US agent warns: fees won’t work

US agent warns: fees won’t work

Report by JEREMY SKIDMORE

A LEADING US agent has sent out a chilling warning to UKretailers by telling them their businesses will be devastated if they charge service fees.

Speaking to Travel Weekly on a visit to the UK, Bob Tennyson, founder of Bungey Travel in California, said service fees had led to widespread closures throughout the US and retailers that survived had been forced to radically change their sales strategies.

The comments come after Campaign for Real Travel Agents chairman Edwin Doran revealed how his policy of charging service fees had largely been accepted by clients (Travel Weekly October 23).

But Tennyson said that while a small number of agents who offered a high level of service, like Doran, may prosper under a fees system, the vast majority of leisure agents will find that customers will walk away if they try to charge fees.

Since service fees were introduced in the US in response to commission capping nearly five years ago, the number of travel agency locations has dropped by around 5% each year and now stands at just over 30,000, although they have not all been put out of business by service fees.

Even in the affluent Silicon Valley, where Bungey Travel is based, eight out of 15 agencies have gone to the wall.

In addition, many have had to switch from selling airline tickets, the mainstay of most US retailers’ businesses, to tours and cruises, for which people are more willing to pay fees.

“When commission cuts were first introduced, agents were appalled,” said Tennyson, whose agency is part of the 3,000-strong agents’ consortium, Giants.

“People started rejecting fees and booking airline tickets direct and on the Internet.

“The US experience shows that charging fees just won’t work for many and I would never start an agency now. As the Internet becomes more integrated into everyday business it will get worse.”

Bungey Travel now charges fees for all transactions and has changed its main business strategy so that it doesn’t sell as many airline tickets.

Tennyson works closely with Don Freeman from London-based Dolphin Travel, who is also opposed to fees.

A new survey shows the profits of UKagents currently charging fees is lower than those that rely on commission (see table below).

Fees expert Nolan Burris, who has been employed by British Airways to tell agents how to charge fees, said:”I’m shocked by the survey results.”

Warning: Tennyson, front, pictured with Freeman, believes agents face an uncertain future

UK agents: profits currently lower for those charging fees

Agents already charging fees

All agents

Turnover per employee

£257,000

£271,000

Profit per employee

£2,636

£3,574