As Ukrainian and multinational businesses in the country increase their presence in the international arena, the travel agencies that cater to the business market are burgeoning.
Several of the country’s travel agencies serve corporate customers as part of international travel agency networks, allowing them to often offer better airfares and room rates than would be otherwise available. Volume sales and partnerships with international hotel chains enable local agencies affiliated with international chains to negotiate significant discounts on a range of travel services.
“It is only possible to manage this business through big travel agencies,” said Iryna Rotgaizer, sales director for Via Kyiv travel agency.
“Negotiating a special price is our specialty, and only agencies with a large number of clients can afford to give good deals,” she said.
She said that Via Kyiv does not work on a discount basis, but does offer special rates.
“We don’t offer discounted services as a rule, but we do provide discounts after negotiations with airlines, which can result in discounts of between 10 percent and fifteen percent,” she said.
If the agent’s commission is seven to eight percent, and 20 percent of that amount goes for VAT, there’s only five to six percent left, so agencies operate on about a five percent profit margin, she said.
“I don’t know how [small] agencies survive,” Rottgaizer added.
Via Kyiv travel agency has been focusing on corporate travel services since 1997, when it began operations in Kyiv under a partnership agreement with the German airline Lufthansa’s City Centers, which are ticketing centers located in several of Ukraine’s regional cities. The partnership with the airline has raised the agency’s
service standards, and resulted in broader options for their customers – namely, fewer hassles when purchasing airline tickets and lower prices.
Moreover, Via Kyiv provides information on hotels, visas and car rental, and accounts for those companies that travel frequently.
Valeria Luik, director of Sky Travel BTI Ukraine, said that her company is able to offer low rates as a result of the agency’s affiliation with hotel booking programs that allow access to 20,000 four- and five-star hotels worldwide.
“The business has been developing internationally. Now the BTI chain is operating in 100 countries,” Luik said.
Since it started providing business travel services in 1999, her firm has been working with as many as 50 corporate clients.
Most of them are local affiliates of multinational companies, like Philip Morris and Exxon Mobil.
Recently Sky Travel has opened an office in Kharkiv to serve a multinational client that Luik refused to name for competitive reasons.
Industry insiders say that the business travel market has already taken shape, with some major corporate customers already loyal to their travel provider.
However, some domestic companies are not yet believers in travel packages, or in working exclusively with one travel agency.
“Many companies still don’t understand that it is best to work with one travel agency, instead of making airline reservations through one agent and hotel reservations through another one,” said Oleksandr Pigolenko, sales and marketing director of Obriy Travel.
“Companies should work with one company that offers the whole range of services.”
Sky Travel BTI, Belgium-based Carlson Wagonlit Travel and Obriy Travel, an affiliate of American Express, are among those who compete for the bulk of the market. Rottgaizer said that the market is nearly saturated for now, as there are not many new clients to be had.
Industry insiders say that their main clients are local offices of multinational companies. Most local companies are not yet in the position to require extensive international travel.
Via Kyiv’s client database was created five years ago, Rottgaizer said, and the company does not expect to expand its corporate clients in the near future. Via Kyiv currently serves 100 clients, including Tetra Pack, Nestle, Robert Bosch and Metro Cash & Carry.
Luik said that foreign companies account for 90 percent of Sky Travel BTI Ukraine’s clients, but she predicts that some domestic firms – primarily firms in the IT and pharmaceutical industries – will begin using her company’s services soon, once they realize the benefits of doing so.
The largest accounts are with multinational companies, some of which have annual travel budgets of as much as $300,000, Pigolenko said.
Although Obriy Travel has been operating since 1995, it was only in 2001, when they became a representative office of American Express, that its business travel services rose to the standards of Western companies seeking travel agencies, Pigolenko said. Now, 90 percent of their work is with corporate clients. The remainder consists of individual retail orders.
Via Kyiv also serves primarily corporate clients: 90 percent of its business is in the form of business travel.
Sam travel agency has built its business on different categories of travelers, providing the whole range of services from individual and group tours to business trips.
If five years ago the share of business travel was only three percent of the total volume of the company’s sales, it has grown by 15 percent to include over 70 clients, said Sam marketing and sales director Arcady Rozbytsky.
“We created a special tour organizing department five years ago, and business trips now occupy a bigger niche on the market,” he said, adding that the company has seen a steady increase in the volume of orders by corporate clients.
Sam organizes special business travel with 50 to 1,000 participants, both abroad and within the country. Because Sam owns the Yalta Intourist hotel complex, which can accommodate 2,500 guests, the company arranges domestic business travel and conferences using the seaside resort.
In order to capture a larger market share, business travel agencies are paying more attention to service.
For instance, Via Kyiv is offering a conference organizing service and railway ticketing.
“It’s very comfortable for companies to use our services. Instead of calling 15 airlines’ offices in Kyiv, they can call one agency, like ours, and learn everything about flight schedules and prices,” Rotgaizer said.
Some agencies offer incentive trips, which are seminars combined with an entertainment program, she added.
To reach new levels of customer service, Obriy is building a representative office of American Express, scheduled to open in 2004.
It will serve American Express cardholders, as the agency’s goal is to combine financial and travel services.
“That’s one of the strengths of American Express: to provide these benefits for their clients,” Pigolenko said.
Obriy Travel’s Pigolenko said that he predicts the business travel market will continue growing as more local companies become interested in corporate travel.
In the past two years, he said, the volume of sales made by his agency to corporate clients has tripled.
“Now we are at the beginning of our business development, and we have huge potential,” he said.
