Originally created 04/03/00

Travel agencies merge to stay competitive



The consolidation bug that bit countless industries during the past several years is now sinking its teeth into the travel agency business.

Independent agencies throughout the country are merging to stay competitive as major airlines continue cutting agent commissions and more travelers turn to the Internet for ticket purchases.

In Augusta, Southern Travel Agencies Inc. has purchased three agencies during the past 14 months: Concierge Cruises, Westside Travel and Travel Masters.

The acquisitions boosted Southern's business by nearly 22 percent, company President Michael Kerbelis III said. The increased volume has helped minimize the impact of the latest commission cuts, which occurred in October.

"We could see this coming when the airlines started making their first cuts in commissions," he said. "It's like any other business that consolidates -- economies of scale help them succeed and be profitable. It's a rather simple formula."

Westside Travel will continue operating under its own name at its Evans location. Travel Masters operations have been moved from Surrey Center to Southern Travel's Walton Way office, along with the former operations of Concierge Cruises.

In addition to reduced operating costs, consolidation creates more opportunities for agencies to win lucrative corporate travel accounts, Mr. Kerbelis said.

He said the recent acquisitions and clout from his affiliation with American Express Travel Service helped his company secure a $4 million corporate account.

But reduced commissions is the "common thread" fueling consolidation nationwide, said Kristina Rundquist, spokeswoman for the American Society of Travel Agents.

"Many companies have been looking to sell, and now is a good time if they are getting a good price," she said. "There's plenty of companies looking to buy."

Airlines historically have paid travel agencies commissions for selling seats on their planes but have reduced payments in recent years in the name of cost-cutting.

Some in the industry say they suspect commission cuts are an attempt by airlines to eliminate the middlemen to reap the profits for themselves, Ms. Rundquist said.

Nearly every major airline now markets its own Web site as the "best" way for consumers to book flights. Some of the carriers even offer special discounts only to customers purchasing tickets online.

"It's sort of a slow plan to cut out the travel agency segment," Ms. Rundquist said.

Many travel agencies have resorted to charging service fees to customers to offset the commission cuts. A study this year by the Alexandria, Va.-based group showed 88 percent of member agencies charged service fees, up from 64 percent in 1998. The average fee was $13 per ticket.

The study suggests consumers don't seem to mind the fees; agencies charging fees reported losing less than one in 10 customers.

Mr. Kerbelis said he believes shifting the cost to consumers is actually a fairer way of doing business because the person seeking the service is the one paying for it.

"It also means we're not beholden to (the airlines) for our income," he added.

Ticket buying options

The Internet has created an entirely new way to shop for airline tickets, sort of.

The nuts and bolts of a travel Web site is an operation that looks a lot like a traditional travel agency.

"A lot of sites you find will have travel agents in the back doing the work," said Kristina Rundquist, spokeswoman for the American Society of Travel Agents.

Web sites, as interactive as they are, cannot generate the number of travel scenarios a skilled agent could produce by working one on one with a customer.

Therefore, online ticket buying works best for frequent fliers with strict schedules who know exactly what they want, said Michael Kerbelis III, president of Southern Travel Agencies.

"The business person who flies routinely to New York can do it because they know the routes, the times and the planes," he said. "But leisure travelers need a little more help."

Travel agencies can help you find the lowest fares, but they also charge a small amount (in the form of commissions and fees) for providing the service.

Buying tickets directly from the airline also has its pros and cons: Deals can be unearthed (because many airlines offer discounts for online purchases),but the consumer receives little help in comparison shopping.

"Every little nuance affects how much you pay, and the airlines are under no real impetus to give you the lowest fare," Ms. Rundquist said. "The airline won't tell you that leaving an hour later would slash the fare by $200."

Reach Damon Cline at (706) 823-3486.