A New Revenue Management Framework for Hong Kong Travel Agencies

Abstract

Today’s highly unpredictable and competitive global environment has had profound effects on the travel industry. Higher operational costs and reduced profit margins have caused many Hong Kong travel agencies go out of business altogether, the profit margins of Hong Kong travel agencies are shrinking. As this sector shares many features with traditional revenue management (RM) users such as the airline and hotel industries, travel agencies have the potential to enhance revenue by incorporating RM techniques into their businesses. Most travel agencies sell product on behalf of suppliers, and do not own or control their inventories. The adoption of RM techniques could optimize the financial health of travel agencies by freeing them from dependence on commissions. This study presents a RM framework formulated specifically for travel agents. It provides a deterministic model for the business operations of travel agencies.