Travel agents may be on bum ticket as DIY trend looms

By NZPA

Wednesday 5th June 2002

Travel agencies used to be the favoured one-stop shop for travellers. A customer could peruse the glossy brochures, book tickets, change money and receive handy travel hints from a friendly agent. Not anymore.

Agencies are caught in a vice between airlines, tour operators and hotels desperate to cut costs in the wake of a travel downturn and Internet-savvy consumers who are happy to abandon the middleman in favour of online booking.

Air NZ spokeswoman Val Hayes said the airline's decision to scrap the commission on domestic travel was consumer driven.

"What you try to do is service the customer and the customer will want to go to a travel agent for some types of bookings, or they may well want to go to an Internet site for other types or just phone an 0800 freecall number."

The bottom line is that people want lower travel costs.

"The research that came out loud and clear as part of developing our new short haul domestic strategy is that customers wanted lower fares," Ms Hayes said.

"In order for the airline to provide that we've got to look at how we lower our overall cost structure. Feeding into that is what we call our cost of sales which primarily is to do with the travel agent industry."

Air NZ certainly isn't alone in its decision. US carrier Delta Airlines earned the unenviable acronym "Delta Evidently Loathes Travel Agents" after it canned its commissions in March this year.

Other big airlines have followed suit, and those that didn't have cut their commissions sharply in a bid to return to profit after the September 11 terrorist attacks.

In Britain, service fees have partly replaced commissions which have been sharply reduced.

Air NZ's commission policy is still under review, and while it is doing away with the guaranteed 4 percent commission, other incentives like rewards for reaching sales targets are being considered.

"We're still talking with the travel agent industry about incentive payments and other kinds of remuneration," Ms Hayes said.

"A final decision hasn't been made."

All the same, the writing may be on the wall for travel agents. The days of surviving on commissions -- 4 percent for domestic air travel, 5 percent for trans-Tasman trips and 9 percent for international flights -- are limited.

Neil Tolich, managing director of travel company Atlantic Pacific Radius, said travel agents would be forced to charge for their services to make up for the lost commissions.

But that could prove a dangerous game, driving consumers to use the Internet and cutting agents out of the loop.

Air NZ has already said it wants to boost Internet sales from the current 10 percent, and in January began offering discounts of up to 12 percent for domestic fares purchased online.

Overseas airlines like British low-cost carrier easyJet sell 90 percent of their tickets over the Internet, and a recent survey by consulting firm Accenture found that 60 percent of US consumers planning to fly this year intended to book their travel electronically. Fewer than a quarter planned to use a traditional agent.

British magazine The Economist this week said travel agents need to smarten their act to beat the burgeoning Internet travel industry -- offering niche services for travellers, rather than homogeneous packages.

"The travel agency system of the future will be based on helping customers to buy what they want, rather than helping suppliers to flog what they've got," the magazine said.

"The profusion of online offers leaves plenty of opportunity for intermediaries to add value for corporate and leisure travellers by steering them in the right direction.

"To do that, though, they need to become more like professional services firms, rather than second-hand car dealers."

Travel agents still hold the trump card over Air NZ, handling around 80 percent of the airline's international business and 60 percent of the domestic business.

James Langton, president of the Travel Agents Association of New Zealand (Taanz), said that while agents' base commissions in the United States had been removed, the market there was dominated by point-to-point travel. In New Zealand, most agents' work involved complex outbound travel.

Mr Langton said that if Air New Zealand was trying to model itself on Ryanair or easyJet it could be making a big mistake.

It was important that consumers had choice, he said.

"To drive the consumer to call centres or the Internet, then the consumer does not get choice. The consumer ends with just the Air New Zealand product."

In the United States, agents had survived by levying a service fee on the customer.

He said there was little evidence that Air Zealand had consulted "their partner" -- the travel industry.

The country's biggest agency, Flight Centre, said Air New Zealand's move would leave his company little option but to switch the $205 million business it did with Air NZ each year to other carriers.

"We expect that other travel agency groups will be compelled to do likewise," chief executive officer Graham Turner said. "To say this is a brave move on Air NZ's part is a gross understatement."

Mr Langton said Taanz will meet the airline next week.

The association is not allowed to call for a boycott although the threat is clear.

"People will form their own opinion. If Air New Zealand is going to treat a travel agent in this country that way on domestic travel then surely they are going to say, ` if that's their attitude to domestic, why should I support them internationally'," said Mr Langton.

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