For Storefront Agencies, More Cuts on the Horizon

For the nation’s 140,000 travel agents, the first few days after the terrorist attacks provided a rare chance to prove their worth.

With airlines jammed with telephone calls and the Internet overloaded, people around the globe suddenly craved the services of travel agents. Working around the clock, they rearranged flights, calmed nervous clients and employed trade secrets such as multiple bookings to get travelers back home.

“Everybody loved us again,” said Steve Loucks, a spokesman for Carlson Wagonlit Travel, a Minneapolis-based network of 1,000 travel agency offices.

But the attraction didn’t last long. Agents quickly began to feel the painful effects of the travel industry’s downturn, which is hastening the decline of the traditional travel agency.

Already worn down by the airlines’ relentless commission cuts and by online travel sites stealing away clients, dozens of agencies have closed since Sept. 11, according to the American Society of Travel Agents. The group said nearly all of its 20,000 members have taken pay cuts.

By the end of the year, travel experts predict, one out of five of the country’s 37,000 travel agencies will be out of business, many of them tiny operations.

At Laguna Travel Services in Laguna Beach, a staff of six full-time agents has dropped to five, and more layoffs are looming. The storefront agency, tucked on Broadway since 1946, is frustratingly quiet. The agents take turns answering the phone, hoping for new business each time.

“I am certainly worried for my job here,” said Eileen Fishbach, who has been a travel agent for 21 years. “I was beginning to think we would pull out of it OK before [Oct. 7, when the U.S. began airstrikes in Afghanistan] because things were starting to pick up. But now, with the war . . . I just don’t know.”

Agents who work for larger agencies have less to worry about because airlines give bonuses to the companies that bring them the most business, and bigger agencies have a better chance of making high-volume sales.

But travel agents earn, on average, $30,000 per year, and the vast majority of all travel agencies do less than $4 million in sales per year--hardly enough to stay afloat for long in tough times, according to American Society of Travel Agents President Richard Copland. The group has asked for a $4-billion government bailout, but unlike the airlines, it has not received aid.

“These are small companies that do not have the wherewithal to survive a fallout like this on their own,” Copland said. “It’s like Christmas in October for the airlines, but we got zero. The value of travel agents is being ignored.”

On Sept. 11, though, it couldn’t have been clearer. At Montrose Travel near Glendale, agents worked nonstop to help 152 stranded clients, booking multiple airline tickets, sending clients by bus to cities with more choices for departing flights and renting fleets of cars for one-way trips. In many cases, the agents acted as counselors, relaying messages from clients to loved ones back home and easing travelers’ fears of flying.

“We had to keep telling people, ‘It’s OK, we’ll get you home, don’t panic, don’t worry,’ ” said Maria Saenz, a 10-year leisure travel agent for Montrose. “I felt like a broken record, but you have to understand that people were desperate for information. They just needed to know what was happening and that they were being taken care of.”

Lesli Keown, a Seattle-based sales representative for Curon Medical who was stranded at a business meeting in Sunnyvale, Calif., said she was amazed at how quickly agents at TraveLeaders, headquartered in Florida, were able to book multiple flights and relay the schedules to her. At first, Keown said she tried to call the airlines herself, figuring the travel agents who handle her company’s business would be overwhelmed.

“I couldn’t get anything done,” Keown said. “The airlines kept saying it’d be a three-hour wait, but the travel agents kept e-mailing me more and more options, more and more flights that could maybe get me home. I got out the very first day flights resumed. I was so, so lucky.”

A week later, Montrose Travel’s president, Joe McClure, laid off 15 people and issued a 10% pay cut for his remaining 150 workers, saying it was necessary to make sure the $118-million-a-year business would make it through the slump.

Likewise, TraveLeaders President Scott Shadrick said he laid off 100 workers, cut salaries by 10% and closed eight of the agency’s 30 offices--including three in California. The company, which merged with Irvine-based Sundance Travel last year, has 600 employees nationwide.

“We knew that we had to make serious adjustments,” Shadrick said. “And they had to be quick and deep or we wouldn’t survive.”

Travel agents make money from commissions they earn for each trip or service booked. Some earn a salary plus bonuses from their agency, while an equal number work strictly on commission.

The airlines--which lowered travel agents’ commissions for the sixth time in as many years just two weeks before the attacks--pay a 5% commission up to $20 for each ticket.

To compensate for the lowered airline commissions, many agencies have increased their own service fees, which agents say bring their total to an average of $43 per ticket. Still others have begun diversifying their business to target more package vacations or trips that include overnight hotel stays, a rental car or limo service. Agents can earn as much as a 17% commission on packaged leisure tours, with no cap on how much.

Further complicating the pay structure is the issue of so-called overrides--bonuses that airlines give to their highest-volume travel agencies each quarter. Larger agencies stand to get extra compensation--an additional 5% uncapped on all sales--through overrides. Montrose Travel usually pulls in $150,000 per quarter this way.

“Once you get bigger and have volume, the airlines will always pay for performance,” said McClure, who pays his agents a monthly salary that he expects them to triple in commissions.

That is why agencies such as Montrose Travel are more likely to escape the downturn with fewer injuries. Last week, McClure strolled through the divisions of his business--leisure, cruises, honeymoon packages, business travel and meetings--and smiled at the number of agents chatting purposefully on their headsets. Despite the layoffs, seats at almost every desk were filled. McClure said business is up to 89% what it was before for corporate travel and 84% in the leisure department.

An agent waved him down as he passed, boasting about the sales she made the week before. “Ninety-two? Terrific!” McClure said, noting that the agent made $9,200 in airline commissions.

Most agents can only dream about such commissions. Even before the terrorist attacks, an average of 300 bricks-and-mortar travel agencies were closing every month--18,000 in all over the last five years.

Industry researchers estimate that 10% of all airline tickets are booked online, either through an agency such as Travelocity.com Inc., Expedia Inc. and Priceline.com Inc. or on individual airline Web sites.

Travel agents say they book 75% to 80% of all airline tickets. But the pie continues to get smaller, experts said. In 1999, about 11 million travel purchases were made via the Internet; the figure doubled in 2000. And even with the drop in travel due to the attacks, analysts still expect online travel agencies to book $20.2 billion in sales this year.

“The scope and price advantages of the Internet are going to keep encouraging people to use it,” said Arthur Frommer, editor of Arthur Frommer’s Budget Travel Magazine. “Traditional retail travel agents are a great deal concerned about it, and they should be. They were the unsung rescuers of stranded travelers for a few short days, but this is real competition that’s not going away.”

Travel agents still insist it is the one-on-one relationship with clients that will sustain them. Although some online travel companies have bolstered their customer service centers in recent months, travel agents say online companies cannot guarantee a caller will always reach the same consultant. And as busy clients resume their travel habits, they won’t have time to scour the Internet for vacation packages. Nor can the Internet match the kind of personal attention that agents provided during the first few days after Sept. 11.

“We had people say, ‘If you get me home, I promise I’ll never, ever book on the Internet again,’ ” McClure said. “We love to hear those words. But of course we know how quickly people forget.”