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Opinion: Travel agents to charge service fee. A smart move, but they will have to earn it.

As domestic full service carriers like Air India and Jet Airways are cutting back on their commissions, travel agents in India have decided to charge a service charge of Rs 225 from July 16 on tickets of full service carriers, issued by them.

In this age of skyrocketing expenses, airlines are desperately trying to curtail costs. Ticket distribution and sales is a major portion. As per its annual report, Jet Airways indicates ticket distribution and sales costs are Rs. 1,261 crore (Rs. 1.25 billion) or about 10% of its annual expenditure. Air India is estimated to spend about Rs. 1,000 crore or 6%.

Full service domestic carriers have been paying travel agents 3% commission. Many international carriers like Air France-KLM, British Airways, Singapore Airlines, and Lufthansa pay none, while Emirates, Qatar, Etihad, Cathay Pacific, Gulf Air and Sri Lankan Airlines pay from 1% to 5%, but even these airlines are heading towards the zero commission regime.

Free image courtesy of FreeDigitalPhotos.net

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 only an opportunity to do business, not the business itself.

Travel agents cannot depend on their age old defence that they are entitled to a commission on tickets they sell.

Any entity in business or service, survives only on the value they add in the supply chain. The day someone or something else improves the value chain, existing links will be re-aligned. Who amongst us, dear readers, will not welcome a 3% reduction in airfare in lieu of the commission airlines pay the agents?

Over the years, technology has caught up with the agents. Today, customers are perusing the internet and obtaining the best value for their money. For a routine trip with minimal support services the internet is convenient. However, travel if anything, is not routine. For long I have propagated, that travel agents must start earning their incomes and not remain air-ticket churning machines, who are being easily replaceded by an internet search engine.

Travel agents in India will be well advised to read what my friend, Brett Synder, The Cranky Flier offers — a travel concierge. They need to start offering genuine help services to their customers when their customers need it, and wherever they need it.

A dear friend, who also happens to be a dynamic travel agent, gave up many corporate clients who were non-remunerative and has started offering improved and diversified, travel related services, to individuals willing to pay it, and is thriving. I am waiting for him to take it up a notch and become a true travel concierge.

The imposition of the Rs. 225 service fee is a smart move by the travel agent fraternity in India. It is along the model followed in most parts of the world and afford customers the choice of paying the agent, or going directly online to the airlines’ websites.

One has to gauge the impact on online travel agents (OTAs) like Travelocity, MakeMyTrip, Yatra and others, who will need to work very hard to differentiate themselves, given the fact that they use, and therefore offer, a very similar front end to airline websites, complete with the restrictions, like for example on complex routings etc.

For these types of tickets passengers would be well advised to go to their friendly neighbourhood agent.

Share your thoughts on the travel agents’ commissions, their future, and what they need to be doing. Post a comment.

About Devesh Agarwal

A electronics and automotive product management, marketing and branding expert, he was awarded a silver medal at the Lockheed Martin innovation competition 2010. He is ranked 6th on Mashable's list of aviation pros on Twitter and in addition to Bangalore Aviation, he has contributed to leading publications like Aviation Week, Conde Nast Traveller India, The Economic Times, and The Mint (a Wall Street Journal content partner). He remains a frequent flier and shares the good, the bad, and the ugly about the Indian aviation industry without fear or favour.

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