This week marks the fifth anniversary of the commission caps era in
the travel business.
For some, the advent of caps was the beginning of the end. There
are fewer ARC-appointed locations today, albeit the decline was
nothing like what the doomsayers predicted.
For other agencies, the caps were a wake-up call, and they woke
up.
One of the major changes that has taken place over these five
years has been in the way many travel agencies feel about
themselves. It might be argued that airline dominance in the
distribution system had left many agencies with what psychiatrists
would call low self-esteem.
The caps didn't cure that condition for all agencies. Some sank
into deeper gloom and others gave up.
But a substantial number of agencies took a look in the mirror
and concluded that they were bringing value to the distribution of
travel and transportation services.
Then they went out and said the same thing to their customers
and asked them to start paying for that value.
Today, travel agencies may not all be thriving, but many are
saying that the airlines did them a favor, forcing them to
reevaluate their operations and emboldening them to gamble that
their customers would stick with them even if it meant paying a
"markup" for the privilege.
I talked the other day with the head of one travel agency who
told me his company had started with a $10 charge for an air-only
transaction and, as the cuts got more stringent, gradually raised
the fee to $25. Very few clients walked away.
This agency, like many others, also charges fees to ticket with
a promotional coupon, to reissue tickets or to research and book
hotels in far-off places.
On the business travel side, a large number of high-volume
corporate accounts are working with agencies on a fee basis. The
higher the volume of the account, the more likely it is that the
agency is passing through all commission revenue to the client and
setting fees for whatever services the client seeks.
The agency owner I talked to described the post-caps environment
as liberating because it dispenses once and for all with the myth
that airlines and agencies were the "partners" the airlines
proclaimed they were for years.
The post-caps playing field allows travel agencies with the
courage of their convictions to set prices as they see fit, just as
retailers do in other businesses. The notion of working on a
mark-up basis was a rare one in retail travel before commission
caps. Today, it is common practice in a growing number of
agencies.
Some agencies are still afraid to charge for what they offer.
But for many, this anniversary of caps even may be a day to
celebrate.