e believe ARC is moving in the right direction with a fee structure for travel agencies that is based, at least in part, on an agency's volume of business. We have long believed that the historic practice of charging an annual fee per location, regardless of the size of that location, puts a disproportionate share of the costs on smaller agencies.

But ARC's attempt to engineer a transition to a new fee structure raises some troubling questions. ARC is fond of bragging that its new electronic reporting system, IAR Interactive Plus, has dramatically reduced the cost of processing agency transactions -- so much so that ARC took the unprecedented step this year of reducing the annual fee from $150 to $125.


Agents -- or at least those who were on IAR -- got to share in the benefits. Next year, however, agents will be required to give back 20% of that reduction, and then some. Goodbye benefits. ARC also brags that agents have flocked to IAR in such great numbers that 90% of the system's dollar volume is now processed using the more efficient system. Against this backdrop of increasing efficiency and falling costs, we find it curious that IAR agents are being asked to pay fees for 2002 that will be, in all cases, higher than their fees for 2001.

An increase in the per location fee from $125 to $130 is not going to break the bank for any agent, but it's an additional $175,000 to ARC, on top of the transaction fees that at some large agencies, will amount to thousands more. And then there's the whole question of small agencies that find it more convenient to report sales using ARC's conventional paper method. Beginning this year, those agents will bear 100% of what ARC calls the "extra cost" of the manual reporting system.

It's a good thing ARC doesn't have to sell rank-and-file agents on the fairness of this system. It might not have time to do anything else.

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