THE biggest threat to the
travel industry in 2014 is the
issue of transparent pricing,
industry authorities say –
that is, agents who discount
their service fees, hiding
these charges elsewhere
in the ticket, in order to win
business.
The topic has stirred
up emotions, with many
consortium heads calling
for the “unethical, possibly
fraudulent” practice to be
stopped. But is it fraudulent?
Is it unethical?
According to the Consumer
Protection Act, transparency
is required. “The CPA clearly
stipulates that intermediaries
have to disclose prescribed
information to customers
[see Regulation 27 read
with Regulation 9],” says
Gareth Cremen, a partner at
Ramsay Webber. In addition,
a retailer or service provider
must not market any goods
or services in a manner that
is misleading, fraudulent or
deceptive in any way, including
in respect of the manner in
or conditions on which those
goods or services may be
supplied [see Section 29].
Travel agents who are selling
cheap fares with limitations as
a full fare are at risk of being
in contravention of CPA if they
do not disclose the rules and
information to their clients.
Director of TAG, Jonathan
Gerber, says he has no
problem with agents who
work on nett fares, as long
as they are open about their
business model and disclose
this to their clients. “There
are many ways to contract
with your clients: service fees,
management fees, fixed fees,
transactional fees, savings
incentives and the like. There
is no need to lie to your
customers. We subscribe to
being travel professionals;
those of us who aren’t should
be named and shamed as
they are doing the entire
industry a disservice.”
Big consortiums are probably
most at risk in terms of trying
to make sure that we adopt
this practice of creating a
proper professional image,
says md of BidTravel, Allan
Lunz. The practice is most
prevalent in the SME sector,
where smaller companies
don’t know what the price
of a ticket is and are easily
“hoodwinked”, he says.
“Unfortunately you do get
procurement people who only
look at service fees as the
cost. Often we are given the
reason why we don’t win a
tender is that we’re not the
cheapest. But we don’t want
to be. Cheap is nasty.”
Wally Gaynor, md of Club
Travel, agrees: “We come
up against this all the time,
particularly with government.
They set themselves up to
be robbed by refusing to go
on credit card, insisting on
30-day accounts that end
up at 120 days or more. It’s
easier for unethical players to
hide fees in fares when all the
transactions are cash.”
The biggest concern is what
this practice will do to the
industry and the reputation of
retail travel agents.
“In an environment where
the retail travel industry is
dependent on convincing
travel buyers of the value
of a professional travel
management service,
this practice is extremely
damaging. Where buyers feel
that they cannot trust the
retail travel service provider,
they are encouraged to
bypass the intermediary and
deal directly with suppliers.
Agencies engaged in unethical
practices should be aware that
buyers do network with each
other, and agency reputations
can be damaged very quickly.
Recovering a reputation takes
far, far longer,” says Jim
Weighell, corporate manager
of Sure Travel.
“Agencies adopting this type
of strategy also run the risk
of inviting state or industry
body pricing regulation or other
‘interference’, something that
would not bode well for the
industry,” Jim adds. “We may
yet find ourselves with industry
parameters being set for us
as they have been for the real
estate and financial services
industries.”
However, smaller agencies
complain that the SA market
is not a level playing field and
is dominated by a limited few.
One agent says: “I own
and manage a small travel
agency and truly believe we
are operating in a highly anticompetitive
environment. I, like
many others, earn little if any
override, especially from our
national carrier, so in essence
I am probably 5% to 8% more
expensive than those that
belong to the large brands.
So, how will I win business
– in fact survive – if I am
transparent with my fees?”
Another agent, who wishes
to remain anonymous, agrees:
“On a high level principle,
why is transparency so
important? Is it driving the
right behaviour? Surely the
guiding principle with any
pricing is being competitive
and delivering a product and
service to your customer that
correlates and exceeds the
value you are delivering. In
fact, I firmly believe having
a business model that is
driven by overrides drives
the wrong behaviour and
enslaves us to our suppliers.
Let’s work together to create
a model that incentivises
us on delivering value to
our customers, not one
that suppresses success,
entrepreneurship and true
competitiveness.
“So next time we brand
nett fares as ‘fraudulent’ or
‘unethical’, perhaps we should
think again?
