SAN FRANCISCO -- Tour operators and air ticket consolidators are
expecting the latest international caps to provide a boost to their
business, as agents seek higher commissions on air-inclusive
packages and tours.
The only major airline to operate its own tour brand in house,
American Airlines, with its American Airlines Vacations, continues
to pay 10% on air tickets sold in conjunction with an AAV tour
order. United Airlines' tour brand, United Vacations, operated by
the Mark Travel Corp. and Delta's Delta Vacations, operated by
Certified Vacations, continue to pay standard commission on
air-inclusive packages. Mark Travel and Certified's relationship
with their airline partners is based on net fare arrangements.
"The beautiful thing is that agents can earn up to 15%," said
Ted Mooney, general manager of Delta Vacations. "Our average
package sale to Europe is $3,500, so that's $350 at 10% commission
and $525 at 15%."
Agents may steer away from airline-affiliated brands because of
their anger with the carriers, however. Mooney said it happened to
Delta Vacations with the first cap of 1995, and the tour firm
suffered a dip in sales from agents. Months later, sales began to
climb. "I'm glad Delta was not the first one [airline to impose
international caps] this time," Mooney said.
Tour operators and consolidators predicted agents will turn to
them for air tickets, even if it means agents will not receive the
air-segment counts to fulfill their CRS contracts. "Agents [will
turn] to where they can make money, and they can earn more money by
selling air-inclusive tours," said John Martinen, Globus &
Cosmos chairman.
In the last several years almost all the major tour operators
added air to their escorted or FIT packages, signing deals with
airlines for contracted space and making the air component a
seamless part of the package or tour. Martinen said there was some
resistance by agents in using air-inclusives a decade ago because
"they preferred to maintain their own relationship with the
airlines." That resistance is eroding with the preference for
"one-stop shopping" with tour firms.
Nigel Osborne, president of Insight International Tours, said
his company was preparing, before the commission cap, to expand its
contracted air program in preparation for 2000, which is expected
to be a banner year for travel to Europe.
However, there are tough spots -- such as Rome and Milan, Italy;
Athens, Greece, and Madrid, Spain -- where capacity shortage from
the U.S. causes airlines to limit allotments to tour operators.
Agents booking those destinations may be forced to book directly
with airlines and accept 8% or the $100 cap on commission -- rather
than the standard 13% that Insight pays on air-inclusives to
agencies with preferred standing, Osborne said.
Brendan Tours' James Murphy, who operates an air-ticket
consolidator division, said he expects from agents because of the
commission caps, particularly to destinations where consolidators
offer not only higher commission but lower fares than published
rates. "We can't compete with air fares to London this winter,
which are starting at $399 from Los Angeles, but we can do better
than a published fare when someone is traveling to London in two
days," said Murphy, who predicted agents will be doing "fast
footwork" to find the lowest fare and the best compensation for
their work.
Darlene Rippon, president of Diplomat Tours in Sacramento,
Calif., said that her company was "inundated" with calls from
agents hours after United's announcement and that she expects
demand from agents for consolidator tickets to "grow stronger" as
the full impact to their bottom line hits.
But Rippon and others warned that airlines' sophisticated
yield-management techniques are leading airlines to restrict more
routes and seats offered through consolidators.
And, although consolidators often beat the airlines' published
fares, the difference in their price and the airlines' published
price is growing smaller. "It's getting difficult to offer a
consolidator ticket at an attractive price," said Heinz Wesner,
president of DER Travel, Rosemont, Ill.