Op-Ed: Demise Of TMCs Continues To Be Greatly Exaggerated

The consumer press has been very excited lately about some of the travel search engines found on the Internet that search travel Web sites for airfares. Yet, from a travel industry perspective, these engines only scratch the surface of the changing airline distribution market. These startup companies, including Side Step, FareChase, Kayak and Mobissimo, are but one form of emerging distribution. Travel agents, corporate booking tools and other travel professionals continue to account for the vast majority of travel distribution and are entering an era where alternative distribution is a reality.

Northwest Airlines' attempt to distribute to agencies via the Internet shows the commitment the airline has to alternative distribution—to agencies as well as consumers.

For the past decade, much has been written about the declining influence of the brick-and-mortar travel agencies. The undeniable fact is they continue to handle more than half of all airline tickets sold and they provide greater cost advantages than fares found on the Internet. Last year, Topaz International, an independent airline auditing firm, found that business travel itineraries booked by a designated corporate travel agency averaged $69 less than the same itinerary booked on a public Internet site during 2003.

The fact is, travel agents continue to be beneficial to customers for two reasons: They have access to negotiated airfares and wholesale fares offered exclusively through travel agencies. Moreover, agencies have adopted cutting-edge technology.

Unlike the Internet, travel agents continue to service their clients after the call has ended. They can find itineraries that a consumer may miss, and they are always in search of the best deals. Adopting the true consultative sale attitude, they create value that entitles them to earn a fee paid for by their travelers.

The recent attempt by Northwest to charge travel companies a fee for booking in the traditional global distribution systems impacts not only travel agencies, but also the online travel sites, including Travelocity and Expedia. For the most part, these sites obtain their fares from the GDS and would have been forced to pass those charges on to the consumer. Northwest still would not have charged travel professionals for bookings made on its travel agent Web site. In fact, the carrier pays the agent an incentive to book through that channel. The Northwest incentive for travel agents who book directly with the airline more than makes up for the cost announced in late August, which it then rescinded on Sept. 2. Given the lobbying power of the GDSs, one can only assume much of the reaction was a protectionist one against an economically sound attack on the cash cow.

Some travel agencies bemoan the increasing fragmentation of airfares. Others view it as an opportunity to distinguish their service. With low-cost carriers approaching one-third of the U.S. domestic air market, up from only 20 percent four years ago, consumers have more choices on where and how to fly.

In more than 70 percent of all U.S. markets, a low-cost airline is able to offer service. As many of these airlines do not subscribe to the legacy, high-cost distribution models, they actively have looked for alternative options and only reluctantly appear to participate in traditional channels. These low-cost carriers are driving down average ticket prices for the traveler, yet the cost of the traditional distribution channel remains high. This is a flawed model, and legacy airlines must adjust to the new realities. While many in the industry took issue with Northwest's effort, the question arises of whether they were deploring the inevitable changes or if they were deploring the fact an airline has been proactive in making the tough decisions required to stay in business.

As airline ticket distribution continues to fragment, the market will demand more innovation in finding and booking airfares in the lowest cost manner. The travel professionals have assisted travelers for more than 70 years, and many times their demise was predicted. Each and every time have they been able to re-invent themselves, as they will do again. After all, they provide a service people value, and hence they are entitled to a fee their customers or suppliers want to pay.

Ivan Bekkers is president and CEO of AgentWare Inc., based in Atlanta.