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Byline: SUE PELLETIER

It started in March when Delta cut travel agency commissions for tickets sold in the U.S., Canada, Puerto Rico, and the U.S. Virgin Islands. By the end of the month, American, Continental, Northwest, United, US Airways, America West, and Air Canada had matched Delta's move. While airlines no longer are commenting on the issue, at the time Delta CEO Leo Mullin told USA Today they did it for a simple reason: "There's too much capacity and not enough passengers." The airline industry, already ailing prior to September 11, has lost billions of dollars in the last nine months.

"Everyone knew this was coming - we just didn't know it was coming quite this soon," says Shaun Pirrera, director of client services with Travel Technology Group in Chicago, a full-service housing, registration, and travel firm for association meetings and trade shows. "They've been cutting and capping commissions for seven years," says William Maloney, executive vice president and CEO of the American Society of Travel Agents (ASTA), Alexandria, Va. "It's no surprise, but the timing couldn't have been worse in terms of rebuilding our businesses and working together to rebuild our industry from the disastrous effects of September 11."

The move, according to the Alexandria, Va.-based National Business Travel Association, changes the foundation of all travel purchasing by forcing organizations to revisit agency agreements and renegotiate with carriers. The possible upside? "Ideally, by eliminating the cost of paying agency commissions, airlines...will be able to offer reductions in business fares," says Marianne McInerney, NBTA's executive director. (At press time, she had announced her resignation to pursue other interests.)

Initial reactions from meeting planners and travel agents weren't so positive: "I'm sure prices are not going down in response to the commission savings," one planner for a large national association said shortly after the cuts were announced. "The fares will stay the same, but now people will have a hefty service charge on top of it," forecast a travel agent who has many tight-budgeted association clients.

But as of April, at least one airline says it has adjusted its pricing in response: According to George Coyle, product manager, group and meeting travel with Dallas-based American Airlines, "Our zone fares have been reduced, and that's an action that will certainly benefit association planners."

SHIFTING COSTS

It appears that planners will have no such luck with agency fee hikes. "I was just getting ready to sign a contract with an agency, and they told me their transaction fee would now double," says Cathy Mason, director of meetings and conventions with the American Academy of Physical Medicine and Rehabilitation in Orlando, Fla. And that's a cause for concern, both for internal staff travel - the fee alone for sending 20 staffers to a conference could be $1,000 or more - and for using an agency for attendee-negotiated rates.

As Cathy Scheck, senior director, meetings and marketing, with The Endocrine Society in Bethesda, Md., says, "We try to consolidate our committee and speaker travel through one agency. Now that travel agencies are passing along an additional fee to the society to make up for their lost commission, we need to revisit our travel policies and allow people to book reservations independently."

That's exactly what travel agencies are afraid of. "Most of my groups are very price-conscious," says Connie Nix, group meeting specialist with Piedmont Travel in Greenville, S.C. "We have had to raise our service fees quite a bit to offset the lost revenue, and I'm afraid it will drive a lot of these people away."

And when customers are driven away, agencies themselves may be in jeopardy. While larger agencies can push preferred carriers with which they have market-share - driven, back-end deals to help keep their costs and fees down, smaller agencies - and even larger agencies whose client base was heavily weighted toward some of the more beleaguered industry segments, such as high-tech companies - may have less to fall back on. At press time, at least one long-established corporate agency was about to close its doors due to the falloff of corporate business.

Consolidation may accelerate due to the impact of the commission cuts on agency bottom lines, says ASTA's Maloney, "but you also may get new entrants who see new opportunities. Travel agencies now aren't like the old general practitioners. They specialize in corporate business, or meetings, or church and civic groups." He adds that even with seven years of increasing cutbacks and commission caps, travel agencies still control 75 percent of the airline revenue booked today, 95 percent of cruises, and over half of all hotel and car rentals.

Particularly well-situated to ride out the storm may be hybrid agencies that offer group housing, meeting registration, and even meeting planning, in addition to traditional travel arrangements. "Group housing is the core of our business, so we haven't been as affected as pure corporate travel agencies," says Heidi Quandt, senior vice president of marketing and sales services with Travel Technology Group.

ONLINE BOOKING, HERE WE COME

Another thing the commission elimination will do is drive the adoption of online air booking even more rapidly. "One of our biggest concerns is that this is forcing people to go directly to the airlines or go online," says Quandt. "Technology's our middle name, and we have software available for attendees who want to go online, but we still have a significant amount of people who want the human touch, who want to be able to pick up a phone and make reservations." And this isn't just wishful thinking; it's based on her company's research. Surveys have shown "time and time again, absolutely without a doubt, clients want to speak with the agent they've been working with for years."

But that doesn't mean the firm isn't thinking ahead. The commission cuts "actually opened a door for us," she says. "Travel Technology already provides an online airline booking engine for the housing part of the business, and now it's about to unveil a similar online service for its association/corporate travel clients." These clients want their employees to book travel online with one vendor as a way to control and manage those expenses, Quandt says. Her firm is one of several housing/travel companies that will offer online air booking for clients as well as attendees.

But these companies may find themselves competing directly with the airlines. "The airlines' zeroing out their commissions to travel agencies is a solid reflection of how important online booking has become to airlines. Southwest was the first to get deeply into it; now everyone does it," says Mark Burton, PhD, director of the Center for Business and Economic Research at Marshall University, Huntington, W. Va.

In March, US Airways jumped on the bandwagon with a new program that enables meeting attendees and other group travelers to book flights at the negotiated fares at its Web site. After the group rate is negotiated and the contract signed, the airline gives the planner a meeting code number. This code number can be made available to attendees. Travelers then can use the code to automatically receive the negotiated rate when they book the fare at the airline's Web site.

Other airlines are working on similar products, such as providing a hot link from the meeting sponsor's Web page that would bring them to a page on the airline's Web site where they can book directly, airline representatives said at a session at the January meeting of the Professional Conference Management Association. When attendees plug in the meeting-specific code, they will get a discount.

"An online product has always been in the forefront of our planning and development process," says Bob McNally, general manager of meeting, association, and incentive sales with Delta Air Lines in Atlanta. "We continue to test our online programs to ensure we release the best possible software program for our association customers."

TIME TO FLY SOLO?

But many planners aren't convinced the airlines can do the job as well as travel agents can. "We used to have two resources - the airline and the travel agency. If we have to rely solely on the airlines to track group usage, it may become more difficult. I worry about their ability to track our business volume accurately," says Patty Quinlan, CMP, director, conventions and meetings, Product Marketing Association, Newark, Del. While she is concerned about increasing per-ticket costs for staff who continue to work with a travel agent, Quinlan says she thinks the time saved in not having to call the airlines or book online may be enough to justify paying agent fees.