Triton: We won’t accept 7%

Monday, 25 Nov, 2005 0

ABTA Convention special report: Triton director John McEwan has warned Thomson that it will not accept a commission level of 7% and its 1,800 shops will support rival operators if payments are cut.

McEwan, who is also managing director of Advantage Travel Centres, was reacting to the news broken by TravelMole that Thomson is slashing commissions from January 1. He stressed that negotiations were ongoing with Thomson parent TUI UK and he still hoped it would be possible to reach an agreement.

“I cannot pre-empt our discussions, but 7% is not acceptable,” said McEwan. “We’ve seen a general erosion of earnings over the years and this is the next step, although it is not a surprise. The only way it would be acceptable is if operators adjusted their own discount strategies, but that seems unlikely. If you have a situation where third party retailers are paid 7%, and the biggest discounts on holidays are available through an operator’s own shops, you can’t expect us to be able to make a living.

“Generally the profit margins for the big tour operators are around 4-5%, but for the average retailer it is 1.3%, so we are already in a precarious position.”

Triton’s shops account for around 10% of Thomson’s business and McEwan said the operator had provided rivals with an opportunity to increase their business through the retailer.

“I think this is a marvellous opportunity for others to set themselves apart and show that they want to work with us. Retailers will think carefully about who they want to work with. You’ve got to remember that, broadly, the main operators’ programmes are very similar.”

McEwan said that if Thomson insisted on a commission rate of 7%, the company’s holidays would still be available through its shops, but would not be promoted.

“I think that whatever happens we will have an agreement in place with Thomson. But to get 10% of a company’s business, you have to promote it and retailers would instead push other operators. It would be up to individual agencies as to whether they wanted to derack brochures.”

McEwan predicted that commission cutting would accentuate the move to dynamic packaging.

“Already around a quarter of our members are actively dynamically packaging and we’re going to see that develop quite dramatically. Agents are going to be putting together their own packages for customers.”

Triton does not include the Co-ops, Midconsort or the Travel Trust Association, but McEwan said he expected commission cuts would lead to greater consolidation among retailers.

“I expect it will lead to further discussions with these groups and agencies will want to work together more and support the same suppliers.”

Thomas Cook has already accepted Thomson’s new payments and McEwan said he thought they had come to a mutual agreement.

“There’s probably a bit of tit-for-tat in there. They’ve both come to the conclusion that they are paying each other too much and agreed to cut payments on both sides.”

Keeping checking www.TravelMole.com for updates and reaction to this breaking news story