Savvy agents can still profit from booking flights. // © 2013 Thinkstock
Once upon a time, in brick-and-mortar Travel agencies across the land, travel agents could make a living booking air travel for their clients. Agents were a source for information and ticketing, and they were rewarded with commissions from the airlines. The shift away from travel agents began with airline commission caps in 1995 and continued with reduced commissions in 1999. The travel agency industry was delivered an even heavier blow in 2002, when airlines cut commissions altogether.
In the decade that followed, the relationship between travel agents and airlines was prickly to say the least. Airlines still needed travel agents as an arm of its distribution system, and agents needed to interact with airlines if they were going to book travel for their clients. Presently, with the country knee-deep in a challenging economic environment, it could be time for agents and airlines to partner once again, even if it’s on a customized, case-by-case basis.
“While change is often met with resistance,” said Rich Lowry, director of distribution and sales strategy for Spirit Airlines, “I see a healing process between travel agents and the airlines.”
In today’s competitive business environment, it’s more important than ever for agents to foster relations with airlines similar to the relationships they foster with preferred hotel and tour operator partners.
“Do your best to channel business to one or two airlines,” advised Brent Jenson, vice president of Salt Lake City-based Morris Murdock Travel. “The airlines still need our help when it comes to booking international itineraries. It is still possible to obtain up-front commission on some fare types for Europe, Latin America and South Pacific tickets.”
Jenson noted that net rates and contract rates are still offered to some agencies that can direct business.
“These rates usually must be bundled with a hotel or a cruise and cannot be sold as ‘air only,’” he said. “If your agency does a good job of increasing market share for a carrier, they are more inclined to offer you ‘top account status’ which could entitle your agency to receive special perks from the airlines with which to service your clients.”
According to Jenson, these perks can include considerations concerning name changes and corrections, missed ticketing time limits, expired fares, seat assignments and access to blocked seats, fare matching and help with debit memos.
However, Tammy Levent, owner, president and CEO of Tampa-based Elite Travel, is no fan of the airlines.
“It’s still a hostile relationship between agents and airlines,” she said. “We profit on airfare when we book a package deal for a client, but we don’t rely on those fees. I find that even when I call an airline to book a group, I end up paying more for the group than a published fare.”
Levent singled out AirTran as an airline that does show consideration for agents.
“If you book through AirTran’s travel agent site, you aren’t charged fees for seat changes or things of that nature. You can keep these savings for yourself or give these discounts to your client.”
The concept of charging travel agency fees didn’t manifest itself until airline commissions disappeared.
“Almost all agencies have created a pricing structure that covers the cost of their transactions, including booking air travel,” said Cathy Bradley Berg, managing director, global sales western division, American Airlines. “Typically, there is a range of transaction fees based on the degree of involvement required by the agent. Every agency has its own business model. Many corporate agencies charge transaction fees while online agencies generally do not. So, it is difficult to say that charging fees has worked for all. It depends on the value proposition to the customer as well as competitive market rates.”
While charging service fees is here to stay, agents have more options these days. For example, Spirit Airlines has recently launched a travel agent program called “Name Your Own Commission.”
“The program enables agents to mark up fares and packages,” said Lowry. “We’ve seen a huge uptick in sign-up for our ‘Name Your Own Commission’ program. Travel agents that book directly with us can purchase the fare or package and mark it up. While we follow the marketplace, travel agents are an integral part of our distribution strategy.”
Lowry noted that the price the agent pays could also be found online by the client, although he suggests that this is offset by the fact that clients are used to paying travel agency fees when they book travel.
Having an ally at the airline is critical when an agent encounters a problem or urgent need for a client.
“American provides a number of different touch points through which an agent can find a support person to provide assistance to travel agents,” said Berg. “We have a support center, based in our head office in Dallas/Fort Worth, with highly trained representatives who are available to help with a broad range of requests from the agency community.”
Not all travel agents find this useful, however.
“As a one-person agency, my response comes from a different perspective than the larger agencies,” said Penny Sheldon, owner of Boise-based Penny Sheldon Travel. “As an individual agent, I really don’t think it’s likely for me to find an ally at an airline.”
Sheldon’s preferred supplier is Travel Impressions.
“I rely on them heavily when I have issues with air,” she explained. “Travel Impressions really steps in and takes care of any changes, delays or anything that needs individual attention. With a 24/7 hotline, they are my best ally. I also rely on Travel Impressions for getting the best rates for bulk fares.”
While relationships are important, the bottom line is still the foundation for many decisions.
“We try to adhere to policy,” said Lowry. “Granting a favor is going to cost money of some sort. If you’re a mom-and-pop agency or the biggest agency in the world, we’ll treat you the same. At Spirit, our price is our product. We’re all about the lowest price. You won’t find us adding features such as in-flight entertainment because that would increase our costs and force us to increase our prices.”
The Changing Landscape
American Airlines and US Airways are close to completing a major merger. The opinion about the effect of such a merger appears to depend on who you ask: American Airlines or the owner of a travel agency.
“As a combined carrier, the new American will have an expanded network to even better match where customers want to fly and a greater ability to invest in our fleet, modern technologies and the products and services customers value most,” said Berg.
Sheldon has a different point-of-view.
“I think the merger will affect everyone who flies,” she said. “We’ll have less airlift under fewer umbrellas, which has only demonstrated a significant increase in the cost. It makes our job more of a challenge. We need to educate our clients about the value of planning and making their vacation reservations far in advance in order to get the best rates.”
The global distribution system (GDS) electronic-reservation industry has been an agent standby for over 60 years. It was put into place by the airlines long before the Internet. The main players, such as Sabre Travel Systems and Travelport-owned Galileo and Worldspan, are now facing challenges from the airlines, who are convinced that the GDS middleman system charges more than they are willing to pay for processing a ticket. It costs about $12 per transaction, and the airlines argue they can do it themselves online for a fifth of that cost. The conflict has echoes of the commission caps and eventual commission disappearances travel agents faced 11 years ago, and it’s feasible that the GDS will go the way of the Polaroid camera and the electric typewriter.
However, at least one airline, American Airlines, believes that the GDS will have a long-term role to play in air distribution.
“Many travel agencies want to access air and non-air information within the context of a single platform,” said Berg. “Unfortunately, there is no single system that is doing that today. If the GDS companies modernize their systems and secure appropriate commercial deals with suppliers, we believe these gaps can be closed.”
Jenson takes a practical view of the GDS issue.
“It is still important to have a good contract and a strong relationship with a GDS provider,” said Jenson. “There is money to be made in segment fees, including selling cruises and tours through the GDS. A good account representative will also keep agents updated on the latest technologies and enhancements that can make it easier to sell travel and support your clients.”
As younger travelers grow more and more proficient at booking air travel with smartphones and tablets, it remains to be seen whether agents will find themselves at a further disadvantage when it comes to booking air, or whether they will find a way to make this trend a positive turn for their industry.
“Online booking engines think lineally,” said Sheldon. “As agents, we know routes, layovers and other connections that make the whole package work with the easiest method to avoid issues with air.”
Berg noted that travel agents have become more creative as the industry has changed.
“Agents provide value-added services beyond what can be booked on the Internet,” said Berg. “They become ‘experts’ for multiple aspects of travel and are consultants for itineraries that sometimes are not straightforward or are subject to numerous changes.”
The relationship between travel agents and the airlines is still in flux, but the good news is that, today, travel agents can regain some of their lost revenue with a little extra effort.