Travel Agency Owner, Weary of Treading Water, Looks for Ways to Grow

As the owner of a travel agency, Kevin Notrica is adept at making sure clients arrive at their destination. Charting a successful course for his own business, however, has proved much more challenging.

Airline commission cuts and the Internet’s growing appeal have taken a bite out of business at Notrica’s Nance Travel Services in Long Beach. Further complicating the picture has been the loss of several corporate accounts the agency once held with local divisions of major national companies. To save money, many of those companies have dropped accounts with regional travel outfits in favor of a single national agency.

Together, those factors have stifled growth at Nance despite the agency’s energetic staff of six agents and a reputation for quality service. Sales have leveled off at about $4 million a year, about where they were back in 1996.

“I don’t like the thought of flat sales,” Notrica said. “We are able to make a living, but we’re really just treading water. I want more than that.”

Notrica has mulled various options to grow his business, including possibly acquiring a competing agency. He’s also thought about bolstering the leisure portion of his business--which generates just 40% of sales--to offset losses on the corporate travel side. Many leisure travel companies, such as cruise lines, do not impose commission caps, providing greater opportunity for profits.

But Notrica has yet to act on those ideas.

“I spend so much time putting out fires that I haven’t spent enough time soliciting new clients or expanding our business,” he said. “Even though my staff is extremely bright and capable, I haven’t been very good about delegating responsibilities.”

Devoting time and attention to immediate concerns at the expense of longer-term planning is a common problem for many owners of small and medium-sized companies, said Paul Ratoff, a business consultant.

“It’s easy to fall into the pattern of concentrating on day-to-day operations,” Ratoff said. “But at some point, you’ve got to step back and create a longer-range vision.”

To that end, Ratoff provided Notrica with a framework to help him navigate a path for the next year and to set longer-range goals in motion. For Notrica, the sessions with Ratoff proved almost as valuable as the recommendations that eventually emerged.

“[Ratoff] really grilled me about the industry and about my business and it really helped me to start focusing,” he said. “The whole process was extremely eye-opening.’

During the meetings, several important issues became clear. The changes that have swept the travel industry, such as commission caps and increased Internet use, will not be reversed. To prosper, Nance must grow, either by offering a broader range of services or by acquiring other travel agencies. Otherwise, flat sales could soon turn into declining sales.

In addition, Nance needs to use state-of-the-art travel technology to better serve its clients. The company’s existing reservation and accounting system is more than a decade old.

Finally, the company must ensure that its staff remains stable and motivated. Because much of the travel business is built on personal relationships, a transient work force could spell trouble.

To accomplish Notrica’s growth goals, Ratoff proposed a multi-pronged approach.

Nance should consider adding agents with expertise that the agency does not already possess. For example, an agent specializing in wholesaling tickets--purchasing blocks of tickets from airlines that are then resold to the public--would be a good addition for both the agency and its customers. Wholesale tickets do not have commission caps so they provide more potential for profit. And because the airlines sell them cheaper than individual tickets, they could be cost effective for some of Nance’s clients.

Another approach to increase growth is to persuade some of the agency’s business travelers to book their leisure trips through Nance.

“You’ve got to let your existing customers know that you offer more services,” Ratoff said. “This will provide more business and strengthen relationships with those customers.”

To help get the word out, Notrica should send corporate clients a brochure three times a year offering special discounts for vacation travel, Ratoff suggested. He could follow that up with quarterly electronic mail newsletters offering special programs along with travel hints. In addition, Notrica and his agents need to get into the habit of mentioning leisure travel opportunities when talking to clients.

Notrica’s efforts to increase his leisure travel business so far has been limited to purchasing mailing lists of Long Beach neighborhoods and sending fliers to those households. Those efforts have had only spotty success.

Notrica had assumed that his business clients already were aware that his agency also arranged leisure trips. But phone calls to clients after receiving Ratoff’s suggestion revealed that was not the case.

