Internet Forces Europe’s Travel Agencies to Evolve as Fees Fall

Europe’s travel agents will have to turn into specialized bargain-hunters and gatherers of added value if they are to survive a radical change in their habitat. Abundant food in the form of fat airline commissions for selling tickets is no longer available, industry spokesmen say.

On top of that, customers are increasingly using the Internet to do their own scavenging for tickets, hotels and car hire—cutting out the agencies as middlemen altogether.

“The days of seven or eight percent commissions simply for issuing a ticket are over…travel agencies are going to have to provide a real service,” a Spanish airline source said.

Across Europe, commissions are disappearing. Finnair eliminated them completely from September, British Airways is cutting British agency payments to one percent from December and Spanish airline Iberia is negotiating a hefty cut, to cite just a few.

In Italy, travel agency commissions on Alitalia’s domestic flights are three percent, down from nine percent just three years ago, said Christian Pitrelli, the owner of Mazzarino Viaggi, a large agency in the center of Rome.

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International flight commissions have fallen to seven percent from nine percent and will drop another point next year.

Commission cuts and Internet sales are squeezing agency business in Germany too, said Anke Dannler, spokeswoman for Rewe Touristik, one of the country’s biggest travel agency operators after TUI and Thomas Cook.

“Different companies are adapting in different ways,” she said. “Some see their future specializing in luxury or long-distance holidays that the Internet cannot offer. Others are attempting to compete directly by offering cheaper deals of their own.”

Felix Arevalo, director general of the Spanish travel agents’ association AEDAVE, said the picture is not so bleak. On one hand, airlines still need agencies to sell their tickets and on the other, agencies are improving their services.

“This is a bit like what happened to the candlemakers when electric light became available. They didn’t go out of business. They discovered that by making decorative candles they could make more money,” he said.

“We shouldn’t get things out of context. Internet ticket sales in Europe are less than four percent (of the total) and they’re expected to be at most six percent in 2006.”

Iberia still sells 85 percent of its tickets through travel agencies, Arevalo added.

Pitrelli said that even if online sales have picked up, airlines still have to rely on bricks and-mortar travel agencies for much of their business. But hundreds of agencies have gone out of business because of the commission cuts, he added.

“Airlines are treating us like the enemy when actually we’re offering them a service,” he said.

In many countries the rapid growth of low-cost airlines, which only sell tickets direct and pay no commissions, threatens both the dominant airlines and travel agents.

Some German agencies are adapting by booking tickets with budget airlines and charging a fee to the customer for doing so, Rewe Touristik’s Dannler said.

Both she and Carlos Sanchez, owner of a small central Madrid agency, Viajes Alvar, said many travelers are uneasy about the security of Internet booking and still prefer to use a travel agency.

“Certainly travel agencies have a future,” Dannler said. “Germans are big travelers and although they might use the Internet to book a simple flight or to reserve a night at a hotel, they still need travel agents for booking more complicated services.”

Spanish tourism figures show the proportion of foreigners visiting without a holiday package, having made their own travel and accommodation arrangements, has been steadily rising and reached 54 percent in August.

“The more developed the tourist infrastructure, the easier it is to go without a package,” the Spanish airline source said. “You wouldn’t want to go to the Congo or Algeria on your own, but you can easily go to Britain or Germany without a package.”

Specialized agencies can exploit the Internet as a sales tool rather than a threat. A quick search turns up trekking in the rainforests of Borneo to a “destination management company” offering business programs in Spain, tailor-made to include translators and a brass band if you wish.

Taking on the discounters at their own game is another option taking hold in Germany, where the trend toward low-price travel has accelerated. There, the economic slowdown has exacerbated the slump the industry suffered in the wake of the September 2001 attacks on the United States.

Germany’s TUI AG, Europe’s largest travel company, said in May it aimed to sell up to 300,000 holidays a year with a new low-cost brand. It has already launched its own no-frills airline, Hapag-Lloyd Express, and says it is looking at buying a foreign budget carrier in the medium-term.

Its rival Thomas Cook sells 600,000 discount trips a year through its Bucher unit.
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