The proverbial hits the industry fan – industry crisis

The Mole [for a change!] has kept his little snout out of a massive issue that has been rearing its ugly head in some other publications over the last few days, quietly watching it develop!

You will recall that The Mole wrote an article recently about the sale of www.ineedaholiday.com to Creative Holidays by the Leapfrog Group with The Mole saying that may well have been the first step towards Creative and the Travel Corporation selling direct to consumers sidelining agents in the process.  Although vehemently denied by Creative and the Travel Corporation, several analysts have said to The Mole there might well be no smoke without fire!  

The latest spat all started with an article in a competitor publication, Travel Daily earlier this week reporting that car rental wholesaler Driveaway Holidays was attempting to distance itself from a direct to-consumer website which it says was set up by its parent company Auto Europe, which operates a local site for its Kemwel brand, with Kemwel carrying almost identical inventory to Driveaway, but offering car rental direct to the public at what appears to be nett prices, i.e. 9% less on line than the prices available from agents.

The article went on to say that although Driveaway claimed Kemwel was a separate venture, the Kemwel domain name was registered in Australia by Driveaway Holidays, with Driveaway MD Kylee Kay a director of the parent company DAH Holdings which owns both businesses.

Driveaway claims that Kemwel isn’t designed to compete against its agency partners, but Kemwel also offers a ‘price beat’ guarantee identical to that of Driveaway, with a number of agents saying that Kemwel has had a major effect on their car business and one saying turnover was down about 40%, with repeat clients booking directly via Kemwel.

Driveaway MD Kylee Kay said she was aware of rumours circulating about Kemwel and that she was “considering legal action against competitors who have been wrongly informing our travel community”.

The spat continued in Travel Daily the following day with Driveaway Holidays responding to allegations that it was bypassing travel agents with its Kemwel direct-to-consumer site, by insisting that it remains focused on the industry, with Kylee Kay saying that Driveaway Holidays “is, and always will try to be, our travel agents’ ‘best friend’, adding, “We truly value our relationships and continually strive to achieve excellence in service whilst maintaining an unwavering resolve to never compromise our integrity”.

However, the story did spark significant interest with the normally placid former Managing Director of Driveaway, Geoff Harvey, who now runs Europe Travel Centre commenting strongly to Travel Daily that the issue of Kemwel selling direct to the public with no agent commission has been of great concern to him and others in the industry for several months.

He claimed that retail agents who have preferred agreements with Driveaway are being undercut by its Kemwel site, in some cases by as much as 12%.

Auto Europe owns 100% of both Kemwel and Driveaway, and Harvey said there can be “no way” that Driveaway can distance itself from the Kemwel pricing and zero commission.

It’s also understood that Avis are refusing to allow their inventory to be listed on the Kemwel site.

Kylee Kay then contacted another publication eTravelBlackboard to say that she wanted to set the record straight to clear up any misunderstanding regarding Driveaway and Kemwel.com.au, the direct-to-consumer brand of Driveaway’s parent company, AutoEurope.

Kay said that she wanted to reassure the industry that Driveaway Holidays would always be on the travel agent’s side, saying Driveaway is a full supporter of the industry, evident in the wholesaler’s ongoing commitment to above average industry commissions and overrides, incentives, technological advancements as well as tradeshow and conference support with all consortiums.”

“We truly value our relationships and continually strive to achieve excellence in service whilst maintaining an unwavering resolve to never compromise our integrity,” Kay said, emphasising Driveaway’s 19-year-strong relationship with the retail network.”

She added, “I do hope that yesterday’s article will be read with a grain of salt and will have limited to no negative implications for such a fine standing company as Driveaway Holidays in this industry”.

Mike Hatton, the Chief Executive of the Australian Federation of Travel Agents is also reported to have advised Ms Kay that he had received a number of complaints from agents regarding its pricing structure, with complaints that Kemwel’s on line pricing was 10% to 12% percent lower than that available to agents through wholesalers and appeared to be lower than that available direct from Driveaway Holidays.

In a reply to Mike Hatton, Kay clarified that Kemwel.com.au was set at online competitor levels, not wholesale levels and that most of their marketing dollars were spent in the online space and not within the Australian retail marketplace, Kay adding that she believed this to be a growing market and while it does have a very small base, it will grow and open doors for other Australian operators to market via this channel.”

She added, “AutoEurope does not wish to miss opportunities in this market, however is still very understanding and supportive of the strength of the relationships that Driveaway has been able to build and maintain for so long now, and does not wish to diminish our opportunities as a consequence”.

So, where does the industry go from here?

Is this the beginning of the end of the relationship between some key wholesalers, operators and agents?

Will Driveaway/Kemwel/Auto Europe apparently taking the direct sell step they are accused of taking, although vehemently denied, encourage others to do the same and will the flood doors be opened?

With margins in this business and in particular in car rental so small are operators justified from a business perspective in trying to get rid of one level of commission by going direct with the advent of the internet and on line booking and payment making that so very easy?

Are car rental bookings on line so straight forward that agents should be prepared along with other types of bookings that people will book them direct?

So, what do you think?

Click on the ADD A COMMENT button below and let The Mole know what you think!

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Go for it – this is a big issue and one that is not going to go away!

The Mole will be following up on this issue next week, so watch this space!

Report by The Mole