Travel industry is often referred to as an example of labor-intensive industry. The industry's low productivity in comparison with other industries has long been argued. Currently, travel industry has initiated collaborated measures with the government and universities to improve productivity of service industry. The report explores factors for further efficiency in travel business operation to improve industry's productivity.

According to 2006's profit and loss statement of the registered 1st category travel firms in Japan, average amount of sales is a high 12,921 million yen, of which 89.3% is paid to transportation and accommodations. After deducting operating expenses from the revenue of 1,383 million yen, operating profit stays a mere 71.4 million yen. The operating profit rate of travel industry, therefore, marks only 0.55%, which is extremely lower than those of non-manufacturing industries (2.5%) or the entire industries' (3.1%).

Travel industry is quite labor-intensive; the proportion of labor cost to total operating expenses is as high as 48% in 2006, which is generally higher than other labor-intensive sectors such as wholesalers, retailers and hotel industry.

While Japan's manufacturing industry is well known for its high productivity with international competitiveness, the low productivity of service industry including travel and tourism has always been a challenging issue. Since 2007, under the leadership of the Ministry of Economy, Trade and Industry (METI) and collaborative support from academic experts, service industry has taken some measures to improve its productivity. ("Campaign for the productivity improvement in service industry sector).

As a part of campaign activities to improve productivity, the study group considers new approaches to apply manufacturing know-how into service industry: In travel sector, several methodologies including 'process analysis' and cost management by 'Activity Based Costing' have been introduced as a trial.

'Process analysis' is a method to identify operation processes that can be improved, such as overlapped operations, by precisely examining the distribution flow. Chart 1 show s an example of operational flow of package tour products sales over the counter. Traditionally, customers visit travel company office twice; once for booking a tour and then receiving travel coupons and tickets on the second visit. In this flow, reception and payment take place at each visit, thus the process is overlapped. By cutting out the overlaps in the traditional flow, sales activities are completed within a single visit by the customers. Operational efficiency is expected to be much higher, as seen on Chart 2, after unnecessary activities are eliminated. Although further analysis is necessary by continuous operation and interviews, the case shown on Chart 2 resulted that it reduced the agent's operation time by 11 minutes and four seconds. Redesigning operational flow not only improves efficiency, but also enhances customer convenience and satisfaction, because they only need to visit the travel company once.

Unlike manufacturing industry, there are more possibilities for travel industry in Japan to improve productivity and efficiency. Travel industry is very likely to face more challenging business environment including 0% commission for international air tickets. Productivity improvement will be indispensable for travel industry in Japan for survival in the future.

A case of operational flow improvement by process analysis

Verification of operating hours' reduction efficiency analyzed by continuous