It's adieu to smaller travel agencies
By Brad Foss
Associated Press
Airlines have stripped away their commissions. Internet companies are luring customers with cheaper fares. And travelers are insisting on premium services that require better technology and round-the-clock response.
Associated Press
Squeezed on so many fronts, smaller travel agencies are finding it harder than ever to survive on their own. Instead, mom-and-pop companies are surrendering their independence to larger competitors, which have gobbled up thousands of them over the past five years.
Valerie Wilson, seated, whose daughters Kimberly Wilson Wetty and Jennifer Wilson Buttigieg assist her as executives, has expanded her travel agency through consolidation of smaller operations hurt by new industry trends.
The number of retail agents in the United States has slipped 21 percent over the past six years, declining to about 27,000 from a peak of nearly 34,000 in 1996, according to the Airlines Reporting Corp., which tracks tickets sold through travel agents.
Ninety percent of that decline can be attributed to consolidation, said Richard Copland, president of the American Society of Travel Agents.
The remainder represents agencies going out of business, he said.
Travel industry officials say their 75 percent market share has remained fairly steady since before the first cap on commissions was initiated in 1995. However, that figure now includes sales by Internet competitors, which were virtually nonexistent back then, and hints at their growing vulnerability.
Online travel companies such as Travelocity.com Inc. and Expedia Inc. now rank among the 10 largest travel agencies in the country by gross sales. They have taken business away from brick-and-mortar agencies and lured customers away from toll-free ticketing services run by airlines.
A major force driving consolidation has been the gradual elimination of per-ticket commissions, which airlines began paying to travel agents more than 40 years ago.
With those commissions disappearing, travel companies of all sizes have responded by charging transaction fees while criticizing the airlines' cost-cutting measures as a thinly veiled attempt to wipe out the middleman and raise the price of air travel. At the same time, smaller agencies saw their profits dwindle. Travelers gravitated toward larger agencies and emerging online distributors, which were handling significantly more volume and therefore could afford to offer better deals.
Another factor contributing to consolidation has been increased consumer demand for travel alerts when flights are delayed or canceled; for around-the-clock availability of agents; and for other premium services. Without the deep pockets needed to pay for necessary labor, training and technology — or to outsource these services — many smaller agencies wind up merging with a company that can.
Rosenbluth International of Philadelphia, one of the country's largest travel companies, has acquired more than two dozen agencies in the past five years. Chief executive Hal Rosenbluth said the loss of base commissions "is only going to accelerate things."
Houston-based Frosch International Travel has added five former competitors in Houston and two in Denver, while Brownell Travel of Birmingham, Ala., acquired three small agencies in Huntsville and formed a joint venture with another in Mobile.
"Any independent travel counselor, at this point, should be looking for an organization that gives them the best buying power and the best return in terms of commission," said Lynch, whose commissions rose about 40 percent when he teamed up with Valerie Wilson in Hilton Head.
The undoing of commissions began in 1995, when the first in a series of caps and cuts was made. Seven years later, the nation's leading carriers snuffed out commissions almost entirely.
American, United, Delta and the rest made the announcements last week with one important caveat: U.S.-based agencies that meet certain sales targets would be rewarded with commissions — an incentive that excludes the majority of the nation's travel agents.
Another advantage for agencies with higher volumes is their ability to negotiate better deals when buying tickets. It allows them to undersell competitors while reaping fatter profit margins on each ticket.
Bill McGee, editor of Consumer Reports Travel Letter in Yonkers, N.Y., says: "If travel agents are being 'incentivized' to push a particular airline, consumers should be aware. Are they an agent of the supplier or an agent of the consumer?"
