In a Q&A with Travel Market Report, the president and CEO of the Association of Canadian Travel Agents (ACTA), David McCaig, discusses the issue of add-ons, which are often NCFs in the guise of government fees and vendor fees, and their effect on the travel industry.

Travel Market Report: Have you had any feedback from Transport Canada on ACTA's concerns about the security fee increase and its impact on the travel industry?

David McCaig: No, we have had no feedback from Transport Canada on our concern over the recent Air Travellers Security Charge. This is not surprising given the fact that Transport Canada apparently does not want or welcome input from the travel industry on government decisions on fees and taxes, regardless of the harm they cause to the industry or consumers. The security charge adds $50 to the bill for a couple flying on an international vacation. This is one of the few security fees not paid out of government’s general revenues but loaded onto an industry already creaking from a barrage of government imposed ‘taxes’ under the guise of fees and charges.

TMR: Is the "all in" pricing issue related to the fee increase issue, in that both turn off consumers and are detrimental to travel?

McCaig: The all-in pricing issue is definitely connected to the increase of fees by government. Suppliers (tour operators/ wholesalers) have been breaking out fees, charges and surcharges and placing them under umbrella headings of taxes or taxes and other charges. This is done so suppliers can not only remove these normal costs of doing business from their base fares but also to mix up government charges, fees and taxes with charges the suppliers impose unilaterally, such as fuel surcharges or expenses they pay like landing fees. This “tax” column becomes a form of slush fund for suppliers who then argue these “taxes and other charges” are not commissionable. This latest increase by government goes into this “Non Commissionable Fee (NCFs)” pool. An increase in government charges may prompt other increases by suppliers – who knows what evil lurks in the tax column of tour operators and others?

The good news: Partly because of ACTA’s advocacy and partly because of good business practices, some suppliers are disclosing fees, charges and taxes and some are paying commissions on all-in pricing, but certainly not all. Pricing is becoming somewhat more transparent since all major tour operators/wholesalers in Canada have now agreed to ACTA’s requests to disclose the make-ups of their tax and other charges category when asked to do so by agents or consumers. As well, Travelport’s Galileo Vacations GDS has just added a first in the industry functionality enabling Canadian travel agents to search for all-in pricing to find vacation products with the highest commissionable components and to provide consumers with true all-in pricing.

TMR: Regarding the all-in pricing of packages – are the add-ons to package prices imposed by the tour operators similar to cruise line non-commissionable fees in that both crimp commissions?

McCaig: What has happened, increasingly over the past decade, among tour operators, cruise lines and other wholesalers is a copy of the model created many years ago by airlines and others: Offer the lowest possible base fares to maximize competitive advantage – albeit unfairly – and then tack on, as after-thoughts, more and more legitimate - and questionable – expenses and making them non-commissionable. This business model is not only deeply flawed in all respects, but also it irritates and misleads the consumer completely.

ACTA believes only legitimate taxes, created through bills of federal and provincial governments should be non-commissionable while all other fees and charges should be part of the cost of doing business and, therefore, commissionable. The victimized consumers think they are getting deals when they first hear low base fares, only to be swacked over the head by extras, adding an average $250 per person to a modest vacation trip (about $1,000 base fare).

There is no real difference between many tour operators and cruise lines in this regard. Many from both camps try to avoid paying fair commissions through this ruse. Just exchange “port fees” for “landing fees” and they are synonymous.

TMR: Lastly, to place the package pricing/commission issue in context: Vacation packages play a larger role in the Canadian market than in the US so package sales and revenue would be much more important to Canadian agents – Is that a correct perception?

McCaig: We can’t comment on the U.S. market and its habits but we can say tour and cruise revenues make up a huge amount of the travel agency business in Canada and, yes, commissions are extremely important to travel agencies.

For a tour operator or cruise line to attempt to evade commissions through the base fare – tax shuffle is extremely bad business since travel agencies represent their most important means of selling products to Canadians.

Travel agents represent the alternative to the do-it-yourself approach that proves frustrating, uneconomical and often disastrous for consumers. If you want to sell anything but the simplest point to point travel to consumers, you need travel agents.  So discouraging them from selling your product makes no sense at all.  Good business doesn’t have borders. Hurting travel agents who work hard on your behalf is bad business in Canada and the U.S.