U.S. Travel Arrangement and Reservation Services Sector: Skift Research Estimates 2020

by Haixia Wang + Skift Team - Feb 2020

Skift Research Take

Travel agents still exist; tour operators are the last sector to be moved to digital; online travel platforms are scrambling to keep the growth rate high. We are expecting to see more changes shaping up the travel arrangement and reservation services sector in the next few years.

Report Overview

We launched our first U.S. passenger airline sector estimates and U.S. accommodation sector estimatesreports in 2019. We will continue to size up the travel industry in 2020. In this report, we turn to the travel arrangement and reservation services sector. This is a complex sector that includes travel agencies, tour operators, online reservation and booking services, ticket offices, convention and visitors bureaus, etc. We estimate that the total travel arrangement and reservation services sector in the U.S. generated $54.8 billion revenue in 2019 and forecast the sector to grow 5% to reach $57.5 billion in revenue in 2020. Travel agencies are still the largest subsector in this industry. With an estimated $23.3 billion in revenue, travel agencies will account for 40.4% of industry revenue in 2020.

We arrive at our proprietary estimates by analyzing our internal consumer survey data, relevant data aggregated in our previous reports, as well as many reputable sources, including the U.S. Economic Census, U.S. Census Service Annual Survey (SAS) and Quarterly Services Survey (QSS), U.S. Bureau of Economic Analysis Travel and Tourism Satellite Accounts, U.S. Bureau of Labor Statistics Current Population Survey (CPS) and Occupational Employment Statistics (OES) Survey, and Statista.

What You'll Learn From This Report

  • U.S. travel arrangement and reservation services sector market size estimates, 2015–2020
  • U.S. market size estimates for travel agencies, 2015–2020
  • U.S. market size estimates for tour operators, 2015–2020
  • U.S. market size estimates for ticket and reservation services, 2015–2020
  • Key operational and performance estimates for 2019, including number of companies, properties, and corresponding revenue
  • Employment statistics for travel agents, tour operators, reservation and transportation ticket agents, and travel clerks, 2014–2018
  • Analysis of U.S. Economic Census data

Positive Market Outlook for 2020

In our year-end Skift Global Travel Economy Outlook 2020 report, we forecast 2020 to be another solid year of growth for travel, both in the U.S. and globally. While acknowledging the downside risks that might lead to the economic slowdown, we believe the fundamentals remain strong for the global economy. Translating into travel, we anticipate further expansion across the board in hospitality, online travel, and airlines.

However, as we are working on this report, the impact of the coronavirus outbreak has just started to show in global travel. Flights are canceled and borders are closed. The long-term effect of this depends on how the epidemic plays out in the coming weeks or months.

Our 2020 forecast doesn’t factor in the impact of coronavirus. As more information comes in, we will evaluate the short-term and long-term effect of it in our future reports.

Overall, the travel arrangement and reservation services sector has experienced strong growth for the past few years and outperformed other major sectors. We believe this trend will continue in the next few years. After near double-digit growths for two years, we estimate that the sector generated $54.8 billion revenue in 2019 and will add nearly $3 billion in 2020 and bring total revenue to $57.5 billion.

Core Segments

Unlike other major travel sectors, the travel arrangement and reservation services sector is comprised of a wider array of subsectors, some of which provide services that cut across different sectors, while others are more niche and focused.

We follow the North American Industry Classification System (NAICS) in categorizing and estimating market sizes for these sectors.

Travel agencies are companies primarily engaged in acting as agents in selling travel, tour, and accommodation services to the general public and commercial clients. The traditional brick-and-mortar travel agencies and the online travel agencies (OTAs) such as Expedia.com and Booking.com all fall under this sector. This is the largest sector under travel arrangement and reservation. With an estimated total revenue of $22.1 billion in 2020, travel agencies accounted for 40% of the total market.

Ticket and reservation services are companies primarily engaged in ticket selling, reservations, and booking services. This is another big sector not far behind travel agencies. We forecast the ticketing and booking services to generate $17.1 billion revenue in 2020, making up 30% of the total sector revenue.

Tour operators are companies primarily engaged in arranging and assembling tours, including tours that are sold through travel agencies and wholesale tour operators. As the third-largest sector, tour operator companies are expected to bring in $8.3 billion revenue in 2020, a 5.7% increase over 2019.

