The U.K. travel trade landscape is looking a bit more like its U.S.
I would call the changes major because, during my 18 months at
Travel Weekly U.K. (ending June 1997), U.S. commission capping was
viewed with reserve, and service fees were dismissed as something
"no one does here."
Now, it's different.
As of last January, British Airways cut U.K. international pay
from 9% to 7% and domestic pay from 7.5% to 7%. The carrier also
said it would pay more than that on all BA business based on
Thomson Holidays, which controls about 25% of U.K. tour sales,
late last year cut pay to 7% from 10% and promised more for
agencies signing agreements to deliver specified market share.
Given the dominance of a few tour firms in the U.K., this kind
of pay cut for British leisure agencies is comparable to airline
commission cuts for U.K. commercial agencies.
One ferry operator, Scandinavian Seaways, is cutting pay to 7%
from 10% in March, and the airlines have new authority to peel
taxes out of their rates, reducing the commissionable part of the
So far, the Association of British Travel Agents said, the
number of agency outlets is static, but it is too early to predict
losses. The turnaround on fees may be a key to the stability.
According to a study conducted by Pricewaterhouse-Coopers with
ABTA cosponsorship, 23% of agencies charge fees on some bookings,
and 40% are considering them. The question was not asked in 1996;
it was "not an issue." (After the first caps here, only 19% imposed
fees; after the second round, the portion was 42%, with another 31%
saying they had plans to do so.)
The U.K. research showed that agencies with the best financial
results charge service fees, pay their staff at least partially
with performance-based incentives, specialize and/or limit business
to preferred suppliers.
Those with service fees reported 11% more revenue and 22% more
profit per employee than the survey average. Those that calculate
more than 10% of pay based on sales reported a 30% higher profit
Those with a product specialization reported 7% more revenue per
employee. Those with fewer than 20 preferred suppliers reported
6.5% more revenue and 5% higher profits per staffer.
I want to make two points based on the U.K. news.
Although no U.S. tour operator has the sway of a Thomson, we
should not ignore the specter of pay cuts, or redistribution, in
that sector. On the positive side, the U.K. research is another
reminder that some things remain in your control -- and it doesn't
matter which side of the ocean you are on.