THEMULTIPLESclaim to have mastered it, clients are either ignorant or sceptical about it, and a startling number of agents don’t know the first thing about it.
The introduction of fees, in all their forms, is something which is now talked about at every travel industry conference but is still a nystery to the vast majority of travel agents.
Each time an airline announ- ces a commission cut, fees are heralded as the solution.
Supporters claim that by charging their clients for the services they provide, agents will be able to recoup the lost earnings.
The larger business travel companies now conduct most of their business on a fee basis and, in the US, fees are the norm in both the retail and business travel sectors.
Many in the industry argue that the move to fees is long overdue. They say the agents of today are professionals and should charge for their services in the same way as accountants and lawyers.
But although most agents accept the need to embrace this new way of conducting their business, the world of fees is a minefield and many agents are understandably baffled by it.
Firstly, agents face the daunting task of educating their customers about the reasons why they must adopt fees.
Alarmingly, the awareness of airline commission capping is very low even among corporate clients. An NOP survey commissioned by Carlson Wagonlit Travel showed only 17% of travel managers knew a great deal about commission cuts, while 31% were unaware of them (Travel Weekly February 17).
Many agents fear they will lose their clients if they try to adopt fees but John Melchior, Woodside Travel Trust managing director international operations, said this will not be the case.
“In the US and Scandinavia fees are the norm, and agents haven’t lost business and if clients have left, they have since come back,” he said.
For agents on the retail side, it is even more difficult to persuade the customer coming in off the high street that they must suddenly start paying extra for a service which has traditionally been free.
Unless the larger chains take the lead, it would be dangerous for the smaller independent agents to charge fees to their customers. Even when customers are ready for it, introducing fees is a complex business.
For a start, there are so many different types of fee-based arrangements (see table, right).
BTIUKHogg Robinson alone uses more than 30 different management fee modules for its clients.
According to Chris Fry, sales and marketing director for the agency’s parent Hogg Robinson, the first wave of fee-based contracts were agreed on a management fee basis, where agents charge a set fee, usually on an annual basis.
But now clients are asking to move towards transaction fees, where fees are paid on a transaction by transaction basis.
Either way, agents need to actually take time out to sit down and calculate the costs involved in doing business.
The problem is that while straightforward transactions can be completed in just a few minutes, often there are cancellations, changes, refunds and other complications which use up a lot more of a travel agents’ precious time. Business travel consultant Albert Taras of US-based Taras Consulting said if agents do it right they could increase their profit margins by upto 30%.
Unfortunately, most agents are unlikely to get it right first time so it is vital they start looking seriously at fees as soon as possible because the ever changing marketplace won’t wait.