NEW YORK -- "Now that's a touching day to celebrate," Dale Eyerly
Colson said sarcastically when informed that Feb. 10 marked the
fifth anniversary of the first airline commission caps.
Agency owner Colson said that the caps "just blew everything we
knew away. In the long run, those changes may turn out to be
beneficial to us -- but it's certainly been a period of
adjustment."
Those first caps most directly affected only high-end and
corporate agents. But they were the first of a series of airline
pay cuts to affect every U.S. agency, as the domestic commission
rate tumbled from 10% to 8% (in 1997) to the current 5% late last
year. So the long-term results of that day still reverberate
throughout the industry.
For one thing, the airline's pattern of pay cuts has "weeded out
the hobbyists from the industry, which I think is good," said Bob
Sweeney, a Roswell, Ga.-based travel industry broker. "The new
blood entering into the business has a definite game plan," he
added.
Existing agents have had to rethink their game plan as well --
and it hasn't always worked. A good number of owners have had to
sell their businesses or, in another industry trend, merge with
other agencies.
Those who survived did so by taking steps such as selling fewer
airline tickets and more cruises and tours, adding more leisure to
their business mix and instituting service fees.
The use of service fees -- rare before the caps, and now a
mostly accepted fact of travel agency life -- also has been
psychologically positive for agents, according to Jani Miller,
president and chief executive officer of Toledo, Ohio-based Central
Travel. "Front-line agents started to think of themselves as
professionals, since people were willing to pay for their
services," said Miller.
After the latest commission cut last October, Miller raised her
agency's fees on airline tickets from $10 to $15 and began charging
a $15 fee on any tour or cruise booking.
"We ran the numbers and knew that would help recoup lost airline
revenue," she said.
Another way Miller's agency makes money on air is by working
through suppliers with air-inclusive products whenever possible.
The agency also began focusing on niches, such as spa and adventure
travel.
Colson's agency, Travelstar Inc. in Westport, Conn., also has
profited by targeting a niche: "affluent, well-educated,
intellectually curious people" who look for products from "lots of
little suppliers you wouldn't find, for example, if you went into
Liberty Travel," she said.
Because "these trips are expensive, I don't have to do 10,000
transactions a week," she added. Colson also just broadened her
service fees to include what she calls "research consultation and
reservation management."
Another key to Colson's survival was moving her agency into her
home in October 1995 to become one of the first fully ARC-appointed
agencies in a nonoffice space.
She thus saves an annual rent of about $29,000, which makes her
"more flexible. I don't have to chase every little piece of
business because I have obligations to a landlord." Colson called
her agency "not exactly thriving, but still here."
Dan Cowan, on the other hand, said his agency's progress has
been "downhill since the caps." Now Cowan is getting out of the
business. He just sold his agency, Accent Travel, in Stuart, Fla.,
because "I couldn't make any money."
He also cited "a whole bunch of issues" connected with his exit
-- from the lack of properly trained employees to the fact that
"the industry is probably poorly served by its two member
organizations."
Miller, whose 10-location agency grossed about $37 million last
year, is a lot more optimistic. "As far as we're concerned, the
caps are just water under the bridge," she said. "We've got lots of
projects going on, we're having fun and looking forward to the
future."