Chapter Thirteen: Money Matters!
"We
offer no-touch, low-touch, high-touch,
and every degree in between,
all at a
different fee."
President, Poe Travel
POE Travel
How does an agency counter declining
commissions and a shrinking client base? In
The result? An additional $12 million in corporate
business this year and a rising trend line in leisure revenues.
"When business is soft, smart
retailers get out and market up a storm," advises
consultant Bob Stalbaum. "Their biggest competitor hunkered down and cut
back on sales and marketing. Picking up $12 million in new business was Poe's
reward for getting aggressive."
Stalbaum was one of several consultants
that Poe CEO Margaret Kemp called for advice on restructuring the agency.
Founded as an international travel specialist in 1960, the 28-person agency had
lost its focus.
Travel agents sold air, cruises, tours,
corporate and anything else that walked through the door. As
airlines squeezed, then eliminated most commissions, revenues fell.
Corporate business was leaking away to Orbitz, Expedia and Travelocity as
companies cut costs in a tough economic climate.
Poe was in the wrong business, Kemp says.
The company was trying to sell travel. What clients actually wanted was someone
to fulfill their travel needs and travel dreams.
"We have put ourselves in the
service business," Kemp says. "People who paint their own houses or
do their own taxes, they don't use us. We market ourselves as a fee-based
agency. It's just like calling a plumber or an accountant: you pay for
service."
BIG CHANGES
On the leisure side, Poe made four
structural changes.
The first is a comprehensive fee schedule, including consulting fees. Every
agent charges customers by the hour. Fees run from $50 to $150 per hour,
depending on the agent's expertise and experience.
"We used to take every call,"
Kemp says.
"Now we are picky about
who is our client. If we can't add value to your travel purchase, we don't want
to be your agency."
Poe also signed with TravelGuard as its travel insurance provider.
Insurance hasn't become a mandatory sale, she says, but clients who decline
coverage have to sign an insurance waiver form. That one step transformed
insurance from an occasional sale to an almost-always purchase.
Looking for a way to boost visibility,
image and buying clout, Poe joined a
respected consortium, Virtuoso. The high-profile affiliation is a good
fit with Poe's preferred clients: higher income and familiar with fee-based
services; female, because most household travel decisions are made by women;
and professional, to tie into corporate and business travel sales.
And to keep it all in sync, the company set sales targets for every frontline
agent: 50% preferred suppliers; 15% fees; and 15% insurance revenue.
"It is looking at our business like
a business: where is there money to be made?" Kemp says. "That
business attitude is what helped us survive and expand."
On the corporate side, Kemp started
calling on local companies to offer travel management consulting and
meeting/incentive travel services. For straightforward air and hotel products,
clients can book themselves on the Poe Web site for a low fee. For more complex
products, they can work with a travel agent and pay more.
she says. "The client gets to choose the combination of service level and cost that makes sense to them. There is growth in the market for companies that want control over their travel expenditures, but not in everyday ticketing. We're solving problems for clients, not selling them travel."--F.G.
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Reading Assignment:
Read Chapter Thirteen.
Discussion Questions:
Answer the following questions by typing the questions and the answers on a separate word document to be e-mailed to the instructor.
- Use the article (above) and your text to answer the following questions:
- How did Poe Travel reorganize for success?
- Who is Virtuoso?
http://www.virtuoso.com/about.html
- How did Poe Travel secure new corporate accounts?
- Go to the Poe Travel website: www.poetravel.com
Can clients books travel online?
Do you think Poe Travel is using the internet to their advantage?
How is this agency creating value for the customer?
- Go to the following site and read the article. Then, answer the following questions
about the article:
RETAIL TRAVEL AGENCIES OWE A WARM THANK YOU....
a.
“We
are not selling travel, we’re selling service”….What does Margaret Kemp mean by
this statement? Explain.
b.
Why
should an agency focus on service instead of travel as the primary product?
c.
What
does it mean to develop “multiple sources of revenue”?
d.
What
is a “preferred commission”? What are
“preferred suppliers”?
e.
What
is an “override schedule”? Do agents
automatically receive override commissions just for joining a consortium?
f.
How
can “ancillary products” help to generate more revenue?
g.
What
is an average fee per hour for trip planning and research?
h.
Some
agents receive $150/ hour for trip planning and research. What kind of experience (in your opinion)
would be necessary to demand this much per hour?
i.
How
much do you think your personal trip planning skills demand per hour? What skills would you need to acquire in
order to charge more per hour?
3.
Should
you be an ARC approved agency or should you become a TSI? Which designation is right for you?
a.
Who
is the ARC? http://www.arccorp.com/aboutus/about_mission_values.html
http://www.theacademy.com/arc/gateway/about-arc.asp
b.
Use
the following site to answer the following questions about the ARC:
http://accreditation.arccorp.com/faq_accreditation.htm
What is the difference between the ARC and
IATAN?
Do
you need to be bonded/credited to become an ARC
approved agency?
What
experienced personnel are needed before applying?
What
is the CAS exam?
Can
a home-based agent become an ARC approved agency?
What
are the conditions for becoming a home-based ARC agency?
c.
Because
ARC represents the airlines (airlines no longer pay any commission), some
agencies have decided not to sell airline tickets. Some agents have decided to sell only leisure
packages. For this reason, they become a
TSI.
http://www.iatan.org/pdf/507.pdf
What is a TSI?
What are the requirements for becoming a
TSI?
If an agent does not meet the
requirements, is there a way to participate in this
program?
d.
What
is the “Area Bank Settlement Plan”?
e.
What
is the difference between fixed and variable expenses with regard to a
home-based agency?
Activity I:
Go to the following site and answer the following questions.
http://www.itasn.com/index.html
1.
Who
is the ITASN?
2.
If
you join ITASN, do you still have to be an ARC approved agency?
(check under FAQs
for the answer)
3.
How
much does it cost to join? (click on “fees”, then click on annual membership
info)
4.
What
are the benefits of becoming a member of this organization?
5. What value does this organization offer (specifically) to the home-based agent?
Activity
II:
Read the following and respond to the
questions.
CARLSON WAGONLIT TRAVEL introduced a $5
corporate online booking fee in a bid to "capture new market share and
to compete head-on with online travel agencies." That fee essentially
matches the fees charged by the corporate units of Expedia, Travelocity and
Orbitz, which last year wrested the McDonald's account from CWT. [If
corporations require that CWT pass along air commissions and overrides to the
corporation, then CWT's online booking fee is $8.] CWT's new approach is part
of i-Select, CWT's new low-cost, standardized service offering. The fee
includes implementation of CWT's self-booking tool, Web reporting, profile
management, customer support and an account representative. Corporations may
choose to add other services, like a VIP desk or consultative services, and pay
more money.
1. What is your opinion of web fees? Do you think web-based fees are appropriate for the service?
Web Site Evaluation:
Go to the following websites and evaluate one of them using
the website
evaluation template:
Travel Consortiums:
Travel Insurance Programs:
Have you thought about selling luggage?
http://www.aaxiswholesaleluggage.com/
Have you though about selling packages on
e-bay?