travel-agency business certainly would qualify.
By Joe Palumbo
If there were a contest for the most beaten-down industry, the
travel-agency business certainly would qualify.
It used to be a real fun industry, but its beginning blight began as
early as 1978 with the clouds of airline deregulation, and its downhill
momentum started in the early 1990s.
Up to that point some travel agents made as much as 15 percent in direct deduction commission, depending on their productivity with a given airline. But then airlines decided that their commissions (their highest cost component) needed to be cut in order to reduce costs and remain competitive and solvent.
Subsequently, standard commissions dropped from as high as 12 percent to 0 percent to 8 percent to 5 percent. But the real pain was suffered when airlines decided to pay zippo! That left the travel agent industry to rely mainly on self-imposed service fees direct to the public.
The question then was: Was this really a cut in agency commission or a
concealed airline fare increase to the public?
Then there was the tragedy of Sept. 11, which hit the travel industry
hard across the board. Granted, there were some selective travel agents
who would maintain what is known as special override commission
agreements due to their company's size and production, which allowed
them to weather the storm longer than the average neighborhood
mom-and-pop shops with an even larger death toll.
Anna Berger of Zig Zag Travel in Rego Park said that the phones just did not ring and everything came to a standstill. She added that she had to dip into her reserves to keep the business afloat and thought about giving up. But she could not because she loves her business too much. Because of her expertise and foresight, as well as her dedicated and professional staff, Berger turned a lemon into lemonade and today is on full production and doing very well.
Unfortunately, many agencies didn't fare as well and were forced to
close their doors. With commissions at zero, how does one make up the
loss? How much can an agent charge as a service fee? Even service fees
of $25 to $35 don't make up the slack.
John Zotos of Arista Travel in Astoria said his costs continue to rise
but his income has been declining. How can he maintain his business?
Zotos said he would need to gain 400 percent market share just to break
even.
In spite of the odds Arista is holding its own quite well. So how's
business for travel agents? Tough with a capital T! Unless you have a
very special niche, opening such a business at this time may not be a
good idea.
Joe Palumbo is a private asset manager as well as the fund manager for
The Palco Group, Inc., an investment company at www.palcogroup.com or
461-8317.
