Agents Will Remain Key In Travel Process - 1996-11-04

<FONT SIZE="+3"><B>Agents Will Remain Key In Travel Process</B>

Have the airlines really engineered the "agent bypass" through corporate travel technology? Will the Internet replace your travel agent? While travel agents are about to loose their monopoly on travel automation, you can be certain a travel agent will continue to play an important part in your travel management future.

To understand the agent's role, we need to examine four core functions that agents provide in today's travel distribution system: reservations, travel documents, ARC settlement and information.

Today, agents book almost all reservations through the airline computer reservations system. One CRS estimates that as much as 60 percent of all reservations will shift from agents to corporate travel arrangers through point-of-sale systems. For the most part, these will be simple point-to-point reservation--the flight to Chicago, a hotel, maybe a car. But what about the other 40 percent?

These will comprise multileg and international trips, as well as reservations for VIPs that require the high-touch expertise of an agent.

Similarly, it is predicted that over half of all trips will be ticketless. Travelers will go to the gate, present identification and receive their travel documents. But business travelers pay a high price for ticketless travel. Today, a ticket is negotiable like cash. Travelers' itineraries include more than one airline, and should their itinerary change en route, they can exchange one airline's ticket for another. Ticketless travel allows neither multicarrier tickets nor carrier substitutions. It has been suggested that the airlines could issue negotiable script at the counter with a bank to manage the payment distribution--precisely the settlement system we enjoy today.

Settlement through the Airline Reporting Corporation is a black hole that we all know is there but that few, including myself, entirely understand. Companies may use direct forms of airline payment to reduce CRS and ARC costs. But at the end of the day, business travelers require a system that can handle a complex itinerary with a negotiable ticket. Direct systems will not do this. Agents process a myriad of complex transactions including refunds, exchanges and partial exchanges because their customers have made changes in their itineraries. Settlement and the agents who facilitate the process are here to stay.

Last, companies require purchasing information to negotiate with suppliers, control costs and integrate with expense reporting systems. A booking of the future might be arranged by a traveler, ticketless and with a direct form of payment, but at the end of the day, that information must be consolidated into some form of system for the company to control and account for the expense. The best person to capture and distribute this information today and tomorrow is the travel agent.

Based upon these core functions, we can make four predictions for the future. First, today's commission structure will continue to fragment. The commission cap was not a cause but an effect. The airlines need to be able to substitute a fixed commission system for one with flexibility to compensate agents for the service they provide. Because an agent's participation in a transaction will vary, airline compensation must be flexible enough to pay them for the value they deliver.

Second, as agents adapt to flexible commissions, they will be required to implement variable fees. Because travel will be a mix of self-service and agent-provided services, fees will be equally complex.

Third, travel agents will be an important broker of complex transactions and a channel to consolidate travel information. True, their role will be different, but agents who understand technology, fee-based pricing and the importance of competent staff will be worth their weight in gold.

Fourth, the services that agents provide today are difficult and costly to deliver. Remember that agents' profit margins are only one percent. The high cost of distribution is due to complexity, not agency inefficiency. While corporate America is busily outsourcing non-core activities, insourcing travel will be a cost transfer. Once all of the costs, including employee time, are calculated to replace your travel agent, there might be only marginal savings or, more likely, new hidden costs.

In tomorrow's complex technology environment, travel managers will be critical to their company's success in controlling travel costs. They will be required to know travel agency processes, costs and technology. Who can better assist you through these decisions than your agent?

<I>Michael Whitesage is the president of Prism Group Inc., a software development and consulting firm headquartered in Albuquerque, N.M.