CHICAGO -- Feb. 9 marked the two-year anniversary of airline
commission caps, but Stephen Shields, owner of Shields World Travel
in Pleasanton, Calif., doesn't need any special reminders.
Looking back to that period in 1995, when Delta initiated the
caps and was quickly matched by other major airlines, Stephen said,
"It still galls me every single day of my life."
A case in point is a roundtrip San Francisco-New York ticket he
just wrote for $1,700.
With the commission cap the agency will earn a flat $50, rather
than the 10% commission that was the standard two years ago.
"I figure we made 2.5 percent," Shields said.
A service fee on that ticket would have upped the agency's
take.
But Shields said that although he has a few specialty fees, such
as a $10 coupon-handling charge, he is not charging any kind of
across-the-board booking fees.
"Basically, no one out here is," he said.
Shields is running counter to predictions that the travel agency
community would be pushed to make a mass transition to service fees
to survive the reduction in domestic air commission revenues.
Even without service fees, 1996 proved to be a "fabulous year"
for Shields World Travel, Shields said.
Although the largest travel agencies say they have converted
their corporate accounts to fee-based pricing, there appears to be
more variance in the day-to-day practices of retailers, as the
example of Shields and the following statistics show:
* Within the Carlson Wagonlit Travel associate (franchise)
agency network, with more than 950 full-service locations in the
U.S., 56.8% of associates who responded to a recent survey are
charging service fees, according to Robert Gappa, president of
Management 2000, a Houston-based franchise consulting firm that
works with Carlson Wagonlit.
Gappa, who reported this finding at a Carlson Wagonlit meeting
in January, said that among the company's leaders group, composed
of agencies with more than $10 million in sales volume, 82% charge
service fees.
* An ASTA membership survey more than a year ago found that
about 27% of respondents were charging service fees and another 28%
were considering it.
* In Travel Weekly's 1996 U.S. Travel Agency Survey, 20% of
agents responding said they had imposed or increased service fees
in response to the caps, but only 19% of agencies overall said they
charged service fees.
* Within Midwest Agents Selling Travel, a Hinsdale, Ill.-based
organization with 370 members, between 30% and 40% of the group's
members charge service fees, according to John Kloster, executive
director.
That's more than in the pre-cap days, but the number has not
increased appreciably in the past year, Kloster said.
MAST continues to offer educational programs for members on
service fees because, he said, "we certainly think it is an answer
for the revenue problem."
At Menno Travel Service, an American Express affiliate in
Goshen, Ind., service fees have been the answer to revenue losses
attributable to commission caps, according to Douglas Risser, the
agency's president.
Menno Travel has had a whole menu of service fees in place since
May of 1995, including a $5 fee on air and rail bookings and a $10
fee for refunds and ticket reissues.
Risser does not want to disclose just how much money he is
earning from fees, but he said fee revenues have more than made up
for caps-related losses, which in 1995 totaled $70,000.
Menno Travel was considering charging fees prior to the caps
imposition, and was able to take advantage of the the publicity
surrounding the caps to prepare consumers for the possibility of
service charges, Risser said.
"That is probably the main benefit of the caps. That made the
introduction of service fees easier," he said.
Agencies not charging fees say they have come up with other ways
to offset caps-related losses.
Shields, for example, said he has built up non-air revenues,
such as cruise and tour bookings, and he's made an effort to sell
tickets on airlines without commission caps, most notably TWA and
America West.
But he thinks one of the reasons his agency had a good year in
'96 is, "There's less competition than there was two years ago; A
lot of agencies went under."
Marilyn Wexler is among the travel agents who, since the caps
were imposed, have decided that travel agency ownership is not for
them.
Last summer Wexler sold her Boston-area agency, Going Places
Travel, to New York-based Direct Travel; she now works for that
agency.
Wexler said it was becoming "more and more complicated" to run a
travel agency, and the caps acted as the "major catalyst" in
prompting her to sell.
Service fees can indeed be an additional complication in the
agency business but industry consultant Robert Joselyn said the
biggest stumbling block for agency owners is a "primal fear that
the customer will turn on their heels and walk out the door."
Joselyn, who conducts workshops on fee-based pricing, urges
agency owners to just take the plunge.
"I haven't had a client put in fees who hasn't wound up with a
much better bottom line," he said.
Joselyn believes that statistics are vastly underreporting the
number of agencies charging fees these days.
"It depends on your definition of service fees," Joselyn said.
"People are hung up on charging fees for airline tickets. But then
there's cancellation and FIT fees.
"If you charge for work you do on behalf of a client, you've got
fees," he added.
There is still interest among U.S. travel agents in introducing
fees into their businesses, although perhaps not at the "frenzied"
level of two years ago, Joselyn said.
Services fees are a back-of-the-mind consideration for Lisa
Modrick, owner of Modrick's Professional Travel in Rapid City,
S.D.
Modrick said that for competitive reasons she has not yet felt
comfortable about instituting fees.
"We are a small community with many agencies," Modrick said.
On the other hand, the caps continue to squeeze her agency, and
Modrick said she continues to "build a file" on fees if the day
comes when she chooses to charge them.
Modrick said her firm was more corporate-oriented prior to the
caps; since then, the agency has seen leisure sales grow to 50% of
its business and overall sales volume has doubled.
Overhead expenses also have increased. The increased sales
volume meant additional sales staff, increased rent and utility
expenses, and there wasn't a lot of fat to cut to begin with,
Modrick said.
Modrick said her January commissions, including all air and
non-air bookings, averaged just under 9.5%, compared with 9.59% in
January of 1996.
"It doesn't leave much room for profits."