Not so Merry Christmas

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.