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The Main Characteristics of Travel Agencies in Montenegro

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 Aleksa Vucetic :
The Main Characteristics of Travel Agencies In Montenegro
95

THE MAIN CHARACTERISTICS OF TRAVEL AGENCIES IN MONTENEGRO

ALEKSA VUCETIC1

Abstract
Travel agencies in Montenegro started developing in the first half of the 20th century, since
when their role as intermediaries in the tourism market has been of exceptional signifi-
cance for tourism development in the destination. They underwent various phases of deve-
lopment from travel agencies working on someone else's behalf and for someone else's
account, through travel agencies which worked on their own behalf and for someone else's
account to travel agencies working on their own behalf and for their own account. They
underwent a developmental phase from classical intermediaries to travel agencies of en-
trepreneurial character, as well as from state-owned travel agencies to privately owned
travel agencies. Transitional processes through which the travel agencies were going were
not simple and they often slowed down their growth and development. So, at some points
in time they were forced to relocate from the downtown districts and main business stre-
ets, to suffer various financial pressures and to merge under various forms of economic
pressures with other economic organizations or to perish. However, they have been and
remained one of the main tourism policy makers in Montenegro, with the intention to inc-
rease their significance in the years to come. Because of that, it is important to define the
basic performances of the travel agencies in Montenegro.
Keywords: travel agencies, characteristics, Montenegro.

JEL Classification: L 83;

Review
Received: June 02, 2012
Accepted: November 11, 2012

1. Introduction
Travel agencies in Montenegro still have not accepted the international definition for iden-
tification of this type of intermediaries in the tourism market, so they are still called tourism
agencies. In the text below we shall however use the term travel agencies, which are used in
most countries of the world.
The first travel agency established in Montenegro was „Putnik“. It was established in
1923 at the initiative and under the auspices of the Ministry of Trade and Industry and the Minis-
try of Transportation of the Kingdom of Serbs, Croats and Slovenes. During 1927 it became a
member of AGOT (Association des Grandes Organisations Touristiques), an association with the
head office in Vienna, which united 20 greatest national tourism organizations in Europe. Ope-
ning of the Putnik brunch office in Montenegro took place in 1929 (Krajcević and Petrovic,
1995), after which an accelerated development of travel agencies in the destination occurred.
In the beginning, the travel agencies were faced with a limited demand of the domicile populati-
on for vacations and other specialized travels, so they had to orient themselves to the internatio-
nal tourism market and attraction of foreign tourists. They were offering full-service and were
dominantly retail travel agencies. Their business premises were located in the centres of the ur-
ban areas of Kotor, Herceg Novi, Budva and Bar. After the World War II, tourism sector became
one of the priority economic sectors in all developmental plans of Montenegro, which directly in-
fluenced the increase in number of travel agencies.

1 Assistant Professor, University of Montenegro - Faculty of Tourism and Hotel Management Kotor, Stari Grad 320 -

85330 Kotor – Montenegro, E-mail: aleksavucetic@gmail.com

 MONTENEGRIN JOURNAL OF ECONOMICS, Vol. 8, No 4
96

During the 70s the travel agencies went through an expansion of growth and develop-
ment. That was enabled by an increasingly numerous and rich tourism demand which was using
their intermediary services more and more. In this period, the number of successful retail travel
agencies is expanding; they are positioning themselves in the downtown areas of Montenegrin
towns. During the 80s, due to great competition and growth in rental prices for the business pre-
mises in downtown districts, the travel agencies in Montenegro were forced to relocate from the
main business zones. At the same time, the full-service agencies were perishing, and the number
of specialized travel agencies was on the increase. During the 90s, the financial pressure on the
retail travel agencies exerted by the state institutions is growing, while they are exposed to an
increasing competition, both domestic and international, which is the reason for perishing of a
large number of retail travel agencies.
Appearance of the computer booking systems, development of the travel agency chains,
appearance of the global distributive systems, development of the on-line travel shops (Conrady
and Buck, 2011), and many other changes directly and indirectly influence development of travel
agencies in Montenegro. If we add to that the increasing and sharper competition in the national
and international terms, it is clear that the travel agencies are facing numerous challenges in the
future. Because of the above mentioned, it is necessary to analyse the basic performances of the
travel agencies in Montenegro.

