SAN FRANCISCO -- Airlines probably will eliminate travel agent
commissions, but new forms of agent pay will spring up in their
place.
That's the opinion of Ron Kuhlmann, vice president at Roberts
Roach and Associates, an aviation consulting firm in Hayward,
Calif., in a report titled Airlines and Travel Agents: An Uneasy
Partnership.
Kuhlmann, who left a regional sales post with Swissair last year
after 29 years with the carrier, portrays in the report a
distribution system poised for even more dramatic changes than
1995's commission caps.
Most observers expect that agent commission will drop to zero,
not only from airlines but cruise lines and hotels, as well, he
said.
Kuhlmann agreed with those predictions but said he believes
airlines and other suppliers will switch to a production-based
payment system that will reward agents for market share that is
directed their way.
This scenario, however, is based on agents maintaining their
traditional strong role in the marketplace.
"Carriers and other suppliers will find it competitively
necessary to continue sales incentives as long as the agency
community remains a major factor in the supply chain," he said in
the report.
According to Kuhlmann, the important component in the changes
ahead hinge on the perceived -- and actual -- value of agent
services to the consumer.
As passengers are given more incentives by suppliers to book
their own travel, and as they become more comfortable with
self-booking, the value of the agency is diminished, he said.
Businesses worldwide are seeking to eliminate processes and
persons that fail to add value, and airlines are as eager as other
businesses to do so, as recent moves suggest, he said.
"For much of its modern history, the travel agent industry has
acted as a surrogate office for suppliers, providing booking
services, documents and information."
But technology and the restructuring of the distribution channel
has "marginalized" agents, forcing them to perform air-only
functions at a loss.
"Many agents note that, although business is booming, there is
no corresponding bulge in their bottom line."
This will continue, he said, especially as airlines and other
suppliers reduce sales staffs and increasingly opt for direct
consumer marketing alternatives.
"Few suppliers display deep concern for the solvency of
agencies," said Kuhlmann. Some agencies, he predicted, will become
dedicated or franchised outlets for carriers or suppliers.
Independently owned agencies, in a battle for survival, must
capitalize on their strengths -- their role as consultants and
their relationships to consumers, he said.
"In a situation that is both frightening and liberating,
agencies must become more entrepreneurial, establishing and
maintaining a revenue stream linked to, but not dependent on,
supplier payments."
Specializing, fees are keys to survival
SAN FRANCISCO -- Agents must charge for their expertise to
survive, even though they might lose some customers, said Ron
Kuhlmann, vice president of Roberts Roach and Associates, in his
report Airlines and Travel Agents: An Uneasy Partnership.
Kuhlmann said specialization is one way to deal with the new
reality of the travel agent business, in which expertise is
paramount.
Agents who know a destination and can add considerable value
with their expertise can easily charge fees for services and
perhaps deal with suppliers for net arrangements that can be more
lucrative.
As long as agents maintain a strong relationship with clients
that suppliers want, agents will be a viable business, Kuhlmann
said.
In those cases, "suppliers will continue to offer incentives for
providing access to those customers. Although probably not a fixed
rate, perhaps not even a set percentage, some fee-based linkage
will continue."
Agents should use their position to their advantage, but income
from suppliers should be one of many revenue sources and not the
primary source, he said.