It’s war

INDEPENDENT agents claim the UK is next in the firing line as Irish retailers declare war on TUI for slashing commission in half.

TUI’s Irish tour operation, Budget Travel, has sent shock waves through the trade with news it will cut agency commissions in the Republic of Ireland and Northern Ireland from 10% to 5% from January 2005.

As the largest Irish operator – accounting for 42% of the package market – it says the cuts are needed to compete with airlines such as Ryanair.

Independent consortia with members in Ireland and the UK believe this is a trial before similar cuts are rolled out in the UK, despite denials from TUI UK.

Travelsavers managing director Europe Dominic Burke, responsible for 102 Irish agents and 50 in the UK, said: “Every agent in Ireland and potentially the UK could be affected. Budget has thrown down the gauntlet and war has been declared.

“This is the single biggest threat to the livelihood of traditional agents. What happened with the airlines pales into insignificance. There’s no doubt TUI has thought long and hard about this.”

Already all Travelsavers’ Irish agents have removed Budget point-of-sale material, cancelled direct debits, and are proactively switch-selling. They are prepared to stop selling all TUI products, Burke added.

Meanwhile, Worldchoice Ireland vice-chairman Don Cullinane said agents could not live on 5% commission. He added service fees would be rejected by customers and drive more business to Budget Travelshops.

He added: “It would be naive for UK agents to think this will stop in Dublin.”

Agents in Northern Ireland are similarly outraged. Worldchoice regional delegate for Northern Ireland Alan Couser, of Belfast’s Strandtown Travel, said all 30 members had de-racked Budget.

“This is the thin edge of the wedge,” he added.

In the UK both Worldchoice and Midconsort expressed concern as UK operators are already taking a harder line on commissions.

First Choice is reducing base commission to 10% for consortia agents, while Thomson is refusing to pay overrides to under-performing members. This week Argo Holidays also reduced commission by 3%.

TUI UK retail and commercial director Derek Jones said there were no plans to reduce commissions.

“This is not connected with TUI UK. We’re still paying the same commission. Ireland is a very competitive market and fuel costs are increasing.”

But he admitted reducing distribution costs was an issue. Thomson is already clamping down by removing guaranteed overrides of more than 10% to all consortia agents.

Jones added: “We’re having constructive negotiations with consortia. We cannot continue paying overrides if sales are declining.”

First Choice chief executive Peter Long reiterated his company’s position following a fallout with

Worldchoice. “There will be a rude awakening for those agents who expect more commission for selling less. The answer from First Choice will be ‘no’,” he said.

Worldchoice claims Thomas Cook sales soared by 81% last week after agents switch-sold away from

First Choice because of the cuts. First Choice sales through the consortium’s 15 Worldchoice Travel Shops were 90% down.