March 27, 2002 – The nation's major airlines have announced they will no longer pay travel agent commissions. Delta initiated the move on March 14, and American/TWA, America West, ATA, Continental, Northwest, United, and U.S. Airways followed suit followed suit last week.
"The airlines see Internet booking as their preferred means of distribution and are forcing flyers to book that way, whether they want to or not," Derryle Berger of Caribbean Travel said. "The fact that not everyone has the access, interest, time or willingness to put their credit card out on the net is immaterial."
The airlines' move comes as no surprise to Berger and most others in the industry, however.
Marilyn Mackay, who spent about 40 years as owner of Travel Services on St. Thomas and now lives in Long Island, New York, said she predicted in 1995, when the airlines first imposed a cap on travel agent commissions, that they wouldn't pay at all by 2000. She was off by two years.
After the 1995 cap, the airlines further squeezed travel agents until, from last August, they were paying no more than $20 on a domestic ticket, which included the Virgin Islands and Puerto Rico. "It's economic," Mackay said. She now predicts that travel agents will soon be like the horse and buggy — extinct.
St. Thomas hotelier Richard Doumeng, general manager of Bolongo Bay Beach Resort and Villas, disagrees. He said that there always will be people who want personal contact, and that agencies that give good service will survive.
Mary Simpson of Southerland Travel — which has been in business in Christiansted for 42 years — said her company "started planning three months ago" for the complete cutoff of airline commissions. "We had devised our survival plan and a new promotion and had scheduled a hotel conference room for a meeting of all staff on March 22," she said. That turned out to be four days after the other major airlines announced they were following Delta's lead.
Southerland "began charging fees when the first commission cut happened five years ago," Simpson said. "We knew then that we were headed for zero. We had already been developing products that we could sell that would not be cut."
Derryle Berger of Caribbean Travel on St. Thomas said she, too, had "felt for some time that this was where the airlines were headed." In her view, "Delta may have gotten the jump on the others. They seem to have already made their deals with their preferred agencies — and made the move earlier than others expected."
Phillip Shannon, owner of All Travel on St. Thomas, has doubts about whether Virgin Islands travel agencies will be able to stay in business now. He noted that several have folded over the last few years. Indeed, a perusal of the Yellow Pages in the 1999 telephone book turned up quite a few agencies not listed in the 2002 book.
Customer service fees are a given
Shannon said his agency will look at expanding more into the cruise and package market in order to survive. And it will raise its service fees, which are now $10 to $30, depending on the distance and complexity of the job. The new fee schedule isn't set yet.
Ruby Bonanno, owner of Cruises Plus in Four Winds Plaza on St. Thomas, said she saw the handwriting on the wall when she opened shop five years ago. She decided to focus on the cruise business and only books airline tickets for her regular clients.
However, Bonanno also anticipates that cruise lines eventually will stop paying commissions, which are now 10 to 20 percent, depending on the volume an agent books. She charged a service fee from the start.
Travel agents must now recognize that "they are not working for the airlines," Berger said. "They are providing a service for the traveling public and should be compensated by same. I think that the way travel agents do business will change, and not just in the service fee areas. There will possibly be more emphasis on revenue-generating sales with partners that still appreciate the sales effort of agencies, such as cruises, package tours, etc."
She added, "Obviously, living on a 32-square-mile island, one is at the mercy of the airlines, but agencies need to think about how they want to sell those products."
Doumeng said the elimination of travel agent commissions will impact most hotels' bottom lines because agents now will push air and hotel packages that are put together by wholesalers who pay agents about a 10 percent commission on the whole package. An agent who sold air and hotel separately would get only the 10 percent commission on the hotel rate.
However, Doumeng said, hoteliers are paying the wholesalers a 20 percent commission, versus 10 percent to travel agents, so it costs them more to deal with wholesalers. "The only people who will benefit are the tour operators," he said.
While travel agents do book vacationers at Virgin Islands hotels and get their 10 percent commission, Mackay sees that aspect of their business soon becoming extinct, too. "You can find even itsy-bitsy bed-and-breakfasts on the web," she said.
American Airlines and the wholesaler Travel Impressions recently offered a 35 percent discount on airfares if purchased in conjunction with a hotel stay. The same kinds of deals can be found all over the Internet, and when travelers book a package on the Internet, no travel agent gets a commission.
Internet makes an agent optional
Mackay said the first direct link between the airline and the customer came in 1981, with the introduction of frequent flyer programs. But Internet use over the last decade has dealt travel agents the death blow, she said: "It's the wave of the future, and you can't hold it back."
According to the American Society of Travel Agents web site, "roughly 23 million of the nation's households will use the web to make travel purchases this year, while an additional 22 million will use the web to research travel but buy offline."
Travel agents who don't already charge service fees now will have to do so to stay in business. Mackay doesn't foresee computer-savvy travelers paying for such services when they can book online at what may be a better price and with no service charge.
Mackay said many travel agents had become mere ticket issuers rather than travel counselors, since that was the way to make money. Advising clients on where to go and stay is not profitable, she said, adding, "It's the only business I know that the more time you spend on a client, the less money you make."
That's definitely not the way Simpson sees it. At Southerland, she said, "We have had people call here and say their friends told them not to call a travel agent, because 'they are not being paid to do it anymore.' The effects of the commission cutoffs are being misconstrued. I work for my customers; I don't work for the airlines."
She cited a recent note from a client who was planning to travel from the Virgin Islands to Boston: "I looked on the Internet, I called the airlines to find out the price of this trip, then I called my travel agent, who got it for $50 less. There are things they know, and it would be a shame to lose the professional help an agent can give you."
The writer concluded, according to Simpson, "We can complain, but the best defense is to support your local travel agent. They are the only remaining unbiased source for airline fares and information."

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