Will consortia squeeze operators to the brink?

Will consortia squeeze operators to the brink?

Operators appear to be losing patience with consortia as they demand even higher commission levels. Steve Jones reports

ASK INDEPENDENT agents why they joined a consortium and most will say it was to earn higher levels of commission.

Like multiples, consortia work on the basis that the greater the number of members, the more negotiating power you have with operators.

That argument has served consortia well up until now. Consortia members, by all accounts, receive rates of commission and marketing support they could not possibly have achieved as individuals.

Yet operators are becoming increasingly frustrated with having to encompass the entire membership while, they argue, discipline within a consortia – getting members to support preferred suppliers – is still poor.

First Choice and Unijet, fed-up with poor performances and rising commissions, recently demanded a two-tier structure with ARTAC Worldchoice.

The proposal was rejected by Worldchoice who dumped both operators from their preferred operator list.

Now, both British Airways Holidays and Norwegian Cruise Lines have denounced the current structure.

NCL executive director Bill Ellerington said: “The problem is you have to support them wherever the shop locations are, regardless of whether they do any sales.”

Italy specialist Citalia said agents break the commercial agreements.

Head of sales and marketing Alyson Playford said: “They need to work an awful lot harder.

“Some do not rack us, even though it’s part of the deal, so we are within our rights to withdraw commission.

“We are also under increasing pressure to pay the same rates to consortia as we do multiples. However, we have to question whether we are getting the same value in terms of sales.”

One operator, who has deals with ARTAC and Advantage, claimed consortia are virtually holding them, and others, to ransom.

“With the level of directional selling, many operators are losing business to the multiples and relying heavily on consortia to rack and sell them,” he said. “The consortia know this and therefore charge extortionate levels of commission.”

However, in the case of First Choice and Unijet, the operators have picked off the best-performing agents and negotiated separate deals.

ARTAC Worldchoice chairman Colin Heal said operators constantly request a deal with the consortium’s top 50 agents.

“They would love to do that but it would defeat the whole purpose of a consortium,”he said.

“Of course we push it to the limit – but we never ask for more than the operator can afford.”

He claimed 90% of agents had backed the decision to sever links with First Choice and Unijet.

Advantage Travel Centres sales and marketing director Colin O’Neill said it is an “implied threat” from operators that they would strike separate deals with productive agents.

“That is a short-term picture,” he said. “There are reasons why an agent may not be selling the operators and it’s not all about money. I don’t see an awful lot of product training and educationals to back up the commission deals, for example.

“A far more productive solution is a base commission rate across the membership, along with override targets and incentives.

O’Neill claimed members are showing a greater willingness to sell preferred operators.

“We realise we have to provide a worthwhile return on investment,” he added.

Cash in question: some operators are unhappy about the level of commission paid to consortia in the light of sales

Analysis

quotes

“Our aim is to achieve the best levels of commission across the entire membership. Of course we push it to the limit – that is the art of good negotiating.”

Colin Heal,chairman, ARTAC Worldchoice

“We want to determine which agents are interested in working with us in the long term. As an operator, we have spread ourselves too thinly.”

Colin Whaley, head of sales and marketing, British Airways Holidays

“We are continually trying to getconsortia members to sing from the same hymn sheet. Over the last 18 months they have been more successful indrawing members along the same path.”

John Harding, sales director, Travelscene