Meetings Hit By Airline Cut

<B> Meetings Hit By Airline Cut</B>
<I>Commission Decrease Felt By Most Programs</I>

By Chris Davis

The lingering effect on the corporate meetings market of the airlines' reduction of travel agent commissions last month will be most acute in centralized meeting programs, insiders said, but the growing popularity of specialized meeting and zone fares will blunt the impact.

Corporate meeting programs in which airline commissions are shared between the corporation and the agency or in which a fee is paid to the agency per transaction with the corporation retaining the commission, will feel the most direct hit, industry watchers said. But nobody will escape completely unscathed.

"Many sophisticated corporate travel managers have net-net arrangements for meetings," said Christine Duffy, executive vice president of Philadelphia-based McGettigan Partners. "But it's still going to hit there. No matter what the meetings management setup, there will be an impact."

Any decrease in revenue into the meetings program as a result of the commission cap decrease from 8 to 5 percent on all domestic travel--instituted by United Airlines last month and quickly matched by nearly every domestic airline with the exception of Southwest--will have to be recouped from somewhere else in the program, be it in event content or hotel expenditures, Duffy said.

"There's nothing planners really can do. All the airlines have matched, so it becomes the price of doing business," Duffy said. "But the money lost from the commission cut will come from somewhere else in the meetings program. It has to be made up somewhere."

Others don't think it will be a crucial issue for corporate meeting managers.

"There's two ways to look at it," said consultant Tom Wilkinson, president of Travel Management Group of Alexandria, Va. "There will be a fairly modest increase in the price of an airline ticket as a result of the cap decrease. But since meetings generally have lower ticket prices than transient fares, due to zone fares, meetings and group fares, and the planner's ability to at times book well in advance, that direct impact will be lessened." The resulting cost-per-attendee would generally be small enough not to change the nature of a meeting or a meetings management program, Wilkinson said.

However, he said, buyers in a centralized meeting environment will have the additional responsibility of justifying the cost increases to either senior management or their internal clients. "But while doing that, they can note that having a meetings management program enables them to get zone fares or meeting fares, which may offset the increase by itself," he said. "It forces the issue."

Corporate meeting managers themselves probably aren't seeing a tremendous difference in the market--yet. "I don't think meeting managers are really going to see the effect of the cut on their meetings budgets until they set their budgets for new meetings or get the bills from meetings they've held since the cap was cut," said McGettigan's Duffy.

Lynn Averill, director of travel and conferences for Montpelier, Vt.-based National Life of Vermont said the agency that handles her company's group business has opted not to charge National Life any additional service fees, despite the loss of commission revenue.

"It's such a significant cut for them, but they'll suck it up," Averill said. "We have a great working relationship with our agency, and that's part of it. We are one of their biggest clients, if not the biggest, and I'm sure they're not anxious to lose that."

Others said their companies' headaches were more painful on the transient side of the travel department. "It will affect us more on that side than meetings," said Annette Morris, manager of travel and meeting services of St. Louis-based Ralston Purina Co. "We're not really feeling the crunch on the meeting side yet."

But there are concerns. Morris said she's working with her agency to ensure meetings are held in areas and times where attendees can best make use of the airlines' group and meeting airfares, particularly zone fares. "We'll be looking for a lot more opportunities to do that," Morris said. "It's a very lucrative way to manage meeting travel. We can't eliminate meetings and we have to fly. We just have to maximize their value."

Manhattan-based New York Life Insurance Co.'s meetings budget will be unaffected, said director of corporate travel Shaun Malay, because he has negotiated net-net fares for both transient and zone fares (<I>Meetings Today</I>, May 17).

Malay uses zone fares with his preferred carriers only when the transient volume-based deals don't provide lower fares for meeting attendees. Either way, he's free of commission cut misery.

"We took a leap of faith with the net-net zones and we're better off for it," Malay said. "I can only speak for us, but I can't understand why more companies wouldn't consider it. Provided your net-net deal is deep enough, it will provide a significant return for you, and you're commission-protected. It won't result in a fare increase for us."

The cap, though, is not on everyone's mind. "All our meetings travel is booked through the corporate travel agency, so we're not affected in any way," said Pamela Bronkema, director of meetings and special services for Chicago-based A.T. Kearney Inc. "We don't have a different arrangement, and I guess it's good that we don't.