News » Up Front

Unfriendly skies

Agency closures reflect shift in travel industry

by

comment

Americans of a certain age may well remember the days of the full-service gas station when young, uniformed men rushed out to fill your tank, gauge your tires and check your oil. Those days are long gone, of course, and the only courtesy left at the pumps these days is when the driver in front of you pulls up to let you fill up before he goes inside to pay.

With full service gas stations just a dim memory, other service businesses cannot be far behind. Consider travel agencies. Until last week there were four in Hamilton. Today there are two.

Depending on who you ask, travel agencies have either fallen victim to the airlines’ rapacious greed, or are in the midst of a major shakeout that will leave the industry better able to meet the complicated and growing needs of the traveling public.

One thing the two remaining travel agencies in Hamilton agree on is that the decision by airlines to eliminate the commissions they pay to travel agents was a bad idea that threw a lot of people out of work.

Georgia Filcher, co-owner of Travel Express, shut her doors last week, citing her inability to do business anymore with the airlines. Hers was the second Bitterroot travel agency to close since March 19, when airline commissions were eliminated. Bestway Travel closed its doors for good in March.

A decade ago airlines paid travel agents a 10 percent commission on every ticket they sold. It was the agent’s bread-and-butter. And because the airlines paid it, travelers didn’t have to.

“As time went on the airlines said, ‘You know we’re not going to pay you 10 percent anymore. We’re going to pay you 8 percent,’” says Filcher. The airlines soon cut commissions to 5 percent, then eventually capped them at $20 per ticket, regardless of the ticket price. “So if you sold a $1,000 ticket you couldn’t make more than $20,” she says.

By then experienced travel agents were beginning to realize the inevitable: the total elimination of commissions. The axe fell on March 19, which, as Filcher says, is when the airlines told its business partners in travel, “We want you to sell our product but we don’t want to pay you.”

Travel agencies were left with two options: Continue selling airline tickets for no commission, or tack on a commission fee for every ticket sold, something that most travel agencies began doing. Simultaneously, the airlines began fining travel agents for breaking industry rules. For example, Filcher’s agency was fined $5,000 when she manipulated travel dates for a businessman client who flew twice a month but couldn’t get any good deals because he couldn’t meet the airline’s requirement to stay over a Saturday night. She eventually negotiated her fine down to $500.

The final straw for Filcher and her business partner came when their computer lease ran out. Travel agencies lease their computers from airline reservation businesses for three to five years. When her three-year contract expired recently she took the opportunity to review the changes in the travel business and decide it just wasn’t worth it anymore. “It was a no-brainer for me,” she says. “The airlines are romancing everyone away to the Internet and they’re going to screw them.”

But Patty McGregor says the situation isn’t at all analogous to the death of the full-service gas station. “Travel is not as easy as pumping gas,” she says. McGregor owns Travel Creations in Hamilton. She’s no big fan of the airlines—not since they cut commissions. Their plea for a taxpayer bailout in the wake of Sept. 11 also rankles McGregor since the airlines were hardly the only travel-related businesses to suffer financially. “We didn’t make any money for two weeks” after Sept. 11, she says. In fact, travel agencies had to return commissions when travelers began canceling. “We didn’t get a bailout.”

Aside from her hard feelings and suspicions that airline executives benefited from the bailout, McGregor remains hopeful for the future of the travel agency business. There will always be a need for travel agents, she says, and making a living from it is possible even after the commission cut.

“There are a lot of older people who absolutely cannot do their own reservations,” McGregor says. “And there are younger people who have never traveled.”

The former always need personal assistance with issues like wheelchairs and transfers. The latter need good advice from someone who’s literally been there. “I wouldn’t send a single woman to Jamaica, for instance.”

The Independent made repeated attempts to contact Delta and Northwest airlines for comments. Anthony Black, a public relations spokesman for Delta in its Atlanta headquarters, says only that the airline issued a press release in March stating that the company’s decision to eliminate commissions to travel agencies was done for simply business reasons. Beyond that, Delta had no further comment.

Travel agents, like anyone whose job or industry is going through profound changes, must adapt to new realities, says McGregor. That means finding the niche market—cruises, package deals, hotels—partly because those industries still pay commissions, but also because travel is becoming more specialized.

She’s not too concerned about competition from the Internet, for two reasons: Travelers will soon realize that online travel services like Travelocity typically charge higher service fees than neighborhood travel agents, in some instances twice as much. She also predicts the online bidding agency, Priceline, won’t persevere in the virtual market. She also predicts some big changes coming in the travel industry, in part because of what she thinks may be the lasting impact of 9/11.

“I think you’re going to see a big turnaround in the next five years in the business.” McGregor says, predicting that only four or five American airlines may survive. “I think you’re going to see some big ones fail. I think you’re going to see American and United fall.

“Sure,” she adds, “there’s going to be fewer travel agents, but we’ll always be there.”

Add a comment