Time To Extend The Olive Branch
<B> Time To Extend The Olive Branch</B>
By L. William Chiles
<i>L. William Chiles is president and CEO of Saddlebrook, N.J.-based Hickory Travel Systems, an international network of independent travel agencies.</I>
Ever since the first round of commission caps some two years ago, airlines have held a gun to the heads of travel agencies. And they recently pulled the trigger when united airlines announced its newest caps and the other carriers followed suit.
The problem is, in sounding the death knell for a large number of travel agencies, the airlines also may have accomplished what amounts to shooting themselves in the foot. There is no question that their timing is absolutely atrocious. Historically, travel agents have played a major role in the travel distribution system and regardless of how much airlines pare the commission structure, they will continue to do so.
It is unfortunate that alliances between agencies and the airlines are becoming weaker at the very time that they need to become stronger to take advantage of global expansion and a shrinking universe. Since the Delta announcement two years ago, many travel agencies have been unable to survive lost commission revenues. In many instances they have simply closed up shop. But the effect has been like that of a pack of wolves attacking a herd of buffalo. The predators weed out the weakest members of the herd, thinning it out, and as a result, natural order prevails. The wolves are fed and able to survive, and the buffalo herd grows healthier and stronger.
Over the past two years, many travel agents have grown stronger and more independent. They have learned to place a realistic value on the services they provide and made efforts to expand those services by adding to the knowledge and expertise they have to sell, making themselves virtually indispensable. As a result, a hardier and more resilient breed of travel agency has emerged.
Travel agencies also are finding strength in numbers as they forge new alliances. They are able to bring impressive credentials to the bargaining table as they combine local expertise with global power.
Airlines need to understand that cutting the agency out of the distribution channel is a no-win situation. It is true that in the past many agencies have abdicated control of their own destinies by allowing airlines to spoon feed them commissions and technology. On the other hand, those agencies that have taken the initiative to provide clients with a whole battery of valuable services also are taking charge of their own professional growth and viability.
In fairness, it is not only a matter of some travel agencies being reactive instead of proactive. In truth, the airlines have complicated the travel delivery system. Despite utilizing sophisticated technology, agencies have been unable to realize an increase in productivity over the past decade. Instead, they have been forced to concentrate on performing more tasks in response to airlines introducing more complex fare structures, itineraries and frequent flyer programs.
More than ever before, the travel industry has moved into an era that sees multiple-task agencies covering all fronts, from leisure and business travel to group and incentive business. Airlines are convinced that the Internet will fill the vacuum created by the travel agents they squeeze out by capping commissions. This is a fallacy.
As astute corporate travel managers already know, the Internet is not a panacea, nor is it a substitute for a knowledgeable travel professional. Those travelers who buy tickets online don't have the luxury of taking advantage of ticketing queues and other strategies used by savvy travel professionals to obtain the best possible routings at the most cost-efficient price. They are abdicating to the airlines their ability to seek professional counsel to help them keep corporate and personal travel budgets in line. The net effect of capping commissions will be to drive up prices so that the traveler ends up paying more for a ticket.
The airline industry needs to reevaluate the real worth of the travel agency distribution channel because in the final analysis, the travel agent still represents the best option for travelers. Airlines must realize that they will not survive on the Internet alone.
Agency owners and managers also must realize that now is an ideal time, perhaps the last real chance, for reason and good-faith negotiation. It is time to extend an olive branch to the airlines and to show how the new breed of agents are indispensable to the distribution system and to develop new revenue alternatives to the commission.