[Anonymous]

[Swissdiver]

In the past, the business was driven by retrocessions from the airlines notably. Nowadays it is not the rule any more though they still exist.

The travel agent of one of my clients is either totally incompetent or totally driven by retrocessions to the detriment of the travellers. As I guess I would not find the information on the airlines’ websites, I am wondering if anyone among you knows what is the state of the industry for that matter. Which companies are known to be more generous than others when it comes to pay to get business…

Thanks

[LuganoPirate]

My TA provides my air tickets via Hotelplan. These are full fare, but discounted tickets without hotels etc. and nothing actually distinguishes then from normal tickets.

I discovered this once when I had paid a top fare, no discount from the F fare, for JNB ZRH LUG. I broke the journey in ZRH for 1 day, and when I wanted to re-use the ticket for the final leg to LUG I was told to contact “Hotelplan” as my ticket was no longer valid! After protesting with Swiss that this was a full fare and you can always break the journey, they told me these were special tickets given to Hotelplan, and were not changeable nor did they allow breaks in the journey, which had I bought it direct from Swiss, I could have done..

I called my TA and they arranged another tickets for me for the final leg.

I have since discovered that if the TA gives a certain volume of business to Hotelplan, they get extra discounts, ie. “retrocessions in my language” and free tickets. I also believe that Hotelplan also get retrocessions from LH / LX etc in turn depending on their volumes.

I could imagine other TA’s and organisations such as Kuoni also get similar deals, in Switzerland at least. I don’t know if this extends to the UK, Germany etc.

[Swissdiver]

Thanks, LP. What you are describing here is the “grey market”. T.O.s (tour operators) are buying seats in advance and in numbers at a discount and then resell them.

My question is more related to kickbacks (retrocessions) airlines would be giving to TAs as it was the case in the past and probably now again.

[LuganoPirate]

I asked my TA, and she said she gets no retrocessions or any other incentive from LX / LH, not even any free tickets as they use to in the past. This is the reason they look to buy from consolidators as then they have a margin other than the service fee, which would not pay their running costs.

Though not said directly, they sort of admitted they do get “better deals” from some of the “non direct” airlines, which I assume to mean the M.E. and Far East carriers.

[Swissdiver]

LP: this is exactly what you describe as “better deals” I’d like to better understand. Also I’d like to know which airlines are still paying kickbacks…

[LuganoPirate]

I don’t know Swissdiver. I think it’s basically commission, as used to be paid in the old days by the legacy carriers. 9% if I remember rightly? No mention of which airlines though so I really cannot help further. Maybe your TA can shed some light on the matter.

I do think it correct however, if an agent brings business to an airline, that they should be remunerated with a bit more than chf 25 or whatever as a booking fee. They have worked to cultivate and keep their clients and are probably bringing many thousand of francs/£/$ to the carrier. It should not however be a reason to rip off the client or act in an incompetent manner.

[SimonRowberry]

LP – interesting stuff. I book everything myself on-line so I haven’t used a TA for years. I noticed today that in my local high street there were retail outlets of Thomson and First Choice next door to each other. Given that they are both owned by TUI I found this rather odd…I don’t know how any High Street Agent makes a living today. I know they’re not the level of TA to which you were referring, LP, but the principle must be similar in the age of the Internet.

Cheers, Simon

[Swissdiver]

Well, Simon, if you stop by any of these two TAs and ask for a quote, you’ll see they are systematically above what you can find online…

There is now a “new” generation of TA’s, the business travel management companies. They offer additional services such as travel budget management, convention organisation, … So for large companies, it might make sense to use them.

The problem of any form of kickbacks is the potential conflict of interest that is linked to it. As long it does not influence the TA’s offering, it is fine. But unfortunately in some case it does…

[LuganoPirate]

Hi Simon, I think Swissdiver is right when he say’s TA’s are often more expensive than booking online, and I have wondered how they survive in today’s climate.

I think the answer is “convenience”. We are mostly seasoned travelers, used to flying and probably speak or have some knowledge of a language or two.

