It's Dog Eat Dog in the Travel Trade ; as Commissions Fall, Travel Agents Must Find Ways of Justifying Higher Fees, Writes Jeremy Skidmore
Skidmore, Jeremy, The Independent (London, England)
Walk into your local high-street travel agent in a couple of years' time, and the chances are you will be sold much more than just a holiday. Agents may offer to walk your dog or tend your garden while you are away - for a fee.
The travel industry is changing the way it serves customers to cope with the economic realities of the 21st century. Up until now, travel agents have received a commission from tour operators (the companies that actually organise the holidays), hotels and airlines.
The size of the commission depends upon how efficiently that agent sells a company's holidays or services. For example, Lunn Poly, part of the Thomson group and the biggest agent in the country, can typically charge a tour operator between 15 and 20 per cent commission because it has the power, through its nationwide chain of 700 shops, to shift hundreds of thousands of holidays. Airlines pay far less than tour operators, on average around 7 per cent.
These payments from travel companies allow travel agents to provide their services free to the public. But this cosy relationship is about to end.
Tour operators and airlines have been under mounting pressure to reduce their costs, partly because they need cash to fund their internet strategies, and are being forced to reassess their payments to travel agents.
British Airways, which lost pounds 244m in the year to 31 March 2000, and parted company with its chief executive Robert Ayling, was the first to take the plunge and announce it would scrap travel agents' commission from 1 January 2001. The move, which could save the airline tens of millions of pounds per year, is certain to be followed by others.
BA's argument is that it makes no sense to pay the same 7 per cent commission to an agent booking a short-haul flight, which might cost less than pounds 100, as for a Concorde flight costing several thousand pounds. There is little difference in the amount of work agents have to do to secure the bookings, but there is a huge difference in the amount of cash they pocket.
Instead, BA is moving towards paying agents straight fees for selling tickets. The payments are structured to save BA money and will consequently leave many agents out of pocket, particularly those which specialise in selling the more expensive tickets. For example, agents will receive only pounds 20 for selling a first- class or Concorde ticket. They are expected to make up the difference by charging their clients a fee, but educating holidaymakers to pay for something that has previously been offered free is likely to be an uphill struggle.
Thomas Cook has had some success in demanding a fee for business under pounds 150, but industry experts expect agents will have difficulty in charging across the board for all transactions. Hence the idea of offering additional services.
"The trouble is that it takes a long time to change the way people think," said one operator. "Everyone expects to pay through the nose for solicitors and accountants because that's what they've always done, but they expect travel agents to provide their service free. When people can buy holidays on the internet, they are naturally going to ask why they should pay for the privilege in the high street. Consequently, agents are having to …
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Publication information: Article title: It's Dog Eat Dog in the Travel Trade ; as Commissions Fall, Travel Agents Must Find Ways of Justifying Higher Fees, Writes Jeremy Skidmore. Contributors: Skidmore, Jeremy - Author. Newspaper title: The Independent (London, England). Publication date: August 6, 2000. Page number: 2. © 2009 The Independent - London. Provided by ProQuest LLC. All Rights Reserved.
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