Travel Agents Join Land of the Fee

Everybody knows that travel agents do it for free, right? They’ll make reservations for you, write your ticket and, if you’re the right kind of customer, even deliver it to you, gratis. Their compensation comes in the form of a commission paid by the supplier whose product you bought.

That, at any rate, has been the way the retail business worked until now. Things may be changing.

Service charges are becoming more and more of a way of life among practitioners of the trade. In other words, commissions or not, you may also have to pay a fee when you ask a travel agent for help.

Not every agent, mind you. The service charge movement isn’t as widespread as that yet. But it’s spreading, slowly but surely.

Low-Yield Business

Travel agencies have traditionally been a low-yield business. Profit margins have been wafer thin.

Air ticket sales have always represented a huge majority of the commissionable business done by retail stores, and therefore, a huge majority of agency income came from such activities. Now, fare wars have driven that income down to what many agents feel are unacceptable levels.

Travel agent commissions have been stable at 10% of tariff for several years, with few exceptions. But while the percentage rate remains constant, the declining tariff has effectively reduced agents’ compensation.

Fares have dropped because deregulation has introduced all kinds of competition to the airline market. New carriers generally have lower labor costs and lower overhead and, consequently, are able to charge less.

Their low fares are matched by existing airlines, the newcomers cut a little deeper, and the downward spiral is on.

Fare Wars Continue

Fare wars show no sign of going away. Agents feel the need to increase income somehow and, in a number of cases, are turning to customers to pay a little extra for services rendered.

Even those who charge service fees can’t decide exactly how that fee should be assessed. It may be a flat rate per visit. Or it may be a commission based on the price of the transaction. Or it may be an hourly fee.

The role of travel agents, how they get paid, where they fit in the overall distribution system are questions guaranteed to cause some people heartburn.

There is a school of thought that agents are order-takers, interceptors of business, middlemen. As such, they shouldn’t be allowed to influence the industry in any way, goes that argument.

Some travelers feel that agents are unprofessional, even inept. They never get the air fares right. They put customers on the airlines that pay them overrides, rather than on the airline that best fits the customer’s needs.

All of the arguments have been hashed and rehashed. Usually they end up with the premise that there is no real need for travel agents and absolutely no need to pay them a commission. The argument goes that if agents didn’t earn 10% of every air ticket they sell, the airlines could cut fares by 10%.

A Gigantic Horselaugh

My response to all of that is a gigantic horselaugh. If the nation’s 26,000 travel agents disappeared tomorrow, air fares wouldn’t come down. They’d go up.

Travel agents perform a vital role in the distribution of travel products. We will use air tickets as the example here only because two-thirds of all airline tickets sold are sold through travel agents--a $50-billion-a-year tab.

If you can explain to an airline executive how to get rid of two-thirds of his inventory by dealing directly with the public for less than 10% of the cost of each ticket, he’ll jump at the chance to put your plan into action.

The airlines have thought about it. They’re not paying a commission of 10% because they are humanitarians. They’re doing it because they know that they can’t do it any more cheaply or efficiently.

Do away with travel agents?

A couple of extra telephone lines aren’t going to do it. Half a dozen extra reservationists won’t fill the gap.

The airlines would have to open city ticket offices--and a lot of them--in order to make their product accessible to the maximum number of potential buyers. And many airlines long ago closed city ticket offices as uneconomical because they figured that travel agents were a more effective, less wasteful way of reaching the public.

Sure, some agents don’t always get the fares right. Neither do the airlines. That’s because, the way things change in the air transportation business, nobody can keep up, not even the carriers.

Borrowing Their Expertise

And, yes, some agents aren’t all that smart, or professional. Neither are some lawyers, or doctors, or teachers, or travel columnists.

You, the customer, pay the doctor and the lawyer and the plumber and the candlestick maker. They don’t make their money off a commission from somebody else.

You pay them because you are asking them to use their expertise to perform a service for you. Why, some travel agents are asking, should the public do any less when dealing with them? That’s why a small number of them have started imposing service charges.

It may never become the norm in the retail industry. To charge or not to charge service fees is still a question that will have to be answered by the marketplace. If the public declines to patronize those agencies which levy a fee, those agencies may have to rethink their program. Or, of course, go out of business.

But if large numbers of them do go out of business, we won’t find travel cheaper, or easier, or more efficient. We will, instead, find ourselves hanging on to telephone lines, waiting for the next available reservationist, listening to Mantovani when we should be getting on with something more important.

And we’ll find ourselves waiting in longer lines at airport counters to pick up tickets. And, mark my words, we’ll find ourselves paying more, not less, for our seats.