NEWS
Study: Agents book ancillaries despite not earning commission
By Johanna Jainchill
Travel agents are booking ancillary products, despite the inconvenient access and
lack of commission, according to a new
PhoCus Wright study.
The report, “Travel Agents and Ancillaries: The Game Is On,” looks at how and if
agents book ancillary products, which the
study valued at $9 billion for the airlines in
2010 and $6 billion for cruise lines in 2011.
The report also revisits the fundamental
travel industry question: What is an ancillary product?
(PhoCusWright is owned by Northstar
Travel Media, which also is the publisher of
Travel Weekly.)
In researching the report, PhoCus Wright
considered not only at the most commonly
cited ancillaries, such as preferred airline
seating or checked baggage service, but also
cruise line extras such as shore excursions
and pre- and post-hotel stays.
One of the study’s authors, PhoCus Wright
analyst Douglas Quinby, said that both are
examples of optional services or upsells that
travel companies offer, and in both cases are
items that agents sell, but not for commission
or compensation from those companies.
“The core travel product is a plane ticket,
a room reservation or a cruise fare,” Quin-
by said. “And then what are all the things
that you do once you’re in flight or at your
hotel or on the ship? Paying a mandatory
baggage fee isn’t the same as choosing a
dive excursion. But in principle, it’s an add-
on to a core fare product.”
Quinby said with both air and cruise, these
add-ons to the core fare product are charged
with “interesting underlying issues in the
cruise and airline segments around the distri-
bution of those products and how suppliers
are managing and dictating the distribution
of those products, which has huge implica-
tions for travel agents and for travelers.”
PhoCus Wright found that most travel
agents book some kind of airline ancillary
service, despite the fact that the ancillaries
are predominantly inaccessible via the GDS
and do not earn agents any commission.
KEY PRODUCT MIX BY AGENCY TYPE
Flights
20%
8%
11%
18%
5%
38%
24%
18%
5%
52%
Cruise 26% 11%
Hotel/
lodging
Tour/
package
Leisure agencies
Home-based agents
Source: PhoCus Wright’s Travel Agency Distribution Landscape
In offering an example of the necessity to
diversify, Moses said he was working on a
100-cabin incentive group where the commissionable cabin price was less than the
noncommissionable port charges and taxes.
“It is no wonder that ‘regular’ agencies
aren’t interested in selling three- and four-night cruises,” he said.
In his agency’s case, he said that being a
member of the Signature Travel Network enabled him to tap into additional leisure travel
options outside of cruise, the main growth
areas being hotels, spas, tours and resorts.
The Cruise Authority is not unusual in
that regard. In 2009, CruiseOne and Cruises Inc. launched a land travel division, and
shortly after, Cruise Holidays made the
same decision.
Leisure agents might be looking to their
corporate brethren as examples: PhoCus-
Wright found that corporate travel agen-
cies account for three-quarters of all agency
sales and that 80% of those bookings are
made up of air, hotel and car rental.
Reduced sales incentives
The study gives quantitative support to
what agents have been saying over the last
few years: Due to low fares and higher NCFs,
cruises no longer pay the bills as they once did.
This is happening just as changing business models and technologies have made it
easier for agents to profit from booking air
and hotel.
“Most everyone I know is diversifying into noncruise-related products,” said
Howard Moses, president of the Cruise Authority in Atlanta. “Noncruise leisure is the
fastest area of growth for our agency.”
External factors
PhoCus Wright also cited other reasons
for agents’ change in market share that have
nothing to do with agents or what they sell.
First, there has been an overall shift in
consumer behavior to online booking that
favors both OTAs and supplier-direct channels. (Although many traditional agencies
have a strong online booking presence, they
are dwarfed in sheer scale by the OTAs.)
Second, the cruise lines have found it
necessary to expand their distribution channels to make up for the passenger capacity
they have added over the past two decades:
According to the Florida-Caribbean Cruise
Association, the cruise industry is the fastest-growing segment of the leisure market, increasing 7.4% annually since 1980.
This has happened, PhoCusWright re-
ported, at a time when agencies are simulta-
neously aging, with three in five leisure and
home-based agents now over the age of 55,
and “facing an imminent recruitment crisis.”
Accordingly, cruise lines have had to find
additional ways to distribute their product
and have made a push to better support
their direct-sales channels.
