Alan Fredericks is on vacation until Aug. 28 and has selected a
collection of columns from the archives to appear during his
absence. This one originally ran September 8, 1999.
One of the first puzzles I heard posed when I entered this field
years ago was this: Does a travel agency represent the customer or
the supplier?
The simplistic answer, I suppose, is both. The agency represents
the customer to the supplier in seeking out the best travel options
but also represents the supplier to the customer in presenting
those options for consideration.
But if you ask a travel agent to choose, the answer almost
always is that the higher priority goes to the customer.
What's more, events of the past few years have focused agents'
attentions even more heavily on the customer. Travel agencies'
compensation, once overwhelmingly dependent on suppliers, is
derived to a greater extent now from the client.
Many agencies with substantial commercial accounts earn
virtually all of their income from fees paid by their clients. In
the leisure travel sector, service fees now account for a
significant portion of agency income.
One question that lingers is this: How far can the pendulum
swing in the direction of income derived from the client rather
than the supplier?
Corporate travel agencies in the higher-volume categories say it
can swing pretty far, maybe even all the way. They remain confident
that the services they provide will be of such value to
corporations that the accounts will pay what is necessary.
Smaller agencies are more fearful about the loss of supplier
compensation. Without a broad base of corporate travel accounts,
these agencies remain largely dependent on individual leisure
business. They worry that a loss of supplier commissions would be
difficult to make up with leisure-travel service fees.
But supplier commissions in the leisure sector are not likely to
disappear. The competition among cruise lines and tour operators
remains fierce, and the need for intermediaries to promote and sell
these sectors remains strong.
Agencies will have to concentrate more of their business on
fewer suppliers, but the compensation levels for such brand loyalty
should stay healthy.
Nonetheless, agencies would be well served to focus more
attention on earning income from clients.
For the most part, the service fees that were imposed after the
commission caps were accepted by customers without protest. People
will pay reasonable fees for added-value service, maybe even higher
fees than many agencies have been willing to charge.
Charging significant fees carries with it, however, a
responsibility to demonstrate the added value time and again. An
agent said to me recently that the clients to whom she charges fees
expect more from her agency than ever before.