Rent, fuel, hotels… Prices are soaring.
Some economists are forecasting a recession in the near future. If this happens, it is important for travel agencies to be prepared. What do you do when a recession is looming on the horizon?
Recessions are more common than most people realize. According to the National Bureau of Economic Research (NBER), the USA has experienced a recession every six years since WWII.
Since the travel industry is based largely on leisure, vacations are generally the first thing to go when Americans feel the pinch of inflation. This hits travel agents right where it hurts.
Even though a looming recession seems scary and unpredictable, there are things you can do to recession-proof your travel agency.
We’ll show you how you can protect your business.
But first, what exactly is a recession?
What is a recession?
A recession is a period of time where unemployment rates rise, the stock market falls, and government debt increases. A recession is called when an economic downturn lasts longer than six months.
For example: After facing an economic downturn like the 2020 global pandemic, many travel agencies had to close their doors.
Prices dropped on everything – fuel, groceries, airfare, and hotels.
Now, as demand increases, prices are rising at an alarming rate as businesses across the globe try to recoup their lost income.
As Americans tighten their belts in preparation for another recession they may start cutting back on non-essential things, like vacations.
Because of the decrease in spending, staff is laid off and everyone suffers, consumers and business owners alike.
How can you prepare your business to face a crisis like this? Keep reading to find out how to recession-proof your travel agency…
What is a recession-proof business?
It’s easy to hyperventilate over an unstable economy. The cost of living is crazy, and your bills keep piling up. How do some businesses make it through these times without folding?
It’s simple: They have recession strategies already in place.
They’re able to continue to make money even during slow times. If cash flow slows down, they have budget strategies to help compensate.
A recession is part of the business cycle so there’s nothing to be afraid of. Yes, some recessions are worse than others, but with a proper plan in place, you’ll be able to keep your head above water and come out even stronger on the other side.
Below are 12 tried-and-true strategies guaranteed to help prepare you for an economic recession:
12 Strategies to Recession-Proof Your Travel Business
When travel agencies don too many hats in an effort to save time and money, their fundamental business practices usually decline. During an economic downturn, however, this frugal method of running your business can make an enormous difference.
By prioritizing essentials and cutting costs where you can, you’ll find yourself saving money rather than spending it.
Here are 12 proven methods for recession-proofing your travel agency during difficult financial times:
- Reduce Overhead
Overhead costs are inevitable, but they always hurt more during a recession. These costs often stay the same no matter what the economy looks like. Trim back on things like outsourced services or staff perks. While most of us never want to go there with our employees, sometimes layoffs are a necessary evil to keep your overhead manageable. Try to plan ways you can reduce overhead before a recession strikes.
- Be patient
It’s hard to wait out difficult circumstances. The reality is that a recession won’t last forever. While you need to be patient, that doesn’t mean you fold your hands and take whatever life throws at you. Stay proactive in looking for ways to better manage your money and your travel agency. Can you get rid of subscriptions that offer overlapping services or ones you rarely use? Or maybe cut out your daily Starbucks stop?
- Beat Competition
It’s important to reimagine your marketing with a recession in mind. Are there ways you can modify your services to better fit the current market? Your clients are pinching pennies right now and need to know ways you can help them make their summer vacation possible. Try writing a blog post about traveling on a budget or providing a free ebook featuring your personal bucket list to get them excited about traveling again. Whatever you do, try to make your unique brand stand out above the sea of other travel agents.
- Assess your risk tolerance
It’s always good to take time to do an assessment on the level of risk your travel agency is capable of withstanding. Take a look at your staff and your systems: financial, client onboarding, service fees, etc. Can they adapt to challenges? Can they handle uncertainty and financial loss? Be honest and ruthless in this area, and I promise it will pay off in the future.
- Cut Back
Cutting out expenses should never encroach on your client’s experience. If you cut your WiFi, you’d likely have to go to a library for your onboarding calls. This could make your client uncomfortable and cause you to lose the sale. Take a look at your highest costs. What can you cut back on?
- Create a Cash Flow Plan
Running out of money is every business owner’s biggest fear. What if you can’t make it? Take a look at your necessary monthly expenses. How much money do you need to take care of those? Come up with a strategy that includes a financial buffer so that during a downturn, or worse a recession, you have peace of mind in knowing that you can handle significant income loss before it affects your financial bottom line.
- Create an Emergency Fund
Some business owners don’t mind flying by the seat of their pants. If you’re like most people, though, you’d rather have a cushion behind you in case of a crisis. An emergency fund can give you the peace of mind you need to focus on your business without worry. Experts recommend creating a six-month emergency fund to cover your business expenses.
- Stay Within Your budget
In order to keep your head above water, it’s essential to stay within your budget. If you set a budget of $2,000 per month, stay in that range. Following your budget is an excellent practice to maintain even without financial stress.
- Have an Action Plan Before Business Slows Down
Another great recession-proof strategy is to plan scenarios and develop action plans to deal with those hypothetical situations. What should you do if client inquiries dry up? Have a new marketing plan in place to keep you prepared for any eventuality.
- Establish flexible client agreements
If you’re having trouble creating return clients during a recession, it’s time to rethink your client agreements. Do you need to offer payment plans – one that accommodates budgeting? By offering more flexible payment options you’ll build loyalty among your existing client base. They’ll appreciate the fact that you went out of your way to give them the best deal possible.
- Use Nurture Campaigns
A nurture campaign can be anything from developing a welcome email sequence to emailing past clients just to check in. This keeps your travel agency in the back of their mind so they’ll know who to turn to when they’re ready to go on a trip. Have a plan in place to make sure you’re nurturing your audience.
- Consider Pivoting
A business pivot doesn’t need to be as difficult as the episode from Friends when Ross is hauling a couch up the apartment stairs. He continues to shout “Pivot!” while no one is pivoting. A business pivot can be as simple as tweaking your marketing plan or rearranging your processes to increase efficiency.
- Stay out of Debt
Instead of continuing to rack up debt on your credit cards, pay them off little by little every month. Set a budget even for your credit cards. It’s helpful to download a budgeting app to help you stay on track. By keeping debt at bay, you’re setting yourself up to successfully walk through any depression.
Prepare for a Recession: Start Learning
There are so many variables when going through a recession. You aren’t sure if you’ll lose your job or even your entire livelihood. The stock market is plummeting, and your business investments are looking sketchy at best.
By following the tips above, you’ll be all set to prepare for a recession and get through it unscathed.
As you implement everything from this article, remember that learning is key to surviving a recession. If you want your business to be truly recession-proof, you’ll need to understand everything about it.
- Efficient and effective marketing
- Legal documents to protect you from lawsuits
- Establishing planning, change, and cancellation fees
- The do’s and dont’s of client onboarding
- Having a clear path of action that assesses variables
You’ll find all this and more in Travel Industry Solution’s membership portal.
Become a member and gain instant access to thousands of useful tools that help you recession-proof your travel agency today!