Change in the air: Elimination of commissions forces travel agencies to increase fees, stress service

0 Comments | La Crosse Tribune, Apr 01, 2002 | by Cahalan, Steve

The nation's major airlines announced last month they are dropping ticket commissions paid to travel agents, which has prompted travel agencies to raise service fees for the tickets they sell and to stress how they help customers in ways that others don't. Dave Friedman, owner of Hobbit Travel in La Crosse, said last week he was surprised only by the timing of the airlines' announcement. "As they have been (lowering) the commissions over the last several years, I think we all knew in the back of our heads that this day was coming," Friedman said. "I didn't think it would come this close to the Sept. 11 (terrorist) incidents. The travel industry as a whole took such a bad hit and is still recovering from that." Friedman didn't expect the airlines to totally eliminate commissions until passenger counts returned closer to pre-Sept. 11 levels.

Last August, Friedman's agency began charging a $15 service fee for airplane tickets, after airlines lowered commission caps. At the time, the airlines reduced the maximum payment to travel agents for tickets issued for domestic travel and travel to Canada, to $20 per round-trip ticket from $50, based on a 5 percent base commission.

Until August, Friedman had resisted imposing a service fee for two years. "We were one of the last (travel agencies) in the state not to have it," he said.

With the major airlines totally eliminating commissions last month, Friedman raised his agency's service fee about 1 1/2 weeks ago to $30 from $15 per round-trip ticket. Before they were eliminated, the commissions for tickets he sold in the La Crosse area averaged slightly more than $18, Friedman said.

Friedman said his agency's $30 service fee for airline tickets might be adjusted, depending on what travel agencies elsewhere are charging.

"It's reasonable to assume there will be a loss" of some customers who will decide to avoid service fees by buying tickets directly from airlines, Friedman said. "I have no idea what (the number) will be."

With commissions for airline tickets eliminated, he said, his agency will put increased emphasis on the cruise and vacation package segments of its businesses because it still receives commissions for those. "But we're not getting out of the airline ticketing business," Friedman said. "That's a major part of what we do."

Friedman said people should buy airplane tickets from travel agencies because "they shop all the airlines and tell you what's the best deal. We give you a lot of information."

He added, "We constantly check to see if the fare has gone down (after the ticket is purchased) and call the customer and help them effect some kind of a refund or voucher. We provide assistance whenever schedules change or whenever the customer has a problem."

It isn't in an airline's interest to tell consumers when an air fare has dropped and that they are entitled to a refund or voucher for the difference in price, Friedman said.

When travel plans were disrupted by the Sept. 11 terrorist attacks and some became reluctant to fly, Friedman said, travel agencies helped customers get refunds or postpone their travel.

Friedman said some travel agencies went out of business or consolidated because of the drop in travel after the Sept. 11 terrorist attacks.

"I think that are a lot of travel agencies that are just on the edge," he said. "And (the loss of airline commissions) may cause some of them to say they can't compete anymore. And that will be a shame."

Friedman said he is confident that his travel agency will remain in business. He doesn't anticipate laying off any of his 13 employees.

Rebecca Naugler, president of the company that owns Carlson Wagonlit Travel in La Crosse, said she had expected before the Sept. 11 terrorist attacks that the airlines would eliminate commissions last fall. She thinks the airlines postponed doing so until passenger numbers returned closer to normal.

Naugler said her travel agency had been charging a $20 service fee for each round-trip airplane ticket, until the major airlines eliminated commissions last month.

The agency's new fees range from $20 to $35 per round-trip ticket for domestic flights, depending on the airline and the number of people traveling. For international flights, the new service fee is $10 per segment. For example, for a trip from La Crosse to Minneapolis to London and back, the total service fee would be $40.

Naugler said her agency's fees are subject to change.

She said consumers should use travel agencies because "we're one source for all travel needs. We have an unbiased approach. We offer more options. We have more flexibility and creativity. We really put a lot of consideration into the client's personal preferences. We're an advocate for the customer.

"We're there to help you if you have a problem," Naugler said. "We really are advocates for our customers."

Naugler predicted some travel agencies will close because of the elimination of commissions but predicted hers will continue.

"Travel agents have to start taking control of their own destiny and make sure they have their own niches, target their markets and provide excellent service to customers," Naugler said.