Ted Roy could see a bad problem getting worse.
Two years ago airlines capped commissions at $50 for all reservations made through travel agencies, including his Roys-Stow Travel. Then, last October, they dropped the commission on all sales from 10 percent to 8 percent.
Lately, the airlines have become more clever and aggressive at luring customers away from their traditional distribution arm. The trend, says Roy, president of the agency, is to offer perks to individuals but not to travel agents.
Roy is not alone.
Jerry Lichty, president of Gordon Air Travel in North Canton, lost 20 percent of his operating capital in one week that October. Since then, he’s watched the subtle new tactics, which seem to strip his livelihood away, one piece at a time.
Lichty says the relationship between airlines and travel agents had always been mutually beneficial. But the symbiotic relationship the two shared has gone the way of the passenger rail.
“We really believe the airlines are trying to put us out of business,” Lichty says. “We don’t understand why. We are an industry distribution system for the airlines. The airlines don’t pay unless we produce, and I don’t understand why they want us out of the loop. For the airlines to service the public, they will have to hire more ticket agents, provide more work space and equipment, and pay benefits and salaries.”
War stories
“My brother flies with Southwest,” Roy says. “Every time he books four tickets through his [home] computer, he gets one free. But the airlines don’t offer this to me as a travel agent.
“I would call it an unfair trade practice, but the government doesn’t seem to care what the airlines do.”
Lichty shares similar experiences.
“One of our longtime clients suddenly stopped buying tickets from us,” Lichty says. “When one of our agents saw him, she asked if there was a problem. Northwest [had] called him up and offered to give him double frequent flyer points if he reserved with them directly. So he said he didn’t have much of a choice, and I don’t blame him.”
Lichty says the airlines “dump seats onto the Internet” when flights are not sold out. The tickets are sold at discounted rates not offered to the travel agents.
A changing world
The problem for the travel agencies now is that the airlines are competing with them for the same customers. The airlines have little sympathy for the travel agencies.
Kathy Peach, a representative from Northwest Airlines, says the airlines’ were simply responding to market demand.
“The reality is the world is changing,” Peach says. “Technology is changing the way we do things. The people who do well are the people who can adapt. The people who did horseshoes probably felt the same way about the auto industry.”
Lichty’s lost customer is the perfect example. Peach asks, “whose customer is he? If the travel agency feels [he’s] their customer … they need to understand the customer is buying our product.
Southwest Airlines Spokeswoman Linda Rutherford says her company “is committed to paying the traditional 10 percent commission” until the year 2000.
Three other airlines Small Business News contacted, American, Delta and Trans World airlines did not return calls.
A changing industry
“When the airlines started all of this, we became convinced it was just another way to bypass us,” Lichty says. “But we’ve turned it around so we can still survive.”
Like most travel agencies, Gordon Air and Roys Travel added a $5 service fee to all airline ticket purchases.
Lichty and his team have since made a list of 24 things their agency can do for clients that the airlines cannot.
“These are things we offer, but we can’t do it for free anymore because of the airlines,” Lichty says.
Electronic tickets, pre-assigned seats, meeting planning and ticket delivery are a few of the services listed. Ranking first on the list is unbiased airline pricing.
“You are either going to have to call your favorite airline or call every airline that flies out of your airport,” Lichty says. “For example, a lot of times we can get the same price departing from Akron/Canton as Cleveland.”
Roy says travel agents provide quality control for businesses.
“We’re still the experts and we can still save people money,” Roy says. Lichty and Roy agree travel agencies are reinventing themselves by offering specialized services or targeting niche markets.
Roy says his father, who founded Roys Travel in 1966, has been doing all along what many travel agents have been forced to do in the past two years.
“We’ve specialized in [Las] Vegas tours since the beginning,” Roy says. “My father knew he had to specialize in certain markets to remain competitive, so he picked Vegas.”
But Roy sees pressure in those niches, too. He expects that cruise lines and tour operators will soon be offering reservation
services via the Internet.
“If you want to spend all of the time and energy with only the possibility of saving a few bucks, is it worth it?” Roy asks.
Lichty says he feels betrayed by an industry he once trusted.
“I feel like we helped them build a golf course; but now they won’t let us play,” he says.
How to reach: Roys-Stow Travel (330) 929-4426
Gordon Air Travel (330) 497-9349
