Commission split looming among major operators

TravelMole Comment by Jeremy Skidmore

Just as retailers are planning for a long, hard winter, it seems some operators are preparing to throw them a carrot.

I hesitate during this festive period to say that travel agents will be given a late Christmas present, because they won’t receive anything new. But they might just have less taken away from them than they first thought.

I refer, of course, to commissions. Just a few weeks after Thomas Cook chief executive Manny Fontenla-Novoa said that they would follow Thomson in cutting agent payments and, indeed, threatened to remove stock from retailers which did not support them, I hear there has been a change of heart.

A split is emerging among the major operators with Thomson and First Choice set to cut to a basic level of  7% from January and Thomas Cook and MyTravel considering a smaller reduction to somewhere between 7% and 10%.

Of course, Thomas Cook and MyTravel will expect some gratitude for positioning themselves as the men who steal your wallet rather than your entire house contents, but more of that later.

First of all, why are they considering such a move when everyone expects the big four to fall in line? Quite simply, they need agents more than they care to admit.

Thomson and First Choice both have successful direct-sell brands in Portland and Eclipse respectively; they’ve also managed to generate a high proportion of sales for their own products through their websites and, of course, they have shops to directionally sell their holidays.

Thomas Cook does not have a thriving direct-sell company and its website has not been doing a great job for the operator. Thomascook.com was set up several years ago and its founders, most of whom have long since left the company, used to boast about how it was one of the most visited travel websites around, even though it wasn’t making any money. But it’s been a retail website which has been very good at selling other companies’ products rather than its own. Similarly, its shops have not been as focussed at selling Thomas Cook products because historically the company has prided itself on being a retailer first and an operator second.

The net result is that Thomas Cook sells around 20% less holidays in-house than Thomson or First Choice and is therefore considerably more reliant on third party agents.

MyTravel is a different case. It is still emerging from a major restructuring and its direct-sell brand, Direct Holidays, for which it paid £81 million in 1998, is going through a challenging period. MyTravel needs all the friends it can get.

Back to the carrot and stick debate. If the rumours about the commission cuts are true, Thomas Cook and MyTravel will expect retailers to support them at the expense of the other big two. If not, they’ll quickly slash to 7%, because they’ll have nothing to lose by doing so.

Will you back them or are you still intent on promoting other operators and putting together your own packages?

Another couple of things spring to mind. It might make companies like P&O Cruises, which sells 97% of its holidays through the trade, think again about cutting commissions. And, if Thomas Cook does throw the carrot, then I’ll owe Co-op’s Mike Greenacre an apology after poking fun at him for begging Manny to reconsider cutting commissions. I said Mike had two hopes – Bob and no – but, not for the first time, I could be proved wrong.

What’s your view? Respond here.