Survival of the fittest

ouse of Travel in Springfield, Mo., survived the post-Sept. 11 period by economizing, charging fees and hustling for business, according to owner Linda Strait.

Sales last year dropped $600,000, from $6.1 million in 2000 to $5.5 million, mostly due to the terrorist attacks and, to a lesser degree, the sluggish economy, Strait said.

It was enough to force her to make personnel changes in the company that she had taken over in 1986 from her parents, the agency's founders.

She laid off her full-time receptionist and made outside agents of two of her inside staff.

The agency now has six full-time employees and five independent contractors. Everyone is paid on a commission basis.

For now, the 32-year-old agency is relatively stable, a position Strait attributes, in varying degrees, to the personnel changes, the agency's location (in an upscale shopping center across from a large mall) and her longtime practice of charging service fees.

"Our fees started with $10 per airline ticket for only those airlines cutting commission," she recalled.

But over the years, the agency increased fees as commissions decreased and caps tightened, she said.

Since last August, the agency has been charging service fees of $20 per air ticket. However, whenever possible, consolidators are used rather than individual carriers, Strait said.

Fees also apply for processing frequent flyer tickets and airline discount coupons.

House of Travel charges a $50 service fee for FIT trip planning; for last-minute FIT trips, the fee is $150.

"We also have a $50 per person fee on any packages canceled after deposit," she said.

Strait said the agency is substituting quality and personal service for quantity and that fee-paying clients are getting good service for their money.

Good service, Strait said, can mean anything from inserting personal tips in final documents to providing a currency exchange service for clients going abroad.

And, in one of life's little ironies, fee-paying clients who wander into her offices in the shopping center across from the mall can expect to be distracted, and perhaps amused, during their wait.

Strait recently enhanced her agency's decor with a display of memorabilia she has collected over the years -- artifacts of defunct airlines.

-- Henry Magenheim

Strait talk

inda Strait, owner of House of Travel, Springfield, Mo., said her hustle for business since Sept. 11 is an extension of her efforts to derive income from clients she might never meet face to face. That includes being nice to "shoppers" and doing some "shopping" of her own.

She instructed her staff to take seriously first-time callers asking for price quotes and to be sure to provide the quotes during those initial contacts. She said she's found this practice to be successful in closing sales right away.

The agency also uses its year-old Web site, at www.house-of-travel.com, as a promotional tool and an informational resource.

One recent feature on the site was a five-day spring break cruise for students, departing March 25 on Carnival's Celebration out of Galveston, Texas.

Another was an eight-day, Feb. 24 cruise on Carnival's Inspiration out of New Orleans to aid the Children's Miracle Network. A share of the proceeds will go to the charity. Credit unions cooperated by encouraging their members to take the trip, Strait said.

The staff contacts companies in the industrial region in and around Springfield to suggest that they sponsor incentive trips for their best employees.

The agents also call professional groups to propose a tax-deductible seminar on a cruise ship. Potential clients for cruise seminars are doctors and accountants who need to take courses to update their certifications, Strait said.

So committed is she to this niche, that if she learns of a group's interest in a seminar and finds none being offered, Strait will determine the curriculum required and locate instructors to conduct it.

Strait is big on educating potential agents, as well.

About a year ago, she founded the Travel Career Academy, which recently won certification from the Missouri Board of Higher Education.

Her timing was terrible, however.

The terrorist attacks diminished the desire to take a travel career seriously, she said. The school is still operating, however, serving students who see travel as a second job or one they can build upon while continuing as independent contractors.

The Travel Career Academy expects to expand instruction with a focus on cruise-only sales and tour escorts.

Strait, a certified travel consultant, also lends her expertise to officials at the local airport.

In her advisory role, she recently was invited to write a front-page Family Travel column for the airport's newsletter, Flight Plan.

From Dan's desk

A taxing decision

When leasing equipment with the option to buy, do I depreciate it?

The short answer is: Consult with a tax professional. The difference between a lease and a purchase agreement can be a pretty fine line, but one that can carry significant tax consequences.

Vendors selling equipment do not always have your interests in mind when they draft agreements, so don't make assumptions and don't take the salesman's assessment as valid.

Dan MacManus.To evaluate your deduction, the Internal Revenue Service will first determine whether it recognizes the agreement as a lease agreement or a conditional sales contract.

Payments made under a conditional sales contract are handled differently from a lease expense.

Instead of writing off the entire lease payment, you would depreciate the equipment. The tax expense would be based on the depreciation schedule and the interest paid, not on the monthly payments.

Whether the agreement is a conditional sales contract depends on the intent of the parties.

The IRS determines intent based on the facts and circumstances that existed when you made the agreement.

In general, an agreement can be considered a conditional sales contract rather than a lease if any of the following are true:

• The agreement applies part of each payment toward an equity interest you will receive.

• You obtain title to the equipment upon payment of a stated amount required under the contract.

• The amount you pay to use the equipment for a short time is a large part of the amount you would pay to get title to the equipment.

• You pay much more than the fair rental value for the equipment.

• You have an option to buy the equipment at a nominal price compared with the value of it when you can exercise the option. Determine this value when you make the agreement.

• The lease designates some part of the payments as interest, or a part of the payments is easy to recognize as interest.

Be sure to consult with your accountant or other financial advisor before you enter into a lease contract because your tax benefits can vary greatly.

Former agency owner Dan McManus is president of the McManus Group publishers of business management advice. Contact him at [email protected].

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