Tourism Talk
Wholesalers, Internet are tourism's new foot soldiers

By Michele Kayal
Advertiser Staff Writer

Angie Borrelli has been selling Hawai'i for two decades, and each year she sends more than a million dollars worth of business this way.

"My boss saw that I really loved the place, and he said, 'You're going to specialize in Hawai'i,' " says the San Jose, Calif.-based travel agent. "He knew my love of the Islands and the people and he said, 'You'd be perfect for it.' "

Travel agents like Borrelli have been the foot soldiers of Hawai'i tourism for decades, winning over potential visitors with their own enthusiasm for the Islands. The Hawaii Visitors and Convention Bureau estimates that two-thirds of all Mainland visitors have some interaction with a travel agent before deciding to vacation here, and over the past two years it has trained more than 6,000 of them in the best ways to close the sale.

Last week, the major U.S. airlines — which already hold tremendous sway over Hawai'i's fate -— reduced the cap on commissions they pay these agents from $50 a ticket to $20, a 60 percent drop. The change will certainly put more than a few agents out of business. And these fallen agents will be foot soldiers Hawai'i no longer has.

But the bigger impact to Hawai'i, industry watchers say, will be the way it adjusts its approach to reaching customers. The power of wholesalers, who already provide more than half of Hawai'i's business, is expected to grow. And the impact of the Internet — and the power of the individual consumer — will not be far behind. And as the system changes, so must Hawai'i.

Wholesalers are the companies that buy airline, hotel and car rental options in bulk, then mix them up to meet individual travelers' needs. These companies are already an integral part of Hawai'i tourism. Many travel agents, if not most, already use these companies when arranging a customer's trip, 1) because they provide one-stop shopping, and 2) because they can offer 10 percent to 15 percent commissions on the price of whole packages. That sure beats a measly commission on a single airline ticket.

But the wholesalers expect to get even more agents coming their way now that airline commissions are negligible. After last week's changes, the airlines offer agents 5 percent of the price of a ticket as a commission, but only up to $20. That means an agent stops making money after a ticket passes $400. I've heard tell of fabulous bargains, but most airfares to Hawai'i come in at more than $400.

Giving more power to the Mainland wholesalers could be good, some say, since they do a tremendous amount of marketing on behalf of Hawai'i and are eager to make that pay off by luring people here. Others say it depersonalizes the experience.

And then of course, there's the Internet, which is shifting power from both agents and wholesalers to free-wheeling, independent travelers. Faced with the prospect of paying a travel agent to book an airline ticket — many agents have been charging "transaction fees" for years to make up for the slowly dwindling commissions, and those fees are expected to rise — more travelers will likely sign on to the World Wide Web. With all those folks surfing the Net, Hawai'i will have to be a presence there.

The state has already started. The visitors bureau says it is finishing a quarter-million dollar upgrade to its Web site. In 2001, it will spend "a couple hundred thousand" dollars on online marketing, a figure that is expected to increase in the future.

No one wants to venture a prediction on how the changes will affect Hawai'i in the long term.

Some say travel agency consolidation will benefit Hawai'i by leaving only the best alive. It will also cut down on training costs: it's more efficient to train 100 agents at one company than at 20 companies. Others say it could cut back on the warm fuzzies potential visitors get if the Borrellis are taken out of the mix.

But one thing is for sure, most observers say: Hawai'i better move fast if it hopes to benefit from changes that are sure to come.

Michele Kayal can be reached at mkayal@honoluluadvertiser.com