The Age of Zero Commission and Zero Guarantees

The “Zero Commission” ruckus has been ratcheted up another step, by the travel agents. As per various recent news reports, “in a move aimed at forcing airlines to revoke their decision to withdraw the five per cent commission, previously built-in to the ticket prices, and paid to the travel agents, over 2,500 travel companies, including IATA travel agents and online travel agencies (OTAs) like Makemytrip, Cleartrip, Yatra and Ezeego, have decided to stop selling Jet Airways and Jetlite tickets from December 4.”

The Jet decision was taken at a meeting of the six associations – Travel Agents Federation of India (TAFI), Travel Agents Association of India (TAAI), IATA Agents Association of India (IAAI), Indian Association of Tour Operators (IATO), Association of Domestic Tour Operators in India (ADTOI) and Enterprising Travel Association of India (ETAA) – which cumulatively account for nearly all of the 2,800 IATA agencies, apart from numerous OTAs.

A previous decision by the agents to boycott Kingfisher Airlines and Kingfisher Red, was withdrawn at the last minute.

The three Indian full service airlines and several international carriers stopped paying 5 per cent commission on the ticket prices to travel agents from November 1. The agencies have had around 10 meetings with airlines to make them withdraw their decision but that has not worked. The airlines, in turn, have asked the agents to levy a transaction fee of Rs 350-10,000 per ticket in lieu of the commission.

Like it or not, we are living in an age of “zero guarantees”.

Customers are increasingly demanding better value for their money spent. In these hard economic times, my customers are demanding that I cut costs, improve service, and be available to them when they need me. In return I am guaranteed nothing. Just an opportunity to do business, not even the business itself, just the opportunity.

Any entity in business, survives only due to the value they add in the supply chain. The day someone or something else can improve the value chain, existing links will be re-aligned. It applies equally to professional relationships as it does to products. An employer looses employees the moment the value chain is superseded by another, and vice-versa. I may be as bold to say, that this is extending to personal relationships as well, but that is another topic of debate.

As you recall from the news reports, The three Indian full service airlines, and several international carriers stopped paying 5 per cent commission on the ticket prices to travel agents from November 1. If anything, I am incensed at the airlines, for not lowering their fares by the 5% commission they used to pay the travel agents. In effect, a fare increase has been hoisted on us.

I also invite your attention to the fact that the boycott is only of the two private full-service carriers, Jet and Kingfisher. Air India is the “mai-baap” (God) of travel agents, and they will not risk their existence, by antagonising them. The travel agents have also brought on board various politicians to bring pressure for restoration of the 5% commission.

These actions of the travel agents are based on one flawed fundamental premise — that have the god given right to be protected from the changing business environment.

Over the years, technology has caught up with the agents. Today, customers, are perusing the internet, making phone calls, and obtaining the best value for my money, just as we do for any other product or service. During this time, many travel agents became air-ticket churning machines, falling in to complacency and sloth, showing an amazing lack of business foresight that borders on outright incompetence.

Most did not bother to live up to their name TRAVEL agents. Air passengers constitute less than 1% of the total passengers who TRAVEL everyday — in trains, buses, hotels, taxis, and yes, even planes.

During my days of super-hectic globe-trotting, I used to call my favourite airline, Singapore Airlines, directly. Choose the routing, make the booking, seating, meals, etc., myself. When all was done, my travel agent would be called in to just issue my ticket. I used to take back all, but 0.5% of the commission, my travel agent earned, as a discount, since I did all the work. In short my travel agent did not EARN the commission they were getting.

Corporate customers, are no different. In return for their large business volumes, they take discounts in the form of lines of credit, free airline tickets, and other such incentives.

In effect, travel agents were already operating in a “zero commission” regime. The recent actions of the airlines have only formalised the reality.

Despite my suggestions to the contrary, my travel agent never bothered to diversify in to other travel related services. As a passenger, I need to get visas, health and travel insurance, car transportation, hotel accommodation, foreign exchange, holidays, tours, and a whole host of other allied services. Services for which I would gladly pay for. Even today, customers will gladly pay the travel agent for services rendered, but it is incumbent on the agent to add value. Travel agents have to EARN their income, and justify their existence. As with any other business, their survival is not guaranteed.

As customers, the same travel agent will joyfully squeeze the last drop of blood, from his supplier of copier or printer paper, tea/coffee, or other office needs. Do they guarantee the business and survival of their vendor ?

My local bookstore is not insulated from competition by Amazon or Barnes and Noble online, and should Penguin, MacMillan, or any of the other publishers start selling their books online, no one has guaranteed the survival of Amazon, Premier bookstore, Gangarams, or any other sales channel. Similarly, my newspaper vendor is not guaranteed his livelihood by the numerous newspapers who now publish e-papers for all to read on the internet.

I know that the age of zero commission will hurt many travel agencies, and many of them will perish, but I remind them, the horse buggy perished in the face of the car, and we have a stronger transport system, the ocean liners perished in the face of the inter-continental airplanes, and they adapted in to holiday cruises and opened up a whole new industry.

These travel agents are smart people, and there are opportunities galore, both within and outside the air and travel sector. It does not take keen eyesight to see the daylight, nor does it take keen listening to hear the thunder, imagination and innovation coupled with swift thinking and even swifter action will differentiate the winners.

I do not know if I would call everything happening today, progress, but it is reality. As much as I do not like saying it, the faster the travel agents face the situation, the better off they will be.