By August 8, 2004 Read More →

Travel Agent? Or Double Agent?

A travel agent used to cost nothing to use. Not anymore.

When airlines eliminated commissions paid to travel counselors, agents began charging service fees. And by and large, customers went along with it, in part because the fees implied that the agents were now working for them. Exclusively.

But that’s not true. Service fees never really replaced the revenue from the airlines. They just supplemented it.

The question is – and it’s a question most agents may not want you to ask – does this create a conflict of interest?

Maybe. Maybe not.

My mother always told me that “it never hurts to ask” and I think it’s always worth following the money. I mean, the agent is probably asking some probing questions of you as well, and any good relationship is based on trust.

Today’s travel agency is a far cry from the bored housewife who used to run the local agency simply for the free travel and a generous second income – both of which are virtually non-existent today.

Today’s agency is probably a part of a consortium or cooperative in order to maximize its buying and earning power. Today’s agency will also charge you a fee for the added value it brings to the transaction.

Today’s agency may earn an override – that’s trade-talk for a bonus payment – based on sales of a particular supplier. Today’s agent also adds to the basic product from the supplier – personal recommendations, insight, destination guides, after-hours service, problem resolution in a timely manner, and, of course, a true appreciation for your business.

Most importantly, today’s agency probably operates on less than a 9 percent margin.

Today’s agency wants your repeat business and should be prepared to discuss how they are compensated. As with most business entities, total revenue is made up of several income streams. Your agency needs to keep people employed, pay the bills, and hopefully make a profit. There is nothing wrong with achieving these goals from two sources as long as the interest of the principle (the client) is served.

Other suppliers have found secondary income streams, too. Airlines are charging for food and changes to reservations. Cruise lines are charging to eat in specialty restaurants and for ice cream. Hotels charge resort fees and exorbitant telephone rates. Car rental agencies are charging for … well, whatever they can. And our agency even created a cartoon character and produced a poster in 2002 which supplemented our income stream.

In our travel agency, we have a “soft dollar” agreement with a major carrier where we can earn free travel. Their service overlaps with other carriers, and we have no problem directionally selling to them as long as the clients’ needs are met.

With our free travel, we sponsor local charities, attend industry education seminars, offer tickets to clients for holiday parties, and even use them to remedy our rare screw-ups. Because of this relationship, our airline account manager is able to work “miracles” – wait lists get cleared, upgrades mystically appear, emergency rows and bulkheads become available, and any issues are resolved in short order.

Who wins here? We both do.

We typically receive a commission from other travel suppliers ranging from 5 percent to 12 percent and we also charge a fee on top of that. Our selection of vendors is made with the best interests of our clients and our agency. We will never sell a product that is not right for the client – and we know our clients.

If your agent sells you something you do not feel is right, call him on it and ask him why. We are not afraid to answer or to turn away business if it is not good for our agency or the client. The business that we write must be a good match to insure satisfaction. If a client is referred to another source, at least they will know why, and that we were honest. More likely than not, he or she will return.

Happens all the time.

I regard accepting payment from two parties as one way of keeping the costs to the consumer down. However, there will be a day in the not-too-distant future where there will be no commissions or awards to agencies and they will be operating off of a net basis, eliminating any perceived conflict.

The product will be available to the agency to mark up as the market will bear (traditional retail model); or it will be sold to the consumer at cost plus the agency hourly consulting fee (consulting model).

Personally, I can’t wait.

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