Joselyn: Don’t Gamble With Your Bottom Line
by Robert W. Joselyn, CTC /Following is a guest column from the president and CEO of Travel Agency Management Solutions (TAMS).
Several weeks ago I read an article in an Australian trade publication where agency owners were complaining bitterly about a recent reduction in compensation from airlines.
One agency owner said the airlines simply “do not appreciate all of the wonderful things they do for the airlines customers.”
That got me thinking. Why don’t travel industry consortia and associations pay me for all the wonderful things I do for their agency members?
It makes no sense, right?
Convoluted thinking
This is the kind of thinking that has kept far too many travel agencies from implementing service fees that would make their businesses more profitable and teach travelers that quality agencies add meaningful value when compared to dealing directly with suppliers.
And while I would like to think this was an isolated opinion just held by an Aussie agency owner, this kind of convoluted thinking is still alive and well among travel agency owners in the good old U.S.A.
I wrote the first travel industry book on service fees in 1984. (After each of my family members bought a copy, sales fell off precipitously!) In it I explained why the traditional travel agency compensation system made no sense for agencies or suppliers and would, sooner or later, self-destruct.
That ship has sailed.
How it used to work – sort of
In the traditional system, suppliers paid travel agencies for the needed and valuable services that agencies provided to suppliers.
For their part, travel agency owners and managers hoped this revenue stream would be large enough to cover the cost of providing services both to suppliers and to their customers, while leaving enough money at the end of the day to make a profit.
There was no rational relationship between the two recipients of travel agency services (suppliers and customers) and the one source of revenue (supplier commissions). When it worked, it worked by accident. But that’s no way to run a business.
Agency service product #1
Make no mistake, travel agencies provide valuable services to suppliers – services that suppliers either do not have the ability to provide themselves or cannot provide as efficiently and economically.
Travel agencies promote supplier products and destinations to customer databases that they have painstakingly built over time as well as to the general public.
Travel agents also close sales through personal selling. And they perform a number of transactional tasks that suppliers would otherwise have to do themselves.
The travel agency should be fairly compensated for these services by the supplier. If a certain supplier does not provide fair compensation, the agency should work with instead a supplier that does.
Agency service product #2
Quality travel agencies also provide needed and valuable and time-consuming services to the traveling consumer.
These services include everything from research, counseling and professional advice to handling all the logistics of a client’s travels and ensuring that they are taken care of. A quality agent is also the emergency lifeline for traveling customers when they need help and advocacy.
At many agencies, this is just the tip of the iceberg.
Does it make sense for suppliers to be responsible for compensating travel agencies to cover all these services that agencies provide to their customers?
Really?
Revenue stream metamorphosis
The traditional agency compensation system not only makes no sense – it is dangerous.
Hoping a revenue stream from suppliers will be large enough to cover services your agency provides to someone else is simply a foolish risk when the agency has no control over that revenue stream.
What’s the solution? The right answer is simple:
1. Don’t work with suppliers who do not compensate you fairly for the service benefits you provide them.
2. Charge customers for the service benefits you provide them.
As for those agents still clinging to the old paradigm, here’s a bit of wisdom from Albert Einstein that may help: “No problem can be solved from the same level of consciousness that created it.”
Dr. Robert W. Joselyn, CTC, (aka Dr. Bob) is president & CEO of Joselyn, Tepper & Associates Inc., a travel agency consulting firm, and of TAMS, LLC (Travel Agency Management Solutions).