The majority are not. They are frightened of booking with “foreign” hotels, of the perception (or not) of being ripped off by the taxi from airport to hotel etc and so they prefer to simply go to an agent and buy a ready made package, with a phone number they can call and speak to someone in English. And if it goes wrong they can deal with an ombudsman and maybe get some compensation, which would be almost impossible if booking direct in an overseas hotel.

The answer must lie there somewhere!

Just one more point though Swissdiver, are kickbacks really no different to commissions. Banks, Insurance companies etc all work with them and there is always the risk you will not get the product that is exactly right for you.

These guys have to earn their money since Joe Public is usually not willing to pay someone for advice, and most people are to lazy to do the research they need to do to ensure they get exactly what is right for them. Something has to give and I suppose in the end it’s a compromise.

[Swissdiver]

Transparency is the key. And the clear trend in many business and many regulators’ eyes is to leave behind hidden commissions/kick backs/retrocessions/whatever you want to call them and to move into visible fees structures. This is where for instance the bank industry goes in Europe (Mifid) and in Switzerland.

Back to the initial topic, yes there is convenience. And also from the companies the idea that a third party will better manage the travelling budget.

[NTarrant]

Does it really matter that an agent is getting a kickback or incentive commission? The thing is that as long as the customer is getting the best deal it does not matter.

I was a travel agent 1975-83 we got 9% as LP says for air tickets, although domestic was 7.5%. Almost everything else was 10% except insurance which was 33% plus 5% for the clerk who sold it. I know the company I worked for received additional payments as a group for the amount of business it did overall with various airlines and tour operators.

British Rail had an incentive scheme which increased your commission from 7% to 11% in half percent increments as you did more business.

The fact that Simon’s two local agents Thomson and First Choice are all Tui is economy of scale, there will probably be a time when one is closed. TA’s are not what they were in my day, to coin a phrase.

I don’t use agents for flights etc although I have done cruise bookings through a local agent as they have been cheaper.

[Swissdiver]

“as long as the customer is getting the best deal it does not matter.” I cannot agree more. The problem is when the customer is NOT getting the best deal as the TA is pushing the flights that generates the best income for HIM.

I suspect this is the case with one I have to use. They try to avoid certain airlines such as BA while pushing even Easyjet (and I suspect the later is giving kickbacks).

[AMcWhirter]

As NTarrant correctly notes, the standard airline commission used to be 9 or 10%. But some airlines paid considerably more in order to incentivise their TAs.

I am referring to the pre-internet age when it was more difficult for foreign carriers to promote themselves in a particular market unless they could afford to spend millions on advertising.

In those days BA was the dominant carrier in the UK market (note that the BA of 20 or 30 years ago had a wider network than today) and lesser-known foreign carriers could only get a look in if they were prepared to pay commission rates of 20 % or more. Much would depend, of course, on the quality of the carrier and the market and/or country it was targetting.

The TA would then use the extra commision to either increase the profit margin or rebate a portion to the customer in the form of a lower fare.

Nowadays TAs can be incentivised in other ways too. Last year when Emirates brought its A380 into Manchester, local TAs were rewarded with shopping vouchers for every booking they made in first or business class. The TA staffer received a £50 voucher for a first class passenger or a £20 voucher for one booked in business class.

http://www.traveltradejobs.com/news/emirates-targets-manchester-agents-with-incentive-news-01792810508

[NTarrant]

It is interesting how times have changed. There was of course more co-operation between airlines and the fare charged by BA was the same as whichever carrier the national airline(s) happened to be.

It was always held as a “badge of honor” how many different airlines “paper” as tickets were refered to was held by an agent. You could then book a customer out on say BA and back on say KL or vice versa with the booking made through the first airline and it was ticketed on that airlines paper. It was not uncommon to get a customer to travel out on one airline and back on another depending on the timings of the flights. Of course if you didn’t use an airlines tickets that often then there was always a risk you would have them withdrawn

[Author]

Posts