Online sales put heat on travel agents

By RACHEL BODDY

Travel agencies used to be the favoured one-stop shop for travellers. A customer could peruse the glossy brochures, book tickets, change money and receive handy travel hints from a friendly agent. Not any more.

Agencies are caught in an industry desperate to cut costs after a travel downturn and internet-savvy consumers who are happy to abandon the middleman in favour of online booking.

Air New Zealand spokeswoman Val Hayes said the airline's decision to scrap the commission on domestic travel was consumer driven.

"What you try to do is service the customer and the customer will want to go to a travel agent for some types of bookings, or they may well want to go to an internet site for other types or just phone an 0800 free call number."

The bottom line is that people want cheaper travel.

"The research that came out loud and clear as part of developing our new short-haul domestic strategy is that customers wanted lower fares," Hayes said.

"In order for the airline to provide that we've got to look at how we lower our overall cost structure. Feeding into that is what we call our cost of sales which primarily is to do with the travel agent industry."

Air New Zealand is not alone in its decision. United States carrier Delta Airlines earned the acronym "Delta Evidently Loathes Travel Agents" after it canned its commissions in March.

Other big airlines have followed suit, and those that did not have cut their commissions sharply in a bid to return to profit after the September 11 terrorist attacks.

In Britain, service fees have partly replaced commissions which have been sharply reduced.

Air New Zealand's commission policy is still under review. While it is doing away with the guaranteed 4 per cent commission, other incentives like rewards for reaching sales targets are being considered.

"We're still talking with the travel agent industry about incentive payments and other kinds of remuneration," Hayes said.

But the writing may be on the wall for travel agents. The days of surviving on commissions - 4 per cent for domestic air travel, 5 per cent for transtasman trips and 9 per cent for international flights - are limited.

Neil Tolich, managing director of travel company Atlantic Pacific Radius, said agents would be forced to charge for their services to make up for the lost commissions.

But that could prove a dangerous game, driving consumers to use the internet and cutting agents out of the loop.

Air New Zealand wants to boost internet sales from the present 10 per cent. In January, it began offering discounts of up to 12 per cent for domestic fares bought online.

Overseas airlines such as British low-cost carrier easyJet sell 90 per cent of their tickets over the internet.

A survey by consulting firm Accenture found that 60 per cent of US people planning to fly this year intended to book their travel electronically. Less than a quarter planned to use a traditional agent.

British magazine the Economist said travel agents had to smarten their act to beat the burgeoning internet travel industry by offering niche services for travellers, rather than homogeneous packages.

"The travel agency system of the future will be based on helping customers to buy what they want, rather than helping suppliers to flog what they've got," the magazine said.

"The profusion of online offers leaves plenty of opportunity for intermediaries to add value for corporate and leisure travellers by steering them in the right direction.

"To do that, though, they need to become more like professional services firms, rather than second-hand car dealers."

Travel agents still hold the trump card over Air New Zealand, handling 80 per cent of the airline's international business and 60 per cent of the domestic business.

James Langton, president of the Travel Agents Association of New Zealand, said while agents' base commissions in the US had been removed, the market there was dominated by point-to-point travel. In New Zealand, most agents' work involved complex outbound travel.

Langton said that if Air New Zealand was trying to model itself on Ryanair or easyJet it could be making a big mistake.

It was important that consumers had choice, he said.

"To drive the consumer to call centres or the internet, then the consumer does not get choice. The consumer ends with just the Air New Zealand product."

In the United States, agents had survived by levying a service fee on the customer.

He said there was little evidence that Air Zealand had consulted "their partner" - the travel industry.

The country's biggest agency, Flight Centre, said Air New Zealand's move meant that it had little option but to switch the $205 million business it did with Air New Zealand each year to other carriers.

"We expect that other travel agency groups will be compelled to do likewise," said chief executive officer Graham Turner.

"To say this is a brave move on Air NZ's part is a gross understatement."

The association is not allowed to call for a boycott although the threat is clear.

Langton said: "People will form their own opinion. If Air New Zealand is going to treat a travel agent in this country that way on domestic travel then surely they are going to say, 'If that's their attitude to domestic, why should I support them internationally'."

- NZPA