Agent Issues Study: Agents book ancillaries despite not earning commission By Johanna Jainchill / April 02, 2012 Share 1 -- The NCF effectA new PhoCusWright report confirms what many travel agents already knew intuitively: While sales of cruise products by traditional travel agencies have grown slowly in recent years, agents’ share of total cruise sales has been falling. Read More Travel agents are booking ancillary products, despite the inconvenient access and lack of commission, according to a new PhoCusWright study. The report, “Travel Agents and Ancillaries: The Game Is On,” looks at how and if agents book ancillary products, which the study valued at $9 billion for the airlines in 2010 and $6 billion for cruise lines in 2011. (In this study, cruise line ancillaries include all onboard revenue.)The report also revisits the fundamental travel industry question: What is an ancillary product? (PhoCusWright is owned by Northstar Travel Media, which also is the publisher of Travel Weekly.) In researching the report, PhoCusWright considered not only at the most commonly cited ancillaries, such as preferred airline seating or checked baggage service, but also cruise line extras such as shore excursions and pre- and post-hotel stays. One of the study’s authors, PhoCusWright analyst Douglas Quinby, said that both are examples of optional services or upsells that travel companies offer, and in both cases are items that agents sell, but not for commission or compensation from those companies. “The core travel product is a plane ticket, a room reservation or a cruise fare,” Quinby said. “And then what are all the things that you do once you’re in flight or at your hotel or on the ship? Paying a mandatory baggage fee isn’t the same as choosing a dive excursion. But in principle, it’s an add-on to a core fare product.” Quinby said with both air and cruise, these add-ons to the core fare product are charged with “interesting underlying issues in the cruise and airline segments around the distribution of those products and how suppliers are managing and dictating the distribution of those products, which has huge implications for travel agents and for travelers.” PhoCusWright found that most travel agents book some kind of airline ancillary service, despite the fact that the ancillaries are predominantly inaccessible via the GDS and do not earn agents any commission. Nine in 10 corporate agents and more than 70% of leisure retail agents have booked air ancillaries over the past year, the report found. “Agents’ willingness to book without compensation implies that the demand for handling ancillaries as part of the flight reservation is customer-driven,” the report said. “Booking air add-ons is a part of the travel agents’ drive to differentiate their business through customer service and maybe add a fee or justify standard fees for booking flights.” The report said that agents’ willingness to book these services even when they are not in the GDS weakens the argument that airlines should make such services available via the GDS to grow agency sales of ancillaries. However, the study also said that because it did not look at the incidence of bookings, it was difficult to know whether agents would book more ancillaries if they could access them via the GDS, and that previous studies have indicated they would. On the cruise side, the report found that nearly a quarter of retail travel agents and 41% of home-based agents typically bypass cruise lines to book shore excursions, opting to purchase them via a third party or directly with the excursion operator. For pre- and post-cruise hotel stays, 63% of retail agents and 69% of home-based agents book with third parties or directly with the hotel. PhoCusWright found this was being caused by many factors, one being that most cruise lines do not pay commission on excursions and hotel stays. “The cruise lines have made their own bed,” the study said. “By introducing [noncommisionable fees], they have essentially invited travel agents to find alternative ways to maintain their commission base. “The question is whether the savings in distribution costs outweigh the potential lost bookings,” PhoCusWright said. Fewer bookings via the cruise line limits the ability of those lines to serve their customers for that portion of the trip and leads to missed revenue opportunities, the study said. Julie Karp, co-founder of ShoreTrips, a third-party excursion provider, said that her company benefits when cruise lines do not offer commission on excursions but said it also has to succeed on its own strengths. She said having in-depth understanding of each destination, and the personalized manner in which ShoreTrips works with agents and their clients, are factors. “I am sure that we would feel a difference if all the cruise lines began to give commission, though several do now and that has not had an impact,” Karp said. “We also have extended way beyond shore excursions as our travel agents are using us for their hotel guests and often request that we design itineraries for their independent travelers. ... Of course we hope the ships never give commission, but I feel we will be fine if they do.”Follow Johanna Jainchill on Twitter @jjainchilltw.