2. Literature review
Travel agencies used to be retail in the beginning and used to place other's products and
services into the market, bore no risk for the unsold accommodation and other capacities, used
to have a direct relation with buyers, their intermediary function was dominant, while commission
was the source of income. By tour operators development, travel agencies became the wholesale
traders, creating own products and services, bearing responsibility for the unsold accommodati-
on and other capacities, as a rule – not having a direct contact with buyers, organizing function
being dominant, while the commission was generated from sale of the own products and services
(Dulcic, 2005).
Main division of travel agencies is into outgoing and incoming agencies. Outgoing travel
agencies provide products and services to visitors (tourists and visitors) who travel abroad from
the source destination, while the incoming agencies provide products and services to visitors in
the target destinations. In today's circumstances of business operation, the number of combined
travel agencies, i.e. the agencies which have business activities in the domain of outgoing and
incoming business operation is growing. The main reason for that is dispersion of business risk
and higher possibility of earning, i.e. achievement of better business results (Spasic, 2010).
Exposed to an increasingly versatile and numerous competitions, travel agencies strive
not only to get better connected in the domain of horizontal, vertical and lateral integration, but
strive to apply the modern information technology, primarily in the domain of promotion and dis-
tribution of their products and services. Thus, travel agencies were less and less linked to direct
contact with consumers and at the same time they were servicing with better quality bigger and
bigger parts of the global tourism market.
A trend which is present in travel agencies is related to their investing in improvement of:
additional web functionalities (on-line sales channels, booking tools, etc.), on-line distribution (in-
vesting into booking portals) and mobile sale distribution (sale via mobile phones). The mentio-
ned trends are a result of the business interaction of the travel agencies with the global distribu-
tive systems such as Amadeus, Sabre, Galileo and Worldspan (Njegus, 2010, Tsai et al., 2005,
Holloway et al., 2009). Owing to the new technological accomplishments, for instance in repor-
ting and telecommunications, travel agencies are able to find the potential travellers around the
world, contact them and proactively distribute a various set of products and services (Conrady
and Buck, 2011, O’Connor et al., 2008).
Domestic authors mention a few instances of travel agencies in Montenegro, whether
they are from Montenegro (Uskoković, 2000), or from former Yugoslavia (Cacic, 1995, Popov,
 Aleksa Vucetic :
The Main Characteristics of Travel Agencies In Montenegro
97

1997, Cavlek, 1998, Unkovic and Zecevic, 2009, Stetic and Salov, 2000). Data of this type can be
found in the archives possibly, or by surveying the travel agency managers. Even when it comes
to some state institutions such as MONSTAT (Statistical Office of Montenegro), they do not pos-
sess the necessary statistical data related to travel agencies. That is why this work is focused on
field survey, so that the results would be as authentic and scientifically founded as possible.

3. Methodology
In Montenegro, there are 30 travel agencies with the business activity code 7911 (CRCS,
2011). Following the overview of the available reference material on travel agencies, in 10 from
30 mentioned travel agencies; the test survey with the travel agency managers was carried out.
The obtained results were then used for formulation of an in-depth survey. Received survey data
were processed in the statistical software SPSS, after which the results received were presented
in this paper.
The survey was prepared in April 2011. The basic goal of the paper is to identify the basic per-
formances of the travel agencies in Montenegro, while the basic hypothesis of the survey is that
travel agencies in Montenegro are not oriented enough to the global tourism market, nor stimula-
ted enough by the economic/tourism policy measures, and are thereby not efficient in their busi-
ness operation to the desirable extent.

4. Results
Structure of travel agencies in Montenegro during 2011 was as follows:

Table 1: Basic characteristics of travel agencies

Characteristics Share (%)

Northern region 10.0
Central region 20.0
Southern region 70.0

Private ownership 93.3

Mixed ownership 6.7

Travel agents (retail travel agencies) 40.0

Tour operators (wholesale travel agencies) 60.0

Specialized travel agencies 53.3

Combined travel agencies 40.0
Non-specialized travel agencies 6.7

Source: author

Structure of travel agencies corresponds to the distribution of tourism turnover at the sta-
te level in which the dominant place is taken by the Montenegrin coastline. A small number of
travel agencies is in mixed ownership, i.e. the mix of private and state-owned property, and these
are the travel agencies in the Montenegrin coastline which will soon be 100% privately owned.
The larger number of tourism agencies are the tour operators which sell their products and servi-
ces, i.e. which are entrepreneurially oriented. They create their package arrangements, after
which they offer them to the tour operators outside Montenegro or sell their products and servi-
ces via Internet on their own.
Diversity of natural resources enabled the travel agencies in Montenegro to have a high
degree of specialization. In that sense, they are most specialized in offering the products and ser-
vices within the following selective tourism types: adventure tourism, ecotourism, sport tourism,
 MONTENEGRIN JOURNAL OF ECONOMICS, Vol. 8, No 4
98

business tourism, cultural tourism, health tourism, religious tourism, food and wine tourism, agro
tourism, nautical tourism, urban tourism, rural tourism, educational tourism, fishing tourism and
hunting tourism (Vučetić, 2009).

