Tzell and Delta: A love story or case study?

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Arnie Weissmann
Arnie Weissmann

In explaining why he didn't want to go on-the-record talking about the commission caps that Delta Air Lines instituted 21 years ago, a former Delta employee likened the topic's sensitivity to the JFK assassination: It isn't an event you want to admit you had a role in.

If disintermediation of travel agents was Delta's goal back then, things did not go as planned. And nowhere was that more evident than at Tzell Travel Group's 50th anniversary gala last month.

At the event, Delta was the sole diamond sponsor and the only supplier allowed stage time.

"We are not just partners but lifelong friends," Chuck Imhof, Delta's vice president for New York sales, told the crowd.

Back in 1995, the only thing less predictable than that testimonial would have been that Barry Liben, retiring after 40 years at the helm of Tzell, will be succeeded by Gail Grimmett, who has held five management positions at Delta. Most recently, she oversaw Delta's plan to boost its presence at New York airports.

Grimmett, a sophisticated businesswoman, apparently found running a $4 billion travel-agency division (she oversees Protravel International as well as Tzell) more attractive than managing a market that generates $6 billion for a major airline.

She's not the only former airline employee to move from commercial aviation to retail travel. One-time execs of major airlines can be found throughout the management ranks of Tzell and its parent company, Travel Leaders Group (No. 9 on the 2016 Travel Weekly Power List).

The migration from airlines to retail is not limited to just the corporate level: At one Tzell agency in Long Island, N.Y., five of 44 employees are ex-Delta.

What opportunities did these former airline employees see in retailing that were missed by their peers, some of whom prophesied (and plotted) the disintermediation of travel agencies?

Agents are typically credited with reinventing themselves by exploiting technology, developing expertise and understanding the power of human relationships.

And indeed, all of those were essential contributing factors. But there was an equally crucial macrotrend that is often overlooked. A handful of visionaries -- ones who focus more on market principles than on marketing and more on the broad power of distribution than on specific sales techniques -- identified and pursued a game-changing shift in industry economics that they believed would be advantageous for agencies.

To understand the opportunity they saw, it helps to look outside the travel industry. Suppliers and distributors everywhere are locked in a relationship that involves both symbiosis and a power struggle. Although interdependent, each looks for advantages.

If a supplier can disintermediate a distributor, there could be significant savings.

But distributors, too, can gain the upper hand. Walmart, for example, dictates packaging specifications to any company that wants to sell products in its stores. And it was not that long ago that Barnes & Noble had veto power over the title of a book that publishers wanted to put on its shelves.

The most effective way to balance a supplier's desire for disintermediation is size. So while smaller travel agencies were adapting to counter airlines' muscle-flexing, others saw a larger-scale opportunity in consolidating a fragmented distribution system.

As Liben told the crowd at the Tzell gala: "[During] 40 years, I've learned it's much better to be a big agency than a little one."

About a third of all U.S. agencies today are linked to a Travel Leaders brand, and combined they represent about $21 billion in sales. And in that mix, particularly in Tzell and Protravel, are the highly desirable travelers who fill the front cabins of airplanes and largely determine a carrier's profitability.

Liben was a pioneer in the recalibration of the supplier/distributor relationship, said Jose Ferreira, chief technology officer for Travel Leader Network: "He realized agencies needed to be seen as peers rather than something to disintermediate."

In an interview a week after the gala, Liben told me he understood the importance of scale, "but not nearly as much as when I got involved with [Travel Leaders chairman] Mike Batt and Greg O'Hara."

O'Hara is founder and managing partner of Certares, whose substantial investments in travel agencies put him in the executive chairman seat at American Express Global Business Travel and onto the board of Travel Leaders Group.

Liben called him "the most powerful man in travel today."

"Greg's a big believer in scale, and I don't think we've seen the end of it," he said. "He's got a big war chest."

Liben doesn't characterize his relationship with Delta as adversarial, noting that he is happy to work hand in hand with airlines to help them deliver the products his clients want.

"Delta really worked to earn travel agent loyalty," he said. Over the last five-to-six years, "they turned it completely around and it worked big. They saw [us] for what we are worth."

As for Grimmett coming over to Tzell, Liben doesn't read too much into it. "If I had been asked to run Delta, I might have jumped at the chance."

It's instructive to remember the balance of power between suppliers and distributors is never static, and neither are distribution models. For proof, go back to the Barnes & Noble example above. In a world where self-publishing is on the rise and Amazon dominates book sales, big-house publishers and big-name retailers have much greater concerns than who writes a book's title.

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