WASHINGTON -- Travel agency sales through the Airlines Reporting
Corp. broke $70 billion for the first time last year, while ARC
recorded a decrease in the total number of accredited locations,
the first-ever decline.
Lingering economic effects of the 1995 caps, coupled with the
steep commission cuts of fall 1997, forced a record number of
agencies to close their doors due to mergers, consolidation, shifts
to home-based offices, retirement and simply bailing out.
The average commission rate on a domestic air ticket was 7.94%,
a gradual descent from 8.57% in 1996, 9.17% in 1995 and 10.05% in
1994, according to ARC statistics. On the international side, the
average commission rate was 14.99%, the lowest since 1992. (The
international percentage includes consolidators' rates and thus may
appear inflated to the typical retailer.)
Pay cuts or not, the total volume of agency sales has ballooned.
Agents broke $50 billion in sales in 1992 and, despite the airline
commission caps, topped $60 billion in 1995. The momentum continued
last year as agents sold $70.5 billion in services on 138 airlines
and three railroads, with credit card transactions accounting for a
record 80% of the volume.
ARC said electronic ticketing accounted for 15% of all sales, up
from 6.5% at the beginning of the year.
Despite rising sales, ARC reported a 3.9% drop in the number of
full-service home, branch and single-office locations, from 31,617
at the end of 1996 to 30,397. It was not the first decline in
full-service retail outlets, but it was the first time that the
number of satellite ticket printer locations remained flat, which
caused a slight drop in the grand total of accredited agencies.
Restricted-access locations (primarily agents working out of
their residences) and on-site locations (agencies serving corporate
accounts) did post increases, but these two categories account for
a small slice of the pie. The net result was a grand total of
47,097 of all types of agency locations, down from 47,286 locations
at the end of 1996.
A glance at some of the 1997 sales figures may illustrate why
the attrition occurred.
Domestic bookings represented 69% of all agency bookings, but
54% of all commissions. Domestic fares (sales minus taxes) rose 3%
to nearly $45.3 billion, but domestic commissions dropped 5% to
$3.6 billion. International fares last year jumped 17% to $20.3
billion, but international commissions only rose 14% to nearly $3.1
billion.
With margins cut to the bone, a record 1,882 full-service retail
home, branch and single-office locations voluntarily relinquished
ARC accreditation last year, up from 1,672 voluntary deletions in
1996. By contrast, during pre-cap 1994, ARC processed 1,020
voluntary deletions of full-service retail agencies.
New blood keeps coming into the agency industry, but at a far
slower pace. ARC reported 10% declines in the number of application
kits sent out and the number of applications received from people
wanting to open full-service retail outlets. Only 963 new
full-service agencies were accredited last year, down from 1,302 in
1996.
At the end of the year, full-service home offices dropped 1.5%
to 2,178 agencies; branches fell 6.2% to 8,121, and single-office
locations dropped 3.1% to 20,098. An additional 378
restricted-access agencies held accreditation, up from 334 at the
end of 1996. Satellite ticket printer (STP) locations remained flat
during the year at 13,597 sites, mainly due to a massive conversion
of STPs to the on-site category, which jumped by 54.5% to 2,725
locations.
The average agency location posted sales of $28,404 per week
last year. The figure is not comparable with the previous year
because it includes ticket taxes, which were not imposed during the
first eight months of 1996.