Before It’s Too Late: the Top Non-Happenings of the Year : Consumers: Despite predictions, travel agency fees didn’t balloon, nobody bought USAir and car rental companies did not impose mileage limits.
Yes, a lot happened in the world of travel in 1995. But many things that could have never did. Here’s a look at five of the year’s biggest non-events for travel consumers.
Travel agent service fees didn’t balloon, and travel agencies didn’t die in droves. Back in February, when major U.S. airlines substantially reduced their commissions to agents issuing domestic air tickets, many travel professionals predicted a rash of travel agency failures and a broad imposition of hefty new fees by those that survived.
The move did force changes. Such major agencies as American Express, Carlson Wagonlit Travel and Rosenbluth International did set fees, which typically ran $10-$25 for customers who booked airline tickets and nothing else. But other agencies--including the American Automobile Assn.--resisted, or at least resolved to protect regular customers from fees.
Ten months later, many travel agencies have found middle ground: They’re charging service fees (often $10) to walk-in clients with modest itineraries, but continue to make bookings of all sizes at no cost for regular customers. (American Express has backed off partially. It announced, then dropped, a $20 fee for consumers who spend less than $300 on airline tickets only. But the company is still charging $10 if you make hotel and rental car reservations without air fare, if you need airline tickets reissued or refunded, or to deliver your airline tickets overnight.)
As for the predictions of widespread agency closures, a spokesman for the American Society of Travel Agents says many agencies have pared back staff or increased emphasis on selling high-commission cruises and tours. But the Airline Reporting Corp., which monitors all U.S. travel agencies accredited to sell airline tickets, found the number of U.S. agencies has dipped only 0.5%, from 23,913 on Jan. 30 to 23,793 on Oct. 29.
Hotels didn’t get built. Though the recession is over in most places, and most measures show that travel is increasing, there aren’t many investors out there putting capital into new hotel projects. The result is increased demand for rooms across the country and increasing rates. Figures from Tennessee-based Smith Travel Research show that over the year that ended Sept. 30, the supply of hotel rooms in the United States rose just 1.5% (to about 3 million rooms), while the average nightly rate rose 5.7%, to $67.22. In the offices of Smith Travel’s California competitor, PKF Consulting, spokesman Bruce Baltin suggests that if you exclude booming Las Vegas from the count, nationwide hotel room inventory grew less than 1% last year. Baltin forecasts that rates will rise another 3.5% in 1996.
The IRS didn’t lower the boom on frequent flyers. For more than a decade now, IRS officials have been warning that if individuals accumulate frequent-flyer miles on business travel, then keep those miles for leisure use, they’re a taxable benefit. But the tax agency again took no definitive action, except to move against travelers suspected of reselling frequent-flyer mileage benefits.
When the IRS this year cited its position again in a memorandum to one company, and word leaked out, many observers interpreted the memo as an immediate threat. The Wall Street Journal editorial page erupted in an anti-tax fulmination, and a tempest of protest and anxiety broke out. Airline officials estimate that more than 30 million Americans participate in frequent-flyer programs. And several airlines this year started selling mileage credits at 2 cents per mile (mostly, apparently, to companies that dole the credits out as bonuses to employees), thereby possibly solving the question of how to assign monetary value to accumulated miles.
But once again, this turned out to be a matter of the IRS talking, not acting. Within days of the flare-up last month, a high IRS official said employers should not apply the IRS analysis of one company’s circumstances to their own situations, and that the controversial memo “doesn’t address the full range of regulations that could potentially apply” to frequent-flyer miles.
Rental car companies, once eager to set mileage limits, lost their nerve. Led by Avis and Alamo, several of the country’s largest rental car firms moved to set a 100-mile-per-day limit on free rental car mileage. (Drivers who exceeded that would pay 20 to 25 cents per mile for their overages.) But competitors resisted, and the experimenters relented. The result: Though daily rates have crept up in the last few years (a mid-size Hertz or Avis car in Los Angeles goes for roughly $45 per day now), unlimited mileage is once again the rule of the rental car road.
Nobody bought USAir. In early October, officials at the Pittsburgh-based carrier acknowledged that they were holding discussions that could lead to the purchase of the airline by one of its larger competitors, such as United or American. The public statement set off a wave of speculation over what would happen to credits accrued on USAir’s frequent-flyer program, and what the reduced competition would mean for the overall marketplace. United emerged as a strong suitor, but the talks led nowhere.
Reynolds travels anonymously at the newspaper’s expense, accepting no special discounts or subsidized trips. To reach him, write Travel Insider, Los Angeles Times, Times Mirror Square, Los Angeles 90053.
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