Convention and visitors bureaus are companies and organizations primarily engaged in marketing and promoting communities and facilities to businesses and leisure travelers through a range of activities, such as assisting organizations in locating meeting and convention sites, providing travel information on area attractions, lodging accommodations, restaurants, providing maps, and organizing group tours of local historical, recreational, and cultural attractions. We forecast this sector to generate $2.7 billion in 2020, a 2.8% increase over 2019.

Number of Companies

For 2019, we estimate there were nearly 17,000 travel arrangement and reservation service companies in the U.S. Despite the concentration of a few big companies, the sector is highly fragmented. The average annual revenue per company is $3.2 million. Stripping off the multi-billion-dollar few, this number would be much lower. And on average, each company runs 1.5 establishments.

Types of Consumers

Travel management companies, which fall under travel agencies, as well as convention and visitors bureaus, are the biggest travel providers for corporate and government travel. Other than these business types, the sector largely serves individual consumers. Overall, about two-thirds of revenues from the travel arrangement and reservation services sector came from household consumers and individuals in 2019, four percentage points higher than in 2013.

Economic Census Data

The U.S. Economic Census, which measures a large range of operational and performance metrics of all businesses every five years, provides the most robust information and valuable benchmarks for every business sector. Even though there is a dire need for more publicly available data and improvement in timely data release, we believe the historical data— with the most recent year being 2012 — still has a lot of value in looking at the fundamentals of each vertical. We will add corresponding comparative data after the release of the 2017 Economic Census.

In 2012, there were only 34 travel arrangement and reservation companies with annual revenue above $100 million. Yet that 0.2% of total companies made up 42% of total sector revenue. This is further evidence of the extreme concentration on the one end and the extreme long tail of the sector on the other end.

The 2012 Economic Census breaks down very detailed product line revenues. Commission and fees were the largest revenue source, contributing to 54% of total sector revenue. And of all the travel arrangement and reservation service companies, 77% generated revenues through charging commission and fees. Trip planning services and packaged tour services combined were the second largest revenue source.

We will delve into the key performance and operational metrics of each sector below.


Travel Agencies

The bleak decline of brick-and-mortar travel agencies and big brands spending tons of marketing money driving direct bookings might have impacted certain companies or segments. The sector as a whole has been posing healthy growth for the past few years. From 2015 to 2019, U.S. travel agencies grew by $6 billion in revenue.

Online Travel Agencies (OTAs)

Thanks to the rise of online travel agencies, travel is among the earliest consumer sectors shifting to e-commerce. As we presented in our Skift Global Travel Economy Outlook 2020report of the U.S. Census Bureau data, 46% of travel arrangement and reservation services revenues were made online in 2017.

Two decades since the first online travel agency started business, the OTA sector is still holding strong. After years of consolidation and service expansion, Expedia Group and Booking Holdings have established and secured their duopoly status in the OTA space. Collectively, the two conglomerates accounted for 37% of travel agency revenues and 15% of the entire travel arrangement and reservation services revenue in the U.S. in 2018.

Number of Companies

We estimate that by the end of 2019, there were about 10,000 travel agency companies and 16,000 local branches for these companies. The average annual revenue of a travel agency was only $2.1 million, skewed by the long tail of this business sector.

Employment Status

We sought and identified two sources for employment data. One is the Occupational Employment Statistics (OES) survey which collects data from businesses on wage and salary workers. The other is the Current Population Survey (CPS) which collects data from individuals and households on labor force participation. In theory, the two sets of data should match for waged and salaried workers and the CPS data would have an additional layer on the self-employed, contracted, and other non-salaried types of employment. However, due to different sample sizes and methodologies, the two datasets don’t match up. What we present below is a rough estimate of the total employment number and the non-waged number deducted from it. Nonetheless, it paints a broad picture of the sector.

Give or take, there are about 20% of travel agents that are not on a company’s payroll. The travel agent occupation is heavily skewed towards women and the older population. In 2018, 86% of U.S. travel agents were women and the median age was 52 years old.

Economic Census data

There were only 10 travel agencies with annual revenue above $100 million in 2012. However, these 10 companies accounted for 35% of total sector revenue.

