Travel Agents: Always Putting Clients First?
Transportation officials investigate special bonuses that airlines pay agents to steer business their way.
NEW YORK — Critics call them under-the-table kickbacks. To supporters, they're a competitive tool that helps to keep the airline industry aloft. For most consumers, they'll probably come as a big surprise.
They are "travel agent commission overrides," bonuses the major airlines pay to travel agents to steer passengers their way. They can be as much as 15 to 20 percent over regular agency commissions. And, critics charge, they can sway some travel agents so consumers don't always get the best prices or the most convenient flights.
"It's fairly outrageous," says Paul Dempsey of the University of Denver's Transportation Law Program.
But travel agents argue override bonuses have little, if any, influence over how they book their customers. The important thing, they contend, is keeping customers happy. If customers don't get what they want, the agent loses their business and the whole issue becomes moot.
Most agents and airlines interviewed defend the practice as a simple free-market incentive designed to reward high-volume agents, the way any company rewards its most successful sales people. "If an agent produces a large volume, it means he's promoted the product, advertised, geared up for it, of course he's earned a larger commission," says Gil Garber, a retired executive of Garber Travel in Boston.
Leaner times for agencies
Commission overrides have been around for decades, but they're garnering new attention for two reasons. The US Transportation Department is investigating whether some major airlines use overrides as part of a strategy to drive low-fare, start-up airlines out of business. Also, some industry experts worry the overrides have become more influential than ever, because the airlines have cut regular commissions.
An estimated 34,000 travel agents book about 80 percent of the flights in the US annually. For their services, they're paid more than $6 billion in commissions from the airlines. Agents used to earn an average of 10 percent on any tickets they sold. Over the past two years, however, the airlines have dropped that to 8 percent and capped commissions at $50 a ticket.
"Especially for agencies that have 60 to 70 percent of their revenues coming in airline tickets, it's almost impossible to survive," says Pat Funk of the Association of Retail Travel Agents in Lexington, Ky. "This is why overrides are very important to some agencies."
That importance, critics say, influences some agents to steer customers to flights or airlines that may not be the least expensive or the most convenient.
"It's very easy for an agent to simply suggest one flight over another, or not even to let consumers know about all of the options," says Professor Dempsey.
Ms. Funk estimates that about 35 percent of travel agencies, mostly the large ones, engage in override contracts. She also insists that good agents put customers first, regardless of the size of a potential bonus. But she acknowledges that the practice of accepting overrides is controversial.
"I'm an ex-agency owner, and never ... did I have an override agreement with anyone because I, personally, felt that it wasn't doing the consumer any good," says Funk.
People who fly frequently probably won't be affected by the overrides, critics say. They're sophisticated enough to know their choices, and most are collecting frequent-flier miles with a preferred airline. Many also now use the telephone or the Internet to scout around on their own for the best prices. But infrequent travelers, who fly once or twice a year and who may not have a long-standing relationship with a travel agent, are most likely to lose out.
"If a client doesn't ... state specifically what airline they want, then certainly that's when we go with our preference, the airline that's paying the override," says a Boston travel agent who didn't want her name used. "Of course, we also look for the lowest fare available."
Critics say such practices hurt consumers in the long run, although it's uncertain how much. No data are available on the portion of commissions that are overrides, nor are there any studies on overrides' effect on booking decisions.
"It is frustrating from a public-policy point of view that we don't know if this is a big problem or a little problem," says Clint Oster, an aviation economist at Indiana University at Bloomington. "But let's have full disclosure."
Until that happens, experts say to consumers: "Caveat emptor."
"Be sure you're dealing with a reputable agent, and don't be afraid to shop around," advises Marty Salfen of the International Airline Travelers Association in Dallas.