John Hays has told delegates at the Hays Independence Group annual conference to “stay calm” over threats of commission cuts, but to make sure they are “in control of their own destiny” going forward.
Against the backdrop of the overall theme of the conference, ‘Preparation for the Future,’ Hays said: “We are in a good place right now. Our sales for Tui and Thomas Cook are excellent and we have some of the best commercial terms in the business.
“But our message this week is to set the scene for the future – for example, preparing for a life of zero commission.”
In what he described as a very upbeat and positive session, Hays said Andrea Kendal, head of commercial at Hays Travel, had used published quotes from Tui distribution director Nick Longman as one example of what might be coming down the line.
Tui has mooted plans to move to single prices online and in its stores which would see it introduce a 1% service fee in 2014 and has also raised the prospect of it moving to net rates for independents.
It has not confirmed its intentions yet, but Longman said recently that a third-party agent could add a fee or Tui could retain commission at a lower rate, and that “if an agent offers a good service, customers should be prepared to pay”, with a service fee capped at £60-£70 a booking.
Kendal told delegates in Benidorm: “I don’t know of anybody who would be prepared to pay £50-60 per passenger for advice in a branch.
“I think our stance on this is that it’s a huge potential threat to our business and something we need to be thinking about. It’s up to us, when we go back to the branches, to take measures to make sure that, if and when this happens, we are actually ready.”
Kendal also cited commission cuts by the major cruise lines as a move it would have to watch, with independent agents’ future earning potential dependent on how well the lines ‘police’ discounting in the marketplace.
Hays explained: “Our history is as a travel agent and I want to stay as a travel agent. 70% of our business is as an agent and if we can stay profitable doing this, then remaining as an agent is where we want to be.
“But the theme of the conference is to say, this is where we are now, but in two or three years’ time or at some stage in the future, if some scenarios that have been talked about come about, then we need to be prepared.
“That’s why we are getting net fares from airlines like Emirates or why we have our own transfer company or our own bedbank.
“We have to have the ability to be a tour operator if we want to be – but the message is not to panic, just to be prepared now so we can control our own destiny in the future.”
Kendal stressed Hays Travel IG is not against all commission cuts, claiming Fred Olsen Cruise Lines’ decision to cut base commission from 15% to 10% has actually benefitted Hays Travel IG, and that agents are earning more on commission now because they don’t have the margins to discount.