This week the Airlines Reporting Corporation (ARC) introduced Helix, a consortium-like program described by the organization as a “hybrid” of other agency group models.
The move ignited an array of reactions, from mild puzzlement over motivation to certitude that the organization is overstepping its regulatory charter and trampling on what should be its neutral relationship with the travel agency community.
“You can’t be on the one hand a regulator of travel agents, and on the other hand operate a commercial entity which competes with groups that manage travel agencies,” said Bruce Bishins, ARTA’s managing director.
ARC’s neutrality is in fact a key issue, according to Nexion president Jackie Friedman.
Her chief concern about the creation of Helix relates to ARC’s “primary charge as the airline industry’s only approved regulatory body. In that role they’ve always been neutral, regardless of the agency, or agency organization, or consortium. We expect them to maintain that neutrality going forward,” she told Travel Market Report.
“ARC belongs simply as a back office resolution program,” commented Jim Mazza, chief operating officer of TRAVELSAVERS. “They should process the transactions, pass through the funds that are due, and police that on the airline transaction side – and that’s it.”
Lauri Reishus, vice president of operations for ARC, disagreed.
Noting that Helix will be “completely separate” from ARC’s reporting and settlement services, she said that ARC is not exceeding its mandate in introducing Helix, and is well within its rights to do so.
“While we have the responsibility for running reporting and settlement, we are in no way restricted to doing that,” she told Travel Market Report.
The why behind the formation of Helix was a straightforward business decision, Reishus said.
“ARC, like any business, is looking for opportunities to enhance the products and services it offers customers, to diversify and to grow as the industry changes. We’ve been doing that for years,” she said, citing other ARC initiatives and programs, including Verified Travel Consultants (VTC).
Reishus described Helix as a “hybrid” of other agency group models.
What distinguishes Helix, she said, is its bundling of products and services, including ARC or VTC accreditation, in a program that is “convenient, affordable and effective.” The three main components are preferred supplier relations, education and training, and business services.
Helix program director Christopher Flores said preferred supplier relations will be similar to those maintained by current agency consortia, including enhanced and bonus commission opportunities for agency members and supplier-supported education and training.
Helix intends to limit its portfolio of preferred suppliers to no more than 40, Flores said.
The benefit to those suppliers will be new business development opportunities, he said, including the ability to target formerly hosted agents who decide to become full-service ARC or VTC agencies.
“I think you’ll see folks who were once hosted make a decision to go and become a full-service agency themselves within ARC, as a full service or a VTC agency. Then suppliers can identify an agency they weren’t able to identify before. That’s very important to the supplier,” said Flores.
In its first year, Helix will focus on the business-to-business side, including agent education and training, providing business services through affiliations with providers such as ClientEase, and marketing its preferred suppliers to Helix agencies.
In 2012, Helix will venture into the business-to consumer territory on behalf of Helix members, including engagement and lead generation, Flores said, citing his prior experience in those areas with Vacation.com.
Target members for Helix
Helix aims to acquire between 400 and 500 members in its first year. Its target will be smaller and medium-sized independent agents who are unaffiliated.
“We believe, based on the thousands of agents we work with at ARC, that there is a large number of agents who are unaffiliated,” Reishus said. “We want to invest in the agency channel. A strong agency distribution channel is good for ARC.”
Flores added that target members might include travel sellers new to the industry with modest sales numbers. “That’s fine with us. If we can help them double or triple (their sales) in a year, we’re doing our job.”
The main criterion for Helix membership will be accreditation as an ARC ticketing authority or a VTC agency.
Flores emphasized that it is not the intention of Helix to “poach members” from other agency organizations. “Our intent is to focus on our existing customer base and provide added value and services.”
Like others, ARTA’s Bishins is concerned about ARC’s access to agency sales and transactional data, including volume, carriers sold, and service charges processed through ARC, as well as private business data relative to ownership.
“ARC has this massive amount of information that no other agency marketing group would have,” and it could leverage it unfairly, he said.
