Euro Travel Agencies To Suppliers: 'Pay us Fees'

<B> Euro Travel Agencies To Suppliers: 'Pay us Fees'</B>

By Amon Cohen

There is no question that commission cutting and its aftermath continue to dominate the agenda for travel management companies in Europe.

Working out a fair system of remuneration remains the number-one priority. The cuts have revolutionized the economics of the agency-client-airline triangle, but while the perfect solution remains elusive, one thing is clear: Travel agents are becoming more assertive about their worth and believe they are entitled to income streams from both clients and suppliers.

For Tony Hughes, chairman of the U.K. Guild of Business Travel Agents and managing director of P&O Business Travel, the most likely answer is transaction fees. "Management fees are only enjoying limited engagement," he said. "Clients still think travel agents are trying to pull a fast one on them. We have to make matters clearer by itemizing our bills, which is why I believe transaction fees will ultimately win through."

Hughes wants the airlines to start to paying transaction fees to the agent as well, a view that is shared by American Express Europe's business travel chief Maria Lilja (see story, page 51).

"Carriers should be paying us a transaction fee for the services we provide them, such as quoting tariffs and booking flights. Anything else, such as delivering tickets, or passport and visa services, should be paid for by the client," Hughes said.

Subscription and transaction fees for clients already have emerged in Scandinavia and elsewhere, initially causing some shock. However, Woodside Travel Trust managing director of international operations John Melchior claimed that clients rapidly came to appreciate the worth of their agents. "In some countries, some clients left and started to book direct from the airlines," he said. "They were back within a few weeks, complaining about waiting on the phone, not having credit facilities and getting incorrect information."

As in the United States, European travel management companies are broadening their services to enhance the business value of the fees they charge. "The future lies in adding consulting and systems integration services," said Bob Booth, general manager for WorldTravel Partners-dominated global network GTM. "Examples include recommending automated booking and expense systems, tying travel into corporate intranet pages and accounting systems, and advising on safety and security issues."

Andrew Solum, an American business travel consultant based in London, thinks European travel management companies have only got their approach half-right. "Management information tools, such as pre-trip reporting, are all very good and are helping companies, who are also learning to use city-pair information," he said. "But although travel agents talk about consultancy a lot, they don't always come through with it. For instance, they offer to help clients write their travel policy, but in practice they don't get around to it."

<B>A Downside to Size?</B>

Customers, Solum said, also are "getting frustrated with the large travel management companies, which are almost getting too big," while with small agencies, "clients receive star treatment."

He is therefore not convinced that all companies will put their pan-European travel requirements in the hands of Europe's major players, especially as clients can find other ways to consolidate their management information, such as through their card or data warehouses.

Figures do not exist, but at present few would dispute that the big three in Europe are American Express, Carlson Wagonlit Travel, and Business Travel International. Rosenbluth International is much smaller as a European player than it is in the United States, but is still significant as a pan-European force because most of its corporate accounts are multinational. Woodside claims it is the fourth force in Europe in terms of national representation, although Melchior acknowledged the network only has about ten accounts that go across one or more borders in Europe.

Melchior said many corporations are deciding not to consolidate internationally. "At least half the companies that start to consolidate accounts across Europe decide it is not worth it," he said. "They are realizing that consolidating the purchase of services is not the same as for the purchase of products. Often, they can get a better discount from each country individually, and they can consolidate their management information from alternative sources."

There may be difficulties in upsetting existing arrangements, but GTM's Booth has identified a new trend among the proliferating start-up companies in growth industries such as telecommunications.

"A lot of smaller and start-up companies are doing their travel management consolidation as they expand into other countries," he said. "This is important to them because while they are expanding, travel is a hefty part of their business. If they are moving into somewhere like Hong Kong, they also consult us on issues like office location and security."

GTM has several accounts across borders in Europe, including Heinz, Air Products, DCC Communications and Fort James. Booth, who commutes between Philadelphia and GTM headquarters in London, has watched the gap in travel management sophistication close between the two sides of the Atlantic but sees a major obstacle to consolidation in Europe. "There is more input from local managers, whereas U.S. managers are more autocratic," he said. "In Europe, we have to go out and sell policy to a client's employees; we cannot assume that policy will be mandated."

Solum has observed the same phenomenon. "I don't think travel management is as effective and widespread as in the United States. Here in Europe, it is wishy-washy--in the United States they mandate very closely," he said. "It is getting there, but there's a lot of self-interest and tradition that is slow to change. There is a lot of fighting with executives on their frequent-flyer programs, and people are very image-conscious. They want to be in front of that curtain, and every flight is a grand journey because they have to show their passports. In the United States, it is mainly domestic travel, so everyone gets on board an aircraft as if it were a bus.