Stop Crying About Lost Commissions And Get On With It

<B> Stop Crying About Lost Commissions And Get On With It</B>

I am simply amazed that there can be anyone in the business travel management profession still claiming surprise over the airlines' most recent round of commission cuts. I am astounded that anyone would cry "foul" or express a feeling of betrayal at what has become an industry's attempt to realign itself with financial reality. The commission structure is in its final death throes, and neither travel managers nor agencies will accomplish anything wailing at its bedside. This conclusion has been the official line at the Association of Corporate Travel Executives for the past three years. Each gasp of this declining system should hardly qualify as news.

The commission structure on airline tickets, and other travel services was an anomaly in the first place. It created false economies, gave the impression that the cost of distribution was free and prompted business practices that were far from best. When I entered the business travel management field, I couldn't understand for the life of me why I outsourced my business to an agency, set up specific goals and service-level metrics--and then asked someone else to pay for them. And this system lingered for years, even as corporate travel managers emphasized the need to apply more traditional purchasing techniques to things like meeting planning, or to become more business-oriented in their thinking.

The myth of the corporate profit center has kept the commission concept on a kind of respirator for the past decade, but this fairy tale fades in the fiscal reality of the fee-based arrangement. Just like pencils, paper or widgets, business travel resources will be ordered, billed and paid for like the commodity they are. The role of the travel manager will continue to evolve and acquire additional responsibilities, but the primary functions of negotiating, setting up and maintaining a travel program, and ensuring that services ordered become services delivered are unlikely to change.

Commission cuts became inevitable when we asked the airlines and other suppliers to cut costs and to improve efficiency. The airlines responded by looking into their distribution systems first. This is the natural progression of things.

I wouldn't want to speculate on the date when all commissions, and overrides, will become history, but I will venture to say it'll be soon. In place of commissions, corporations need to develop long-term relationships with only the requisite number of suppliers needed to accomplish our business. Fee-based arrangements and net fares are the way of the future.

My advice to any corporation whose success hinges on commissions is to begin looking into an alternative soon. The handwriting has been on the wall for airline commissions for quite some time. The letters are in neon now. Anyone or any company still clinging to the way dollars were earned in the past will eventually become history themselves.

<I>Earl Foster is president of the Association of Corporate Travel Executives and director of global travel management for Joseph E. Seagram & Sons, New York.