Sitting alongside Pets Paradise and HowardÍs Storage World, it is tempting to view Harvey World Travel as any other franchise system. Yet those within travel claim their industry is a breed apart, requiring specialist skills and attracting different investors. This is only partly true.

Adrian McFedries, managing director of the franchise consultants DC Strategy says that travelÍs entry requirements are not very different to other skilled service-based franchise systems such as Choice Home Loans, or Life Resolutions clinical psychology clinics.

Ian Krawitz, head of intelligence at franchise-focused consultancy 10 Thousand Feet, says such easy comparisons cannot be made, however, as the level of goodwill is significantly different. Customers looking for a new home loan visit a broker frequently over a period of a couple of months, then are unlikely to visit ever again. Clinical psychologists have repeat visitors, much like John Brennan hairdressers, but each consultation is relatively low value and takes place every month or so.

The journey

Travel agents, on the other hand, have around 40 per cent repeat business and aim to see good clients twice a year.

Travel is not as onerous to become qualified as either hairdressing or psychology. To establish yourself as a licensed travel agent you need to complete Fare and Ticketing I and II, a course dictated by the International Air Transport Association detailing the intricacies of issuing airline tickets. The Technical and Further Education (TAFE) college course takes around 60 hours, or around the same as a comparable real estate agentÍs Certificate IV in Property, McFedries adds.

But the entry level investment for those tempted in acquiring a travel agency is significantly higher than a Ray White, at between $150,000 and $250,00 for a typical travel agency franchise.

ñThe shop fit and rent will set you back $100,000, plus youÍll need to pay 3-5 per cent of turnover to buy the storeÍs goodwill, which on a $3 million turnover is at least another $150,000,î says Adrian Caruso, managing director at TA Fastrack, a specialist consultancy for travel franchises.

There is quite some choice, too. Flight Centre is the only wholly owned travel chain in Australia, with big names including Harvey World Travel, Jetset and Travelworld, all offering franchise opportunities. Travellers Choice also has a stockholder membership that replicates a franchise in many ways while both Escape Travel and STA Travel have a mix of wholly owned and franchised stores.

Many of the large franchise chains also offer affiliate membership, which gives independent agencies access to negotiated airfare deals, but not the right to share national marketing or advertising schemes, Caruso says.

Krawitz points to an entrepreneurial rather than a salaried employee mentality as being likely to motivate those in non-branded agencies, since entrepreneurs ñseek out an environment where they can make a lot of money and just need a basic system around themî.

All of the top 10 travel agencies in Australia bear the name not of a major chain but of their founder, even if they are affiliates of a buying group.

Caruso advises potential investors to weigh up how good each agencyÍs client database is and its location before taking the plunge, but says you could be sitting on a goldmine if the previous owner focused on the all-important client relationship management.

Meanwhile, many former travel agents reach a point in their life when they get sick of working for someone else and ñbuy themselves a jobî, says Krawitz. This group is far more likely to prefer the comfort of a national brand, have the national 1300 number diverted to their store and let the brand do the work for them, he adds.

Since travel agencies generally operate during business hours (with many closed on Sundays), those buying themselves a steady income as part of a chain are also likely to be looking for a job that fits in with their lifestyle, McFedries says.

There is another factor to bear in mind when deciding whether to go branded on not: many shopping malls including Westfield, do not allow independents to operate, preferring established brands. For this reason, non-branded affiliate franchises operate often from upstairs offices and over the telephone with high-end leisure clients they know by name or medium-sized company travel accounts.

More than 70 per cent of travel agency franchisees are female, and Caruso says he has spotted a third group of people buying agencies: the wives of entrepreneurs. ñThe husband does the sums and sees itÍs a sound business, the wife likes the idea of organising holidays and then all of a sudden she has a business to run,î Caruso says.

And itÍs quite a complicated business. Franchisees pay a royalty to the franchisor to use the brand and have access to the national marketing campaigns, training and computer reservation systems. Tied to this is branding and point-of-sale obligations on behalf of the franchisee. But the franchisee also has to give a cut of commissions each store earns from selling preferred suppliers (such as airlines, tour operators or hotel groups) back to the franchisor.

Another quirk in travel is that there are few multi-unit franchises, so less scope for economies of scale, says Krawitz. He points to some of the best systems at the moment as being ones that are scalable, such as Xpresso Delight office coffee machine maintenance or virtual telecommunications provider Telcoinabox.

But travel is a mature market, with much of the initial spark lost. That doesnÍt mean there is no scope for making money, you just need to know where to look.

Room service

And one solution could be the accommodation field. Not a heavily franchised arena, the hotel and accommodation sector offers a good financial prospect _ you might just have to wait a while to get your foot in the door.

According to Matthew Tyler, general manager at the Lido Group, an aggregator of hotels in Australia and internationally and not a franchise set-up, the recent boom after the lows of 2001 to 2003 have not been matched by the supply of new properties. With occupancy levels at historic highs accommodation providers have been able to increase room rates significantly over the last four years, he says.

He highlights that although apartment-styled properties are enjoying the steady incline of occupancy and average room rates along with hotels and motels, statistics from the National Hotel Development Register show a decline in new developments in the serviced apartments sector.

Quest Serviced Accommodation, a business which has notched up a more than respectable 20 years trading, has a queue of franchisee prospects itching to invest in the brand, and is growing exponentially; the company just canÍt build properties fast enough.

ItÍs a tale echoed throughout the industry.

ñTourist arrival numbers into Australia continue to show an overall upward trend and in a number of capital cities the growth in demand and the lack of new supply is driving room rates to record levels,î says Tyler.

It is interesting to note that Brisbane, Canberra, and Adelaide have no new rooms under construction despite there being a significant increase in demand, he points out.

ñMelbourne and Sydney maintain their positions for the highest room rates in the country and will continue to benefit from the strong corporate and government travellers but could soon be getting a serious interstate challenge if current trends in room rate growth continue.

ñAreas like Perth, Townsville, Brisbane, Canberra and Darwin have been particularly strong with the resources and commodity boom while Canberra benefits from a strong government market and limited supply.î

Simon McGrath, vice president Accor Australia, concurs. ñThere hasnÍt been much of an additional supply to major markets for the last five years and a strong corporate market is driving demand.

ñCurrently we are seeing leisure take advantage of the high Australian dollar and low cost of flights internationally and therefore there is an influx of outbound travel. However, pleasingly the corporate market has been very strong in Australia and remains so. In relation to leisure, there is some positive growth in the mid market and economy hotel levels.î

McGrath predicts rapid growth in the franchise arena as independent operators recognise ñthe need for brand recognition, distribution and connectivityî. The companyÍs own multiplicity of brands and strong distribution are complemented, he believes, by an active sales network, giving it a strong reach.

Of course business travel remains linked to the strength of the economy and international business conditions, but is not a discretionary spend as is the leisure market.

ñLeisure markets can be affected by things such as the strength or weakness of the Australian dollar, as this affects whether travellers go overseas or stay locally _ right now the Aussie is strong so visitors will be put off by costs and the domestic traveller will consider going abroad to take advantage of a strong Aussie dollar,î believes Tyler.

It isnÍt just those businesses profiting from the franchise opportunities that can see the benefit.

Tyler reports that purchasing a hotel/motel franchise in the right area of Australia still offers great potential. ñI was consulting to a national company that was amazed at what they were being forced to pay small independent accommodation operators in remote regional areas.în

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