By Alex Salkever Summer used to be the season of cash registers ringing for travel agents. They booked cruises, family vacations to Europe, and honeymoons to Hawaii. But this summer could prove to be a difficult one for the industry. For the first time, a number of major U.S. airlines have managed to entirely cut retail travel agents out of the revenue pie. That happened in March, when Continental, Delta, and the country's largest airline, American, cut to zero commissions on domestic tickets sold by travel agents.
Airlines have long sought to eliminate fees they pay to travel agents, seeing that money as a negotiable cost center in a business laden with fixed expenses. According to a May 16 study by Accenture, a ticket sold over the Web costs an airline $3 in overhead, vs. $35 for one sold through a travel agent. The carriers' desire to zero-out the middlemen found a perfect form in the Web, with its direct-sales channel to customers. And with many airlines still flying upside down financially post-September 11, the Web push has become a key to survival.
Travel has long been an industry pervaded by thin margins and hypercompetition, so the push to eliminate travel agents has quickly spread to cruises and other lucrative commission areas. Web discounts are also deepening for these other portions of the travel sector. Without a doubt, the Net is having a big effect. According to the Accenture study, 63% of Americans who book travel this summer will do so online. Only 22% will use a travel agent.
A GREAT SERVICE. The American Society of Travel Agents argues that this practice is generally bad for consumers because it reduces their choices and minimizes their information. Running travel agents out of business, claims the ASTA, means consumers lose a valuable advocate.
I beg to differ. Online travel and corresponding commission cuts, in fact, are doing customers and travel agents alike a great service. Why? The Web is elevating what was a profession with too many order-takers into a skilled trade. If sharp travel agents were highly valued before, they'll soon be worth double as their ranks thin.
At the same time, switching from commissions to direct fees charged to consumers by travel agents ensures that information coming from the agents will be more reliable and less tainted. In the end, travel agents who know their business will be able to charge more for specialized services.
TOO MANY POSSIBILITIES. Take the case of my wife. This summer she needs to go to Europe on a business trip. During that time, she has to be in a specific town in Germany for seven days. She then wants to visit a friend in Austria for two days. Then she wants to fly back and meet me for a vacation in New England. The possible number of permutations for a trip this complex -- between trains, plans, rental cars, buses, and ferries -- is off the charts.
Yes, Expedia and Travelocity can make suggestions on multileg trips. But the little software buddy that runs their Web sites probably doesn't know which airport has the easiest train hub, say, from Dusseldorf to Aachen. Nor does it seem to understand that if you want to get to Cape Cod to take a ferry to Nantucket, taking the Bonanza Bus is $300 cheaper than flying out of Boston, while being only three hours longer. Or how much extra it would cost to fly one-way from Nantucket back to New York rather than out of Boston?
Could we have found out all that information ourselves? You bet. It's all at our fingertips online. But as dynamic as the Web may be, it remains a bewildering place when the number of possible variables gets above four or five. My wife might have needed three or four hours or longer to put it all together. But our travel agent, Jim Jeffries, can spit it out in 15 minutes. And he knows, for example, that we prefer longer connections, or regional jets over turboprops.
AN AGENT'S ALLY. If my wife had decided to do it herself, though, we would have considered it time wasted and money lost. We don't want her to become a travel agent. And that's why we would gladly have paid our travel agent $50 to $100 to arrange her itinerary. (In fact, he charges only $15 or $25 for such a trip.) I tell Jim all the time my family members, all of whom use his services, would gladly pay him a monthly retainer if he wanted.
According to Edward Hasbrouck, author of The Practical Nomad Guide to the Online Travel Marketplace, the Web can actually be a travel agent's biggest ally. If an agent can build a credible specialty in, say, arranging food tours of Tuscany or surfing trips in the South Pacific, then word of mouth will feed him or her a steady stream of customers from around the country who are willing to pay extra for expertise and connections.
Going on trips booked by a travel agent who's a regular supplier to such specialized destinations is also an extra layer of quality control. Who wants to tick off their best customers? Of course, specialty travel agencies have been around for a long time. But now, as the Web gives airlines a one-to-one relationship with customers, so, too, do search engines give travel agencies the ability to reach millions. And word of mouth, once tied to geography, becomes virtual and omnipresent, just an e-mail away.
LOYAL CUSTOMERS. So don't despair, Jim. We'll be using Lake Falls Travel for some time to come. No, we probably won't book tickets through you for flights on JetBlue from New York to Oakland. But for anything complicated -- and higher margin for you -- you can expect our call.
And we don't think we'll be alone. We'll keep telling our friends about you. Your expertise on booking the really tough stuff, particularly international travel or multistop business trips, is why folks like yourself will be worth their weight in platinum in the Web Age. Salkever is BusinessWeek Online's Technology editor