

Anniversary Celebrants: Older married couples, usually in their mid-40s to late 60s, planning a special wedding anniversary. These individuals are often retired and have disposable income for leisure activities, including cruises and extended trips.

Grand Family Reunion Coordinators: These individuals are responsible for planning large family gatherings. They are often busy, people-pleasers who handle multiple tasks and appreciate the convenience of outsourcing complex travel arrangements to an expert.

Competitive Analysis

The travel agency industry is competitive, but there is still room for new entrants, particularly with the growing demand for personalized travel services. Success in this industry often hinges on effective marketing and networking, which build a strong sales pipeline for both short-term and long-term income.

Direct Competitors: These include other travel franchises, independent travel agents, and agencies. Each competitor aims to capture a share of the market by offering similar services. However, franchisors may differentiate themselves through technology or exclusive packages, while franchisees may focus on targeting specific markets and collaborating to avoid competition within their territories.

Indirect Competitors: These are businesses that offer travel planning as part of a broader service, such as airlines, hotels, or credit card companies. Additionally, online platforms like Priceline and Expedia allow travelers to plan their own trips, often at a lower cost. However, the key differentiator for travel agents is their personalized service and unbiased recommendations, which online platforms cannot match.

Threat of New Entrants: The travel agency industry is always open to new players, particularly with the rise of franchises. However, unless there is a groundbreaking technological innovation, such as advanced AI replacing human agents, new entrants will likely fall into the same competitive categories mentioned above.

Fit

Beyond the feasibility and competitive analysis, the final consideration is whether travel planning aligns with the entrepreneur’s goals, skills, and lifestyle. The individual in question is seeking a part-time side hustle, with the long-term goal of transitioning into full-time self-employment. The entrepreneur’s background in IT project management provides a strong foundation for managing the technology and communication aspects of the business.