Travel agents get name-your-price tool
Online travel agencies have been stung by airlines that have refused to pay commissions. Vacation.com says it has a new way for the agencies to make a profit.
The company said Tuesday that it has unveiled a new online booking tool designed to help brick-and-mortar travel agencies set their own prices and build in their own profit margins for the fares they sell. The tool, available only to Vacation.com member travel agents, allows agents to view published fares alongside negotiated fares.
The move comes as airlines and other travel suppliers are increasingly unwilling to pay commissions, typically a travel agency's largest source of revenue.
"Our opinion is that travel agents need to become like traditional retailers that look for space between their Net cost and market price," said Bobby Heiser, Vacation.com's vice president of sales. "The whole idea is to get them away from being so dependent on commissions set by somebody else."
Catering to more than 9,000 travel agencies in North America, Vacation.com enables agencies to book fares with travel providers such as airlines, tour companies and cruise lines via the Web. Alexandria, Va.-based Vacation.com also negotiates and posts discounted rates on its site, Heiser said.
For years, commissions fueled travel agencies, but that revenue has begun to dry up as the number of airlines and other travel companies unwilling to pay them has grown. Last year, Northwest Airlines and Continental Airlines ceased paying commissions on fares bought over the Internet.
To make up for the lost commissions, most travel agencies, online and off, have been searching for new ways to charge for their services and generate income.
One of the most popular strategies among online travel agencies is the "merchant model." Instead of getting paid a commission for each fare they sell, companies such as Expedia and Hotel Reservation Network buy discounted fares from airlines, hotels or other travel suppliers, sell them to consumers at a higher markup, and then pocket the difference. The companies have proven it can be a lucrative business.
In its fourth-quarter earnings report, Expedia said revenue from its merchant business tripled to $34 million.
Vacation.com makes money by charging travel suppliers fees and by charging travel agents more than $300 in yearly dues.
Heiser said the booking tool by Vacation.com, a unit of computerized reservation company Amadeus, automatically adds the profit margin that an agency chooses into the price of a fare and can be configured to add the margins in dollars or percentages.
The service is not yet available for hotels or rental car companies but does allow agents to book last-minute cruises and vacation packages.