“I’m confused as to how ARC would think there would be comfort and trust among the agency community with them having a hand in their entire business,” said TRAVELSAVERS’ Jim Mazza. “Would you want to give that data and that insight into your business to ARC, which is controlled by the airlines?”
ARTA plans to file a complaint with the U.S. Department of Justice, asking it to review ARC's Helix plans. It will request that the Justice Department investigate an “attempted percipient monopoly with the relevant market where no one else controls the distribution system of the Area Settlement Plan,” according to a statement.
ARTA will also ask the Justice Department to determine if ARC has “improperly changed the nature of its business with respect to the caveats imposed by the DOJ in its original 1984 review and conditional approval of ARC’s incorporation.”
Ensemble Travel Group's co-president Lindsay Pearlman commented that “the question is, does Helix’s value proposition conflict with ARC’s core responsibilities. ARC/BSP, as it’s used in Canada, still captures a significant amount of volume. So does that potentially give them an unfair advantage, if there’s no wall between the businesses? Sure, it would. Would that be a concern? It would.”
According to Reihus, “The carrier airline ticketing data is not connected to Helix at all. It’s not a carrier settlement program. The only information we have is airline ticketing data, which is irrelevant to Helix.”
“I don’t see any opportunity for abuse. We’re treating travel professionals like valued customers, and we’re offering them products and services they can take advantage of,” she said.
Flores added that “there are no airlines as part of Helix.” Moreover, he said, ARC is subject to “very strict rules” about the information it holds.
“Whenever we’re dealing with data there’s always a question mark – and I won’t label it a fear, just a question mark – where is that data going and who’s looking at it,” Scott Ahlsmith, president of 23TouchPoints, said. “I wouldn’t call it a fear until it’s used for some other purpose.”
Ahlsmith added that sharing data is not necessarily always a bad thing. “If Helix is doing this in aggregate to help suppliers spot consumer trends to build better products for members to sell, then I think there’s benefit in it.”
Ultimately, he said, “There’s a right way to do it so that everyone benefits. And there’s a greedy way to do it so that only one organization benefits, and the greedy people generally get weeded out pretty quickly.”
New consortium on the block
Though some agency group executives are concerned about data-sensitivity issues that Helix might pose, few are worried about their own members jumping ship.
“I don’t see them just coming in and taking away from an established consortium that has great marketing and educational programs,” Ahlsmith said. “I think that would be an uphill battle. I think they’re carving out a new niche.”
“They have not found an unmet need here at all as far as I’m concerned,” said Bob Joselyn, CTC, president and CEO of Joselyn, Tepper & Associates. “There are a lot of people who do this, and do this well.”
Joselyn also questioned the ability of an organization owned by the airlines to gain traction with travel agents. “The travel agency community’s affection and trust for ARC is not very high,” he said.
In launching its Helix program, “ARC faces formidable competition from established, strong and successful brands such as Vacation.com, Virtuoso, Nexion and Signature Travel,” said Paul Ruden, ASTA’s senior vice president for Legal and Industry Affairs.
“While the program is aimed at ARC’s Verified Travel Consultants, it is possible that it will bring innovations to some travel agents. Failure to deliver on such opportunities though will be dealt with by market forces in an area where there is a lot of competition.”
In spite of their questions, some agency executives see ARC’s decision to move beyond its original role as a natural progression.
“I understand why ARC would need to evolve into something,” Pearlman said. “Their VTC side is growing. They have 1,300 members in the VTC program and they’re looking at bringing added-value to them; they want to maintain that membership. And if your core component is strictly settlement services and data, is that a strong enough value proposition to maintain your membership? Their actions say it no longer is.”
“This is part of the normal trend whenever an industry goes through lots of changes. Old legacy businesses are going to be frightened,” said Ahlsmith.
In his opinion, the decision to create Helix should be up to ARC alone. “Should they be in this business or not? I don’t know that that’s for any of us to decide,” he said.
In the grand scheme of forces that might threaten the agency distribution channel, Helix is barely a blip, Ahlsmith added. “At the end of the day, the whole thing with the GDS and airline content is probably more threatening to the distribution channel than anything else.”
Nick Verrastro contributed to this report.