Sunday, December 2, 2001

Danny Casey, special projects manager at Quality Travel, said customers have understood why travel agencies have added service fees to counter-act commission cuts by airlines.


Travel agencies struggle with
reduced commissions, Internet
competition and slow times

By Russ Lynch

At the end of August, struggling U.S. airlines looking to cut costs announced they would not pay more than a $20 commission to any travel agent selling a ticket for them, no matter the price of the ticket.

Travel agents in Hawaii and elsewhere in the country were hit again in what they saw as a series of blows to their ability to make a living.

Then came Sept. 11.

But Hawaii agents say they are weathering the travel downturn and see a better life ahead based on one factor -- travelers are still more likely to get a deal going through a travel agency than booking directly with an airline.

The agents say they can find their clients better deals than could ever be found on the Internet, and do it faster.

Surviving hasn't been easy, though. Island agents say they have laid off employees, cut expenses and closed unprofitable offices.

But by now, they're used to that and things are looking up, the leader of an industry group said.

"Prior to Sept. 11, most of the agents that I had spoken to said sales were about the same as last year or down a bit," said Danny Casey, who earlier this month became president of the Hawaii chapter of the American Society of Travel Agents.

"Everybody has been hit hard since Sept. 11," said Casey, whose paying job is special projects manager at Quality Travel Inc.

Even before the attacks, travel agents had seen their commissions from selling airline tickets drop from 10 percent to 5 percent and finally to a maximum of $20 a ticket. To survive, travel agents began assessing fees to clients.

Where travel agencies
earn their money

Travel agencies earn revenues from five main sources: Airlines, service fees, cruises, hotels and cars. Not included are miscellaneous fees, which make up an estimated 9.7% of revenues for this year.

Airlines 31.4%
Cruises 20.9%

Hotels 12.9%

Cars 6.4%

Fees 18.6%

Source: American Society of Travel Agents

Now Casey doesn't know of any local agency that doesn't charge a fee of $20 or so to book an airline ticket.

Travel agency revenues across the country are likely to be down more than 26 percent this year, to $9.86 billion from $13.4 billion in 2000, according to the American Society of Travel Agents. Casey said customers have understood the plight of the industry and don't seem unhappy to pay a fee.

But agents have had to work for it, he said. Getting space for travelers has not been a problem but travel agents have had to work hard to change bookings as airlines continually alter schedules to save money.

It's not just airlines. Ocean cruises and other package deals have had to make adjustments to deal with the changed structure of travel, and travel agents have to deal with that for little or no return, to take care of customers who had booked future travel well before Sept. 11, Casey said.

Lon Eastlund, vice president of Sun Tours & Travel, agreed. "People recognize the value of going through a travel agency as against going through the Internet," he said. It takes ordinary people lots of time on the Internet to find out what they want to know and often rules and conditions aren't clear, he said.

"Commission cuts have been ratcheting and squeezing us for the last four years. The last round really was hard to swallow and then came Sept. 11," Eastlund said. "We are charging fees, probably about $50 for an international airline ticket, $20 to $40 on a domestic ticket."

Eastlund thinks there will be more closures of small travel agencies and mergers among others but things aren't all bad. His agency in Aiea is seeing a lot of bookings by military personnel and their families, he said.

Travel agents, he said, are likely to have more leverage than an individual, more experience and longer relationships with travel providers that can get the consumer a better deal.

Earl Loo, president of Business & Leisure Holidays, said agencies are working hard to break even these days.

"A hundred percent of the travel industry, whether you are a tour operator or a retail travel agent, you are working hard to earn your dollar," Loo said. "All of our staff, myself included, have taken substantial cuts in pay. Our business is about 70 percent of where it was a year ago."

While travel agents in the islands charge a fee to make up for lost commissions, that usually applies to published ticket prices, but with special deals, tour packages and other ways of doing business "almost nobody pays retail price," Loo said.

He has been in the business here for 30 years and says he believes travel agents will survive the tough times.

Richard M. Copland, co-founder of Hillside Travel in the Bronx, N.Y., and current volunteer president and chief executive of the American Society of Travel Agents, has a fairly positive view of the future of the agencies.

Despite the airlines' "determination to get rid of the middle man" and get away from paying anything to travel agents, Copland said, agents still book 75 percent of all airline travel and 85 percent of the cruise business.

"The traveling public doesn't trust the airlines. 'Airline service' is an oxymoron," he said. "It's going to be the agent that is going to have to get the message across that it's OK, that it's safe to fly."

Travel agents are working harder than ever for less money, because of all the extra work they have to do educating clients about new post-Sept. 11 travel rules and conditions, dealing with airlines' altered schedules and striving to make sure their customers are treated fairly, he said.

However, travel agencies have gained strength in the process, he said. In the days immediately after Sept. 11, thousands of people were stranded around the world and travel agencies got them home at a time when "you couldn't get through to talk to an airline, even if you were the president of the United States," Copland said.

Copland said the new improvements in airline safety rules, widespread encouragement to travel and growing consumer confidence should get travel agencies back on their feet in the first half of next year.

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