“I was surprised at how many of our clients said, ‘I didn’t know you booked leisure trips,’ ” Notrica said.

Ratoff also urged Notrica to get serious with his acquisition plans. He already has the most important ingredient to turn those goals into reality--financing. His company’s cash reserves and a credit line have put him in position to make a purchase.

Potential targets could include corporate travel agencies similar to Nance, which would help make Notrica’s company more dominant in its market. A larger agency would enjoy increased purchasing leverage with hotels, car-rental agencies and other travel-related firms.

Notrica could also consider acquiring an agency with another specialty, such as cruise trips or ticket wholesaling in order to broaden Nance’s offerings.

With wise acquisitions, Nance is likely to gain market share. And consolidating two agencies into one at Nance’s Long Beach location, which has room for more staff, would provide cost savings in the form of lower rent and other overhead expenses.

To get the acquisition ball rolling, Ratoff advised Notrica to put together a financing package and confidentiality agreement he could present to potential sellers. He also urged him to have legal and financial advisors in place to examine targets.

Ratoff’s advice to upgrade Nance’s technology was a move that Notrica already had in the works. Nance Travel will soon install specialized software that gives agents historical information about clients. Details on what airlines, seating arrangements or hotels these travelers prefer and other information culled from previous trips will be at the agents’ fingertips.

“All this data will help us provide even more service to our business travelers and could also help us develop the leisure business,” Notrica said.

Ratoff applauds the technology upgrade as a smart move to help differentiate Nance from competitors.

“This is a good way for Nance to strengthen their relationships with customers and provide more services, which they need to do if they want to dominate their marketplace,” he said.

Finally, Ratoff recommended several strategies for attracting and retaining key personnel, an important issue for a company trying to grow its way to success.

The suggestions ranged from morale boosters, such as regular staff dinners, weekend trips and team-building seminars, to financial incentives, such as creation of a profit-sharing program. He also suggested creating a survey program to gauge employee feelings.

“You’ve got to take care of your employees, because a lot of turnover in an industry such as travel could really hurt business,” Ratoff said.

Notrica said he is well aware of the importance of a strong and committed staff and he is receptive to putting many of Ratoff’s suggestions into place. In fact, Notrica seemed energized by the entire process with Ratoff and said he is committed to following through on many of the suggestions.

“Before, I had general goals, such as trying to grow and make more money,” Notrica said. “But my thinking was all over the place. [Ratoff] has really reeled me in and helped me focus. Going forward, I might still be a little scattered, but I’ll be less scattered. We have the wherewithal and the desire to succeed.”

If you would like to apply for a Business Make-Over, send a letter describing your company and its problem areas to: Business Make-Overs, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. Cyndia Zwahlen can be reached by e-mail at cyndia.zwahlen@latimes.com.

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This Week’s Company Make-Over

* Name: Nance Travel Services

* Headquarters: Long Beach

* Type of Business: Travel agency

* Status: C-corporation

* Owner: Kevin Notrica

* Founded: 1970 (Notrica purchased in 1994)

* Start-Up Financing: $50,000 in savings

* 1999 Sales: $4 million

* Employees: Seven, including six agents

* Customers: Businesses and individuals. Corporate travel is 60% of business, leisure travel 40%.

Main Business Problem:

How to increase sales in the face of trends that are cutting into revenues for independent travel agencies.

Recommendations:

* Add staff to tap market niches such as wholesale sales.

* Push ahead with plans to acquire other travel agencies.

* Use various techniques to expand leisure business, targeting existing corporate travel customers.

* Invest in computer technology to improve customer service.

* Take steps to maintain a positive work environment to attract and retain top-performing agents.

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Meet the Consultant

Paul Ratoff is a certified management consultant at Los Angeles-based Moss Adams, one of the 15 largest accounting and consulting firms in the U.S. Ratoff, who has 24 years’ experience as a business consultant, specializes in comprehensive business planning.