Table 2: Investment types

Characteristics Share (%)

Inbound private investment 75.9
Inbound and outbound private investment 13.8
Outbound private investment 10.3

Source: author

In the process of transition from socialist into the market economy system, most travel
agencies in Montenegro were privatized or established by domestic investors. In most cases, in-
vestors are the former managers in former state-owned travel agencies. Montenegro is a small
tourism destination with an expressed seasonal concentration of tourism turnover and a rela-
tively small tourism offer, because of which major tour operators do not have the need to open
their own brunch offices, and directly invest in that respect. Foreign travel agencies use the in-
termediary services of the domicile travel agencies on contractual basis, while the joint ventures
or direct investments are symbolic. From total number of travel agencies: mainly incoming – ac-
count for 56.7%, fully incoming – account for 33.3% and mainly outgoing account for - 10.0%.
Most travel agencies are without a network of branches (86.7%), while only 13.3% are
with a network of branches. These are the small travel agencies operating in the small national
tourism market and are present in the small part of the global tourism market, which requires
existence of brunches in Montenegro. At the same time, the existence of brunches of travel agen-
cies outside the national borders is economically unjustified.
Travel agencies in Montenegro are the independent economic entities (73.3%), while only
26.7% are dependent economic entities. Horizontal and vertical cooperation participate with
53.3%, and lateral cooperation with 6.7% share, while 40% travel agencies in Montenegro are
not included in any form of business cooperation. From total number of travel agencies in Monte-
negro, 73.3% are included in the national association of travel agencies MTA - Montenegrin Tou-
rism Association, while only 30.0% agencies are included in international associations of travel
agencies.
Table 3: Tour operators by states

Characteristics Share (%)

Russia 44.4
Serbia 40.7
France 33.3
Great Britain 33.3
Italy 25.9
Germany 22.2
Ukraine 18.5
Croatia 14.8
Slovenia 14.8
Poland 14.8
Other countries 14.8

Source: author

From total number of travel agencies, 89.7% operate with the tour operators, while the
tour operators from Eastern Europe and former Yugoslav countries dominate. This confirms the
 Aleksa Vucetic :
The Main Characteristics of Travel Agencies In Montenegro
99

fact that the travel agencies from Montenegro are present in a small part of the global tourism
market, and the previously mentioned data of other type confirm the fact that they are less globa-
lized in business terms.
Female managers' share in travel agencies is 80%. In addition, female managers domi-
nate in the age structure, so their share up to 29 years of age is 85.7%, from 30 to 39 years of
age 62.5%, while from 40 to 49 years of age it is 100%. Their educational structure is also sig-
nificantly better than at male managers, so in the segment of highly educated managers there
are 80% of them, in the bachelor segment 66.7%, with post-secondary education 100% and sec-
ondary education 80%. Bearing in mind that no great capital is necessary for establishment of
travel agencies, and that they can be established as commercial entities, business activity of an
individual, that the non-governmental organizations can get involved in their activities, the ground
is fertile for the female managers to demonstrate their business skills in the travel agencies in
Montenegro.

Table 4: Professional structure of managers (%)

Profession Female managers Male managers

Graduate tourism manager 100 -
Graduate in economy 60 40
Graduate in philology 100 -
Administrative technician 100 -
Tourism technician 100 -
Mechanical engineering technician - 100
Other professions 50 50

Source: (Vucetic, 2012c)

From total number of surveyed travel agencies, 66% employ up to 9 workers, while 34%
employ from 10 to 49 workers. They employ 62.5% full-time workers and 37.5% seasonal work-
ers. The highest number of seasonally employed workers are in age between 25 and 29 (41.9%)
and from 20 to 24 years old (39.5%). They are hired for jobs of tour guides and trip managers and
are usually tourism students and seasonal workers for whom this is an additional job. It is intere-
sting that the employers are more satisfied with work of seasonal than the permanently em-
ployed workers in travel agencies (Vučetić, 2012a). When it comes to the employees' salaries,
40% receive up to 500 € per month, 20% receive from 501 to 600 € per month, 16.7% receive
from 601 to 700 € per month, 3.3% receive from 701 to 800 € per month, and 20% receive
more than 800 € per month (Vučetić, 2012b). From total number of travel agencies, four micro
agencies were at loss in operation during 2010.
From total number of surveyed travel agencies:

− 33.3% sell airline tickets using the Amadeus software and IATA hardware,
− 10.0 % have the ability of direct on-line payment via Internet,
− 66.7% have their own vehicles,
− 63.3% have their own business premises, and
− 86.7% generated profit in 2010.