Commissions and fees are the main revenue sources for travel agencies, accounting for 63% of the sector revenue in 2012. Trip planning services made up another 28% of the revenue.



Ticket and Reservation Services

Ticket and reservation services encompasses a large variety of companies providing travel-related reservation and booking services. Ticket offices of all travel verticals (airlines, car rentals, cruises, hotels, rail, museums, etc.), booking services, reservation services, etc. all fall under this segment. In 2019, we estimate that the ticket and reservation services sector in the U.S. generated $16 billion revenue. We expect a 5.2% increase and a total of $17.1 revenue for the sector in 2020.

Number of Companies

We estimate that there were about 1,700 ticket and reservation service companies in the U.S. in 2019, which is a very small number compared with other major travel sectors. And the segment also stands out in average company size. Revenue per company averaged at $9.6 million, much higher than travel agencies.

Employment Status

Because there is a lot of gray area in terms of what falls under travel clerks, we believe how individuals report their occupations in the Current Population Survey (CPS) is not as accurate as the business reporting in the Occupational Employment Statistics (OES) Survey. So we only include the waged employment data from OES in the chart below.
There were about 132,000 individuals working as ticket agents and travel clerks in 2018. Women made up 59% of the workforce and the median age was 41 years old.

Economic Census Data

In 2012, there were 21 companies with annual revenues at $100 million and above. And the combined revenues of these companies made up 73% of the total sector revenue.

Given that ticket and reservation service is the core product of the sector, 92% of the revenue generated by the sector came from commissions and fees in 2012. And within that, event tickets, domestic lodging, and airline tickets had the biggest revenue shares.



Tour Operators

The fall of Thomas Cook Group in the UK in 2019 is often attributed to the declining interest in packaged tours from the consumer side. But a deeper analysis shows that it’s more a strategic and operational failure that should be blamed (see Skift’s Debt, Egos and Bad Decisions: How Thomas Cook Failed to Adapt to a New Era of Travel for more details). While it’s true that the packaged tour in the U.S. has never been as popular as in the European markets and there was a period of waning interest in packaged tours, there have been signs of renewed or new (in the U.S.) appetite for it in the past few years.

The U.S. tour operators segment saw double-digit growth in both 2017 and 2018. We estimate the sector to further grow 5.7% in 2020, reaching $8.3 billion in total revenue.

Number of Companies

We estimate that by the end of 2019, there were nearly 25,000 tour operator companies in the U.S. And the average annual revenue was only $660K per company.

Employment Status

In line with the rapid revenue growth in 2017 and 2018, there was a spike in tour and travel guide employment at the same time. Waged employment for tour and travel guides jumped 11% to 46,000 and total employment jumped 28% to 68,000 in 2017. In 2018, women accounted for 44% of the total employment and the median age was 39.

Economic Census Data

In 2012, there were only three tour operator companies with annual revenue above $100 million and the combined revenue of these three companies only made up 9% of the sector revenue.

Arranging pre-packaged international trips was the biggest revenue source for the sector. In 2012, this service alone accounted for 51% of the entire sector revenue.


Convention and Visitors Bureaus

Convention facilities and services and sightseeing tours are the core revenue sources for convention and visitors bureaus (CVB). As with other travel arrangement and reservation services sectors, this sector has seen steady growth in the past few years. We forecast the sector to grow 2.8% and generate $2.7 billion revenue in 2020.

Number of Companies

We estimate that there were about 1,200 destination marketing organizations or CVBs in 2019 and on average, each organization generated $2.2 million revenue through travel arrangement services.

Economic Census Data

In 2012, convention planning and assistance accounted for 47% of the CVB revenue and visitor information and sightseeing tour service accounted for 39%.



Methodology

Skift’s travel arrangement and reservation services sector estimates are based on Skift Research’s analysis of our internal consumer survey data, relevant data aggregated in our previous reports, as well as many reputable sources, including the U.S. Economic Census, U.S. Census Service Annual Survey (SAS) and Quarterly Services Survey (QSS), U.S. Bureau of Economic Analysis Travel and Tourism Satellite Accounts, U.S. Bureau of Labor Statistics Current Population Survey (CPS) and Occupational Employment Statistics (OES) Survey, and Statista.


Further Reading