Op-Ed: Agencies Are Using Tragedy To Gouge Clients
The following will, more than likely, incite a number of readers—primarily travel agency owners, but Management Alternatives feels very strongly in its opinion, thus we are prepared for any adverse reaction.
On Sept. 11, we, as a nation, experienced one of the greatest tragedies known to mankind. There are no words that can describe how we feel as a nation or as individuals.
We can applaud those in our industry who went the extra mile during this extraordinary time: The tireless travel counselors who tried, and mostly succeeded, to help displaced travelers find a bed to sleep in and, eventually, a flight back home; the rental car companies that permitted one-way rentals without drop-off charges for stranded travelers and the global distribution systems that waived their segment commitments during this time. These examples, and there are many others, of the commitment to business travelers and their companies represent the best of our industry.
Sadly, this is not the whole story. There are no words that can describe those who use the "event" (as the media has termed it) as their reasoning for increasing fees for servicing their best clients. This, unfortunately, has occurred, and, in the words of one of our clients, it is "outrageous" and the agency is "hitting us below the belt."
Picture the following: A company has an agreement with a mega travel agency that requires the agency to return 100 percent of all revenue generated on behalf of travel reservations. The travel agency is reimbursed for all direct operating costs by the company. In addition, the company pays a fee per transaction—typically defined as a ticket issued. This fee covers "corporate overhead and profit."
In the year 2001, the economy shifts and transactions processed by the travel agency drop off. This same agency continues to have all of company's operating costs covered, but experiences reduced profit and overhead margins because "travel is down." By the way, this occurred long before Sept. 11.
So, what does this mega agency do? They notify all their clients that effective Sept. 11 new pricing terms will take effect, perhaps only for a short period of time—I think we have heard that before when it came to income tax—blaming the loss on current events. Additionally, the fact that they are using the exact date of the tragedy isn't very humane.
This unilateral decision, although concessions will be made on a case-by-case basis, saddens the associates of Management Alternatives.
We believed that the agency community had gotten a handle on their costs, and that their fees were in direct relationship to their margins for overhead and profit.
This above-mentioned agency is asking companies to guarantee profit and overhead in a time when many businesses, clearly all businesses related to travel and leisure, are severely suffering and forced to retrench.
Where is the spirit of partnership?
There are no guarantees in business. It is not the client's responsibility to keep the agency profitable, or any other business for that matter. This travel agency needs to run its business in a new world manner, as all companies do, in this unfortunate situation.
Even the airlines, realizing the losses they already have sustained and will continue to take, have rescinded many of their ticketing rules and also have lowered many fares to try to get travelers to return to the skies.
Perhaps this travel agency should take a signal from the airlines and other organizations and temporarily further reduce every bit of corporate overhead as is possible.
The associates of Management Alternatives Inc. recognize that all travel industry buyer/supplier relationships will need to be reshaped in the near future, but whatever happened to recognizing that "now is not the time."
Carol Ann Salcito is president of travel management consulting firm Management Alternatives in Norwalk, Conn.