Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, August 27, 1995 TAG: 9508250061
SECTION: TRAVEL PAGE: G6 EDITION: METRO
SOURCE: BRUCE RAMSEY SEATTLE POST-INTELLIGENCER
DATELINE: LENGTH: Medium
That long-haul ticket was the money-maker.
``It subsidized every other transaction we did,'' said agency owner and George Washington University professor Darryl Jenkins of Falls Church, Va. ``Now, with that gone, all of a sudden we realize that a lot of the services we were providing to people were not being paid for.''
Jenkins argues that the 10 percent commission had been undermined for years by the payment of rebates on corporate accounts, and is now dead. The traditional airlines are in a battle of survival with Southwest, ValuJet and other discounters. The old carriers already have cut costs by squeezing their workers. They will cut costs further by going ticketless, as Morris Air and ValuJet have done, and Southwest is now doing. The old carriers have turned to squeezing the agents, whom they have kept in business to the benefit of archrivals like Southwest.
In a study for the Aviation Foundation, Jenkins argues that travel agents should give up commissions entirely, unbundle their services and charge transaction fees. Following this idea, he plans to open in January a kind of Charles Schwab of travel - a no-frills, discount agency.
``In our industry, it takes seven or eight calls to generate one ticket,'' he says. Customers typically call to inquire about schedules and prices, eventually book a ticket and then change it two or three times. What's needed, he says, is a fee structure that encourages clients not to waste his time. Prices should be lowest to clients who look up schedules on the Internet.
``We've got enough experienced travelers now,'' Jenkins said. ``I see a very large market of people like this out there.''
Randall Malin also sees a market. A former executive vice president of marketing at USAir, Malin is now an Alexandria, Va., consultant to Business Travel Contractors, a start-up company that plans to negotiate fee-only arrangements for corporate travel.
``Corporations don't like paying ticket prices that include big commissions,'' he said. ``Today the corporation does not select which portion of the travel agent's services to buy. In the new world, the corporation will say, `I want this and I want that, and I'll only pay for the things I want.'''
That might work with corporations, but it will be a hard sell to individuals. People like the idea that something is ``free,'' even when a tiny voice in the cerebrum says it ain't so. I know my agent's fee is rolled into the price of a ticket. But I don't see it, can't measure it, and therefore don't make demands over it.
Only a few agencies have had the moxie to ask for fees. The Travel Exchange in Seattle reacted to the fare cap by instituting a transaction fee. Corporate accounts were given an option of a monthly fee.
There was a howl at first, then clients adjusted, said general manager Rosalyn Strand.
``We have lost some business because of it, but no more than 5 percent,'' she said. ``You have to wonder whether that business was profitable.'' And the fees were modest: She estimates that they make up only 40 percent of the revenue lost to the $50 cap.
At Advance Travel, a small Seattle agency whose business is 25 percent corporate and 75 percent individual, owner May Leung said, ``I don't think any of our customers would be willing to pay a fee to purchase a ticket.'' And how to make up for the fare cap? ``We have to cut corners in our expenses internally,'' she said.
The long-term question is deeper than commissions vs. fees, or tickets vs. no tickets. It is whether agents, which now sell more than 80 percent of airline tickets, will be replaced by do-it-yourselfers using the Internet. With trip-planning software that looks up schedules and prices, even the unsophisticated traveler could put together his or her own itinerary.
Despite all the Internet hype, that doesn't exist yet.
``Looking up schedules on the Internet is easy once you understand it,'' Malin said. ``But it's pretty hard for a neophyte to look up fares and make any sense of them.''
Fares, now purposely made complicated, would have to be untangled.
These are problems, but not big ones. Change could come quickly to this industry if customers support it. By the beginning of the new century, the full-service travel agency could go the way of the full-service stock brokerage, only some of which have survived in a market invaded by discounters.
by CNB