Agents Take a Beating

Travel agents must surely be among the most misunderstood and most maligned small business people in the nation. It sometimes seems as if everybody is lining up to take potshots at them.

Many airlines can’t wait to devise schemes to bypass them, even though travel agents process about 80% of all air tickets sold.

Some cruise lines, even while swearing allegiance to retailers, clandestinely offer discounts to affinity groups, consolidators and barter companies, again in effect cutting out the retail travel operator.

Some hotels and car rental companies are chronically guilty of failing to pay agents for sales made.

And how often have you heard the line, when an airline or other supplier loses your reservation: “Your travel agent must have fouled this up.”

But don’t shy away from travel agents because you think they contribute to the high cost of travel. They represent a saving, not a cost, to the traveling public.

Despite this, no matter what goes wrong on a trip, more and more travelers take it out on the agents and want them to make good.

This often translates into damages, or suits in small claims court. They would be funny if they weren’t so serious.

Example: Two brothers asked an agent to arrange a trip for them to Kauai and then sued for a full refund when they returned. The grounds for their small claims action? It rained for part of almost every day they were on Kauai, and the travel agent hadn’t warned them that it would.

Believe it or not, the lower court judge ruled in favor of the customers. It took an appeal to have that decision reversed.

Reasonable Deduction

At the appeal hearing an attorney argued convincingly that the weather was outside the agent’s area of control or responsibility and that, in any case, any reasonably intelligent person (the customers were both professional men) should have deduced from the lush greenery prominently shown in the brochure that Kauai got its fair share of rain.

The agent won in the end. But at what cost in time and legal fees?

Example: A woman bought a restricted, non-refundable air ticket and signed a document for the travel agent noting that she was required to adhere to the agreed-upon flight dates and times. She chose to spend an extra day at her destination and, consequently, missed her return departure.

As a result she had to buy a full-fare, one-way ticket on the next plane home.

Was it the agent’s fault? She seemed to think so when she asked a small claims court to order the agent to refund her the cost of the new ticket.

In this instance the court’s usual, seemingly knee-jerk bias toward the consumer didn’t apply. The judge allowed as how he couldn’t hold the agent responsible.

But the agent had to sit in court for a half a day to hear the judge render that decision. What a monumental waste of time.

Indeed, a travel agent’s lot is not always a happy one.

The reasons for the industry’s and the public’s ambivalence toward travel agents are complicated.

It may well be that travel agents handle such a volume of business ($64 billion in 1987, according to one survey) that suppliers, though the beneficiaries of this effort, are resentful. In some ways they are even afraid of the market power wielded by this group. So they try to cut them down to size as often as possible.

What also causes much friction is the popular myth that agents, because they get their money in commissions from suppliers, cause higher prices.

Here’s how that theory goes: If an air ticket costs $100 and the airline has to pay a travel agent $10, the ticket would only cost the passenger $90 if no third party were involved in the deal.

As a theory, that is simplistic at best. And pure balderdash at worst.

Travel agents don’t cost the public money; they enable suppliers to keep their prices down.

How It Really Works

Retailers process four out of five air tickets sold in this country, and do it for an average of about 10% of the fare. Some agents have volume incentive arrangements with specific airlines that may be higher but, essentially, the average commission is 10%.

The airlines--and others--aren’t paying a commission out of the goodness of their hearts. They’re paying it because they need the travel agency network to sell their products. Agents represent the most efficient, least expensive distribution system available.

The arrangement is not perfect, but nobody has found anything to beat it yet.

If the airlines had to take over the entire cost of distributing their tickets directly, fare prices wouldn’t drop, they’d skyrocket.

The carriers would have to employ thousands of additional reservationists, some not as well-trained as others. They’d have to install thousands of telephone lines and open hundreds of city ticket offices.

Getting your hands on a ticket could become a nightmare. Some of us city folks could stand in long lines at the airport, but many people in suburban and rural areas would have to rely on the U.S. mail or on private delivery services.

The extra costs would be staggering, and they’d be passed on to the traveling public. And they would add up to far in excess of the 10% now paid to travel agents.

Disclosure Plan

The latest to join in the agent-bashing chorus is Prof. Alfred Kahn, the former Civil Aeronautics Board chairman who masterminded the deregulation of the airline industry. Kahn wants agents to disclose to customers all of the commission arrangements they have with airlines.

He also wants them to rebate part of their commission to travelers, a de facto fare discount. The implication in all of that, of course, is the misguided theory I mentioned earlier--that agents cause the price of air tickets to be artificially high.

I can’t help wondering if every time Kahn buys a can of soup he asks the store manager what the markup is? Or if when he has a glass of wine with dinner in a fine restaurant, he asks the waiter how much the bottle cost wholesale, and how many glasses it produces?

Why should travel agents be treated differently from any other retail entrepreneur?

Some of you may have had bad experiences with travel agents. I’ve had bad experiences with sewer-cleaning specialists and house painters, but that doesn’t mean that the plumbing and decorating industries as a whole need tighter regulation or a form of policing uncommon to other trades and professions.

Travel agents work at becoming professional. Their lifeblood is repeat business, and that means that they have to strive to provide good service.

Far from being prepared to rebate their commissions, some have also begun to charge customers a service fee, on the grounds that they can’t make a profit on what the suppliers pay them.

Service charge or not, if you prefer to deal directly with the airlines, go ahead. But do it for the right reasons.