A Love-Hate Relationship Plagues Consolidators

If you ever meet a travel consolidator and he or she appears to have a split personality, don’t be surprised. It’s no wonder that people in that line of work have trouble keeping their heads straight.

They are both loved and feared by the airlines and cruise lines that put them in business.

Travel agents, by and large, despise them, but an ever bigger chunk of what they sell is being bought by the very agents who hold them in such low esteem.

Rip-Off Expected

And the traveling public often enters into business transactions with them, half expecting to be ripped off.

Nobody even seems certain what to call them. “Travel consolidators” has a ring of stability and authenticity to it.

But very often they’re referred to, with some derision, as “bucket shop operators.” That appellation has connotations of sleaze, of shysters conspiring to bilk the public out of good money for bad products.

Talk about an image problem. Maybe it’s time to set the record straight about what a travel consolidator or bucket shop operator is.

No matter what their detractors may say or hope, they cannot be ignored as a factor in today’s travel distribution system. Notice I said today’s. How long they last really depends on how soon the demand for full-fare seats catches up with supply.

Second, travel consolidators are not inherently more likely to be sleazy or dishonest than practitioners of any other art.

Third, they may well represent, at the moment, the public’s best chance for the lowest possible prices.

Given all of the above, why is there so obvious a disparity in the reaction of many consumers and much of the rest of the industry to travel consolidators as a group? Perhaps it lies in the way their businesses are constituted. Not by them , mind you, but by the suppliers with whom they deal.

Method of Operation

Let’s consider how an airline consolidator operates. (The theory is much the same for those in the cruise business. Some are in both.)

The consolidator negotiates with an airline for a special low price on one of the carrier’s route segments, Los Angeles to London, for example.

Let’s say that the price is $530, which the consolidating company is permitted to mark up to whatever its clients will pay. The airline, meanwhile, has as its lowest fare an advance purchase excursion (APEX) rate of $815.

The consolidator’s advertised price might become, for argument’s sake, $665, or $150 lower than the airline’s.

The airline, of course, is hoping that the operator can bring it extra business and not divert passengers who might otherwise pay the higher rate. It will not permit the consolidator to draw attention to the price differential by using the airline’s name in advertisements.

That is a marketing disadvantage for the consolidator and it contributes to the image problem.

The first thing most people think when they see an ad that offers “London, round trip, $665,” with no carrier identified, is: “Must be a catch. Probably offering seats on a four-stop puddle-jumper, maybe even a prop plane.”

So they go direct to the major international airline of their preference. What they may never realize is that the airline they flew on, at $815, was the same one available from the advertiser for $665.

It’s all part of a game the airlines play called, “We’ll give you this low-ball rate and you can do what you like with it, but don’t tell anybody.”

Answer Ad First

Most consolidators will tell you what airline you are buying, when you respond to one of their blind ads.

Why, you may wonder, would the airlines charge one price themselves and let somebody else undercut them? It’s simple: They deal with consolidators because the airline can’t be certain to sell out its flights without help. Perhaps they’re afraid they can’t afford not to play the game. That’s where the fear of consolidators comes in.

The more traffic that segment of the industry generates, the more powerful it becomes and the deeper the discounts it demands. The deeper the discounts, the more likely it is that higher-yield traffic will be intercepted and lost.

Talk to any airline executive about why his company deals with consolidators and you’re likely to be told, “Because our competitors do.”

Consolidators play an important role in distributing the travel product.

Why do travel agents look unkindly on consolidators? The answer is purely economic. Travel agents can’t get their clients the same low fare direct from the airlines because it simply doesn’t exist in the published tariff, so they’re faced with the prospect of (a) losing the customer or (b) buying from the consolidator and earning commission on the lower price.

Only recently has some semblance of rapport been established between the two groups. That came about when it dawned on consolidators that they would be smart to start making their product commissionable in order to expand potential sales outlets. And it dawned on agents that, in a price-sensitive business, they had better start getting their clients the best possible deals.

Nobody really knows how much consolidators do in air and cruise business. Overall, it’s probably a fairly small percentage, but it amounts to hundreds of millions of dollars. And any time you get into that rarefied atmosphere, some people are going to worry about your clout and try to cut you down to size.

Thus the unenviable lot of travel consolidators--they’re courted by many who can’t wait to end the romance, questioned even by those who buy their wares.