In the breakneck quest to cut distribution costs, some major
industry players have launched an effort dubbed Momentum.
Backers maintain the new program will offer agents access to
sought-after Web fares while reducing distribution costs for
suppliers.
Critics contend the payback doesn’t warrant the expense.
An intriguing group of bedfellows has created the program.
Cendant subsidiary Galileo represents the GDS perspective;
Rosenbluth International, the travel agency business. and Chapter
11 carriers United and US Airways round out the group.
Essentially, Momentum is a program that provides exclusive
benefits to agencies and airlines that decide to enroll. Agents
receive full access to a participating carrier’s publicly available
airfares. Participating Galileo agencies receive special commission
opportunities in exchange for reduced financial incentives.
And the airlines? They get to reduce distribution costs by 20
percent, while increasing fare distribution via the agency
community.
“Everybody continues to talk about a need for change in travel
distribution,” said Sam E. Galeotos, Galileo’s president and CEO.
He contends Momentum provides a platform that participants can use
to plan and grow their business. And growth, he said, is critical
“in today’s uncertain economic and regulatory environment.”
Participation in Momentum is tied to a three-year contract.
What do agents have to give up to get access to UA and US Web
fares? “Let me just offer the example of reducing a booking fee by
$1,” said Galileo spokeswoman Deborah Bernstein. “We would put 50
cents into the equation, and the agency would put 50 cents into the
equation. The airline then would get a dollar reduction in its GDS
distribution costs.”
For airlines enrolled in Momentum and so far there are just the
two the typical booking fee per ticket drops to between $8 and
$11.
What kind of momentum is the plan gaining among rank-and-file
travel agents?
“I have to be honest with you. I haven’t had a single agent even
mention it,” said Pat Funk, vice president of operations for
ARTA.
And, at press time, ASTA had yet to comment.
Despite what ARTA sees as a luke-warm response, Funk compared
Momentum favorably to American Airlines’ EveryFare initiative.
“[Momentum] has a little more to offer, inasmuch as they only
request a three-year contract. That’s two year’s less than
American’s,” she said.
Noting that most of ARTA’s members are small agencies, Funk
isn’t crazy about “the idea of assuming costs for some of the GDS
payments to get Web fares. A lot of agents are [already] booking
those fares for their clients on the Internet. So why would you
take on some of the costs of the GDS fees to get access to these
Web fares?”
Using a bit of creativity, she said agents can readily book on
the Internet. “Whether the airlines would consider it legal or not,
that’s another question,” she said. “Because you use the client’s
credit card.”
Another problem: agents lose any control over the reservation.
That, however, is mitigated by the fact “that today you have so
little control over the reservation anyway.”
Another industry player considers Momentum intriguing.
“It’s an interesting initiative,” said Bruce Bishins, president
of United States Travel Agent Registry.
For some agents, he said it could be a good deal.
Those agents in places like Denver or San Francisco who book a
lot of United could benefit. Perhaps those in Charlotte or
Pittsburgh too, those who write a slew of US Airways tickets.
And travel agents anywhere who do a lot of business with Cendant
brands such as Avis, Budget or the company’s numerous hotel brands
stand to gain. They could get additional commissions.
But agents in cities such as Dallas, Houston or Albuquerque
secondary markets on United and US Airways’ route maps are less
likely to find Momentum means much, at least not yet.
“Not every deal is good for every travel agent,” said Bishins.
“It depends on what the agent’s business is, and the meaningfulness
of the products in that suite of services or offerings for that
particular agent.”
Many observers see Momentum as a response to American Airlines’
EveryFare program, which debuted last September.
EveryFare makes American’s low Web fares available to
brick-and-mortar agencies.
The quid pro quo: the cost of the GDS booking fee is shifted
from American to the travel agency.
The carrier initially gives agencies a travel allowance credit
of approximately $4 per flight coupon.
Agents then pay AA an amount equal to their own GDS fees, based
on their choice of GDS services and products. The allowance
gradually declines over the term of the contract.
The theory is that EveryFare participants will seek out lower
GDS fees. Bishins, too, sees Momentum as a reaction to EveryFare
but a reaction that that falls short.
“Frankly, I don’t think the response is enough,” he said. “I
think this industry is just not waking up to the underlying
problem. We have an industry that is in deep trouble when it comes
to distribution costs. We are going to find ourselves with every
supplier in town moving away from GDS distribution, and moving
toward a Web solution, because they just cannot sustain or justify
the high cost of segment fees.”
Ironically, he said that GDS systems are moving to increase
segments fees, an indication that they “just haven’t gotten the
message yet.”
The upshot, contends the USTAR chief: “You’re going to see other
models evolve, and travel agents are going to be dragged into them
if they want to sell [certain] products.”