Travel agencies in Montenegro represent a significant factor of tourism sector develop-

ment; however, their operation is not stimulated by additional measures of the econo-
mic/tourism policy. In the second half of the 20th century, they had priority in development (along
with hotels) of the destination offer. That manifested in placement of favourable credit lines with
preferential interest rates by the Central Bank of Montenegro, retention quotas, different types of
benefits for investment in selective tourism offer, reduction of income tax rates and reduction of
 MONTENEGRIN JOURNAL OF ECONOMICS, Vol. 8, No 4
10
0
basic sales tax for travel agencies (Vučetić, 2008). Today, there are not any incentive measures,
nor have any new ones been introduced. Bearing in mind the increasing and sharper competition,
the question is posed whether the travel agencies will survive in the future, to what extent and
which will be their role.

5. Conclusion
Abundance and versatility of natural resources, as well as versatility and quality of the an-
thropogenic resources enabled development of the tourism sector in Montenegro. Tourism deve-
lopment has had and still has priority in all the destination developmental plans. In line with the
abovementioned, travel agencies have had from start, i.e. from their establishment a stimulating
ambiance for sound growth and development.
Development of travel agencies in Montenegro has had its ups and downs. Ups in agency
development were especially expressed during the 40s, 60s and 70s of the 20th century and in the
first decade of the 21st century. On the other hand, downs in development of travel agencies are
related to the World War II, great economic crises and recessions which occurred in cycles, great
petrol crisis, natural disasters (such as earthquake in 1979) and social crises including the violent
dissolution of former Yugoslavia.
It can be said that the human resources in travel agencies are of higher quality than in
the hotel management. The reason for that lies in the fact that most jobs in a hotel are of labour-
intensive character, but also in the fact that the level of education in the state has risen since in-
troduction of the Bologna Declaration, which is why the workers with secondary level of education
were replaced by workers with faculty degrees in travel agencies. Travel agency employees are
specialized for certain selective tourism types; they have a relatively long work experience in tra-
vel intermediation and know foreign languages very well. Even when it comes to seasonal
workers, these are usually the students of faculties of tourism and hotel management, economy
and philological faculties. What is especially valuable is acceptance of the lifelong learning con-
cept in travel agencies.
Travel agencies' offer is versatile, while they are trying to service the market niches at the
global tourism market, especially the ones related to the environmental protection. These are the
international markets for ecotourism, adventure tourism, rural tourism, health tourism and agro
tourism. It is good that the agencies strive to place their package arrangements and other pro-
ducts and services. Also, many of them have their own offer of the eco summer pastures, ethno
villages and other forms of accommodation offer characteristic for Montenegro in the rural areas.
Agencies offer almost all types of travel arrangements and round tours.
Travel agencies invest significant funds (in average 10% of the generated profit) for pro-
motional purposes and distribution of their products and services, which provides them, along
with the good price competitiveness, a good positioning in the tourism markets of the Eastern
Europe, former Yugoslav countries and a part of the Western Europe. All the agencies have their
web sites and attempt to introduce the direct on-line payment offer and dynamic packaging. This
should be added the contract with well-known tour operators and other business partners in the
field of hotel management and transportation.
Motivation of employees by salaries is better in travel agencies than in hotel manage-
ment. Average salary in travel agencies is above average in the economy of Montenegro, while at
the time of global economic crisis, only four agencies were at a loss, but were not liquidated but
kept on with their work, taking loans from banks.
What lacks in the intermediation sector are the incentive measures for development of
travel agencies by the economic/tourism policy makers. They could arise from the VAT reduction,
preferred interests for incoming-oriented agencies, introduction of a progressive taxation rate on
travel agencies profit, etc. Significant help would be the VAT payment on the basis of the genera-
ted profit, and not the accrued profit during the on-going month. Introduction of incentive measures
would eventually increase the efficiency of travel agencies in Montenegro, and thereby their contribution in
the future tourism sector in the destination.
 Aleksa Vucetic :
The Main Characteristics of Travel Agencies In Montenegro
101

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