Airlines' elimination of travel agency commissions and the resulting new fees for customers is changing the way that many companies book travel.
Since a March decision by the major carriers to cut commissions, agencies have been passing the cost to corporate customers in the form of $25 transaction fees. This unexpected cost has hit some companies hard — particularly those that don't have net rates with agencies.
Amy Beaulieu, coordinator for a grants program at the Midwest Bioethics Center in Kansas City, Mo., credits her agency with giving her organization $10 off the $25 transaction fee. The agency is also letting her pay the fee on a biweekly basis, instead of once a week (even though the agency must pay the airlines by the week).
At Quorum Health Resources, a hospital management firm in Brentwood, Tenn., “We've had to go from funding our on-site agency through commissions to paying our agency a fee,” reports Judy Bunasky, conference and travel manager. “We don't even break even, especially with the car-rental companies cutting commission as well” — a reference to the 5 percent commission cut on negotiated and government rates implemented by the car-rental industry.
One result of the price increase — whether in the form of higher agency fees or loss of revenue in cases where the agency passed on the commission to the client — is a growing trend toward “total meeting management versus doing registration, land, and air separately,” says Scott Graf, president of WorldTravel Meetings and Incentives, a division of WorldTravel BTI, which is based in Atlanta.
Graf says that more companies have been motivated to consolidate meetings, as they did previously with travel. “If you leverage our expertise and have some type of compliance program, we'll save you 15 [percent] to 20 percent on the available spend.”
One example is Executive Travel, a Lincoln, Neb., agency with $17 million in annual sales that offers a packaged bill including air, hotel, and tours. Paul Glenn, owner and group administrator, says that he has picked up $4 million in new business since the airline commission cuts. “Companies are getting rid of their travel planners and coming to us instead.”
Glenn says that his agency had introduced a $10 fee on air bookings made through its Web site, which is tied into the Galileo GDS, and upped its full-service fees from $25 to $35. Clients can use the self-booking service for air tickets for a meeting (as an affiliate of BTI-World Travel, Executive Travel benefits from overrides and pushes those carriers), and they can get hotel rates negotiated by the agency.
The airlines have been seeking to cut costs in the wake of a more than $7 billion collective loss in 2001 and an additional $2.5 billion in the first quarter of this year. In mid-March, Delta Air Lines eliminated its 5 percent commission on tickets sold in the United States and Canada, followed in short order by American, Continental, Northwest, United, US Airways, America West and Air Canada. The move was the logical outgrowth of the commission caps the airlines began implementing in 1995, and by one estimate it would save the industry nearly $1 billion.