THOMSON has declared an end to blanket commission
payments as it embarks on a fresh drive to cut distribution
costs.
Under new commercial deals sent to every agent this week,
commission on accommodation-only – the industry’s
fastest growing sector – will vanish from January 1.
Commission on seat-only has also been axed for agents with no
commercial deal with the operator. Thomson will continue to pay 10%
to agent partners until “further discussions” have taken place.
Sales and marketing director Miles Morgan said: “What this
signals is an end to everyone enjoying the same level of
commission. It is well recognised that those days are over.”
A letter which accompanied the new deals said the 0% commission
would “ensure that we remain competitive in the dynamic packaging
sector and provide agents with an alternative dynamic packaging
option”.
“It will give agents more flexibility. They can build in their
own mark up,” said Morgan
In further changes, commission on package holidays booked
through Thomson websites will be cut from 10% to 7% while it will
no longer pay a penny on fuel supplements or air passenger duty.
Provisional booking options, except for groups, will also be
scrapped.
In the letter to agents, commercial and retail director Derek
Jones said: “The agreement has been reissued to reflect a changing
marketplace and the introduction of new Thomson and Specialist
Holiday Group products, including Magic, Thomson Accommodation-only
and one-way seats.”
Although the commission cuts were not totally unexpected the
speed of the announcement took many by surprise.
However, Morgan said it was imperative to act swiftly and ensure
“no stone is left unturned” in its crusade to cut costs.
“We need to work with those who want to work with us,” said
Morgan. “That has always been the case but the significant
difference now is that the market has become very fragmented. It is
a tough world.”
He also refused to rule out cutting commission on its mainstream
package product for those who fail to support the operator. “We
have no plans at this stage but it would be naive to say it will
never happen.”
Observers believe the stance will signal renewed and aggressive
cherry-picking of consortia’s best agents.
“Agents who produce no or few sales for the operator will be
gradually squeezed,” said one source.