Threatened by Web, Travel Agents Adopt New Tactics

Online travel shops from UnitedAirlines.com to Priceline.com aim to cut out middlemen such as John Dekker, yet high-tech companies and Internet analysts are spurning Web sites to book trips at his Golden West Travel.

Lower commissions from airlines and higher Internet bookings have helped reduce the ranks of traditional U.S. travel agencies by 16% in the last six years. But by exploiting the very high-tech tools that threaten their business, creative agents are saving clients time and money--often far more than travelers could save online.

Fighting to survive, the agencies have sued airlines and pushed for legislative relief. But their personal ties to clients have proved their most powerful weapon. Customers especially value “the ability of a travel agent to solve problems if something goes wrong,” said Bear Stearns analyst Jason N. Ader.

Dekker, a Carlson Wagonlit franchisee, is a case study in what thousands of real-life agents still do best: Target an area, then play an “information-giving, advice-offering, hand-holding role,” as Ader put it in a recent report on travel and the Web.

Pounding away at a computer keyboard in his Westminster office, Dekker caters to upscale, Web-savvy corporate travelers who could easily go online to buy, say, a last-minute business-class ticket from Los Angeles to London and back.

On one recent day, however, they would have paid $7,433 for that trip, yet Dekker could get it for them at $4,912, with a bonus trip to Greece thrown in.

How he does it is an insider’s lesson in manipulating the system. He tacks on an open-ended Athens visit to the London trip because the two-stop journey is cheaper. He buys the return legs in drachmas, and the fare is cheaper still, thanks to the dollar’s strength against the Greek currency. The client saves $2,521 and has a London-to-Athens ticket, usable within a year.

“I used to book our trips online, but I don’t have the time to surf the Internet for fares that aren’t that great of a deal,” says Stacey Cole, an executive assistant at ISyndicate.com, a San Francisco supplier of news and games to Web sites. Dekker has saved her time and thousands of dollars for the company, Cole says.

Despite such testimonials, traditional storefront agencies are clearly under stress. Lower commissions from airlines and the push both by airlines and bargain travel Web sites such as Travelocity.com and Priceline.com already have taken their toll: While travel spending continues to rise, the number of U.S. travel agencies peaked at 32,913 in 1994, started falling the next year and was just 27,729 last December, the American Society of Travel Agents reports.

Senior Internet analyst Henry H. Harteveldt at Forrester Research in Boston expects the number of storefront travel agencies to fall 15% more as online travel bookings rise from $16.7 billion this year to an anticipated $40.7 billion in 2003--about 9% of the total market.

“Travel agents who simply wait for the phone to ring so they can take an order will die,” says Harteveldt, another client of Dekker’s. “The guys who get it--who add value--are going to make it.”

Using the Web to increase his own value, Dekker monitors sites where frequent fliers trade tips and others set up by the airline ticket discounters known as consolidators.

Faxing confirmations to clients using his ticket reservation system used to cost him 50 cents a page. Nowadays, he e-mails them--courtesy of a free messaging account at Yahoo Inc., whose travel site is an online competitor. Dekker saves $3,600 a year on faxes, he figures.

Other agents are using their own Web sites to provide information about still-lucrative specialties, such as cruises and adventure travel.

John Schmitt, for instance, recently debuted a site promoting vacations in Florida, Hawaii, Las Vegas and other resort areas. Nowhere does the site mention that his four-office Superior Travel Service, based in Flint, Mich., also sells airline tickets.

“Niche marketing is the big industry buzzword,” Schmitt says.

His site describes popular vacations, provides travel tips and gives links to family-activity Web pages. His strategy is to encourage potential clients to call agents, not to book online themselves, though it is possible for them to do so.

“People still want a handshake relationship,” he says.

At the other end of the spectrum, Navigant International Inc. has bundled 32 regional business-travel agencies into a national firm during a three-year merger blitz. It emphasizes high-tech travel management for such corporate clients as Fluor Corp. in Aliso Viejo, which engineers huge construction projects around the globe.

On a bank of video monitors at Navigant’s Southwest regional office in Santa Ana, software robots check endlessly to improve each booking with cheaper fares and lodging, better seats and frequent-flier upgrades.

Navigant computer programs allow employees of client companies to book their own trips online, which also saves Navigant money by reducing the number of agents it needs. Navigant services range from accounting and analysis of travel costs to alerting managers if someone buys a more expensive ticket to get frequent-flier miles.

“Almost everybody is predicting that airline commissions will go to zero in the near future,” says David Buskirk, president of the regional office. “So we provide the services, charge customers fees, and they make the determination if we’re adding enough value to support the costs.”

With domestic commissions generally cut in half to 5% already, most agents charge at least $10 to issue a ticket. International commissions remain higher, and airlines still pay bonuses to agents who send them large amounts of business. Even so, commissions fell from $6.6 billion in 1997 to $5.7 billion last year, according to Airlines Reporting Corp., a clearinghouse for ticket sales.

To survive, agents work every angle, and that puts them increasingly at odds with the carriers.

Many agents exploit fare disparities through such tricks as providing an extra leg to a trip that lowers the cost but doesn’t have to be used.

Using computer programs to monitor travelers, airlines have penalized agencies that sell restricted tickets for such uses, contending the practices violate the carriers’ rules.

Fighting back, Westways World Travel Inc., a three-person Santa Monica agency, has filed a racketeering suit in federal court in Los Angeles contending that American Airlines routinely issues such tickets itself over the telephone and on its Internet site.

The carrier is attacking agents “for the express purpose of extorting money and/or putting travel agencies out of business,” the suit alleges.

American has denied the allegations and has asked the court to dismiss the suit.

In perhaps the biggest threat yet to the agents, 30 carriers are developing a $100-million online reservation system on which they plan to post joint schedules and fares. The airlines call the site “T2”--a code, the agencies say, for Travelocity Terminator.

“The finishing torpedo is in the tube, and it’s this joint Web site,” says Paul Ruden, an official with the travel agents trade group.

Ruden predicts the site will offer bargains unavailable anywhere else, and his group has asked the Justice Department to investigate the carriers for antitrust violations.

Some agents are even protesting a California state tourism Web site with links to hotels. They contend public funds are being used to steer consumers directly to lodgings, undermining the agents’ business. State Sen. Jackie Speier (D-Daly City) has proposed a ban on the Web links to the private sector.

At Golden West Travel, Dekker says he is too busy to worry about such matters. The phones ring off the hook, and he is looking for a bigger office so he can add two agents to his seven-agent staff.

The agency, started by his father, is now 37 years old--two years older than Dekker. He is trying to land a corporate account that would take his annual bookings from $8 million to $14 million.

“Travel agencies are like gas stations--there’s one on every corner,” Dekker says. “But they’re also like a barber: Once you find a good one, you never leave.”

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The Ups and Downs of Travel

Airline ticket spending has soared.

1991: $47.9 billion

1999:$76.6 billion

*

Online travel purchases are on course to take off.

1999: $9.4 billion

2003: $40.7 billion (estimated)

*

Old-style travel agencies* are dwindling.

1994: 32,913

1999: 27,729

*

Commissions from airlines have nose-dived.

1991: 10.83%

1999: 6.43%**

*

*Including single-office retail agencies,

home and branch locations

** 2000 figure is year to date.

Source: Airlines Reporting Corp., Forrester Research Inc.