As the industry prepares for borders to reopen on October 1, consortiums and suppliers are in discussions, renegotiating their override agreements, with the aim of finding new win-win-win solutions for the customer, agent and supplier in an industry that has been without income for six to seven months.
Head of supply for Club Travel Group, Sharon Schierhout, explained to Travel News that industry generally made use of gross-base override agreements. This means that agents are paid based on the growth they achieve with the supplier compared with their previous year’s sales.
“We are currently negotiating for a new era of override agreements, as the gross-base model will not be a practical solution for the next few years. The industry has not been fully trading for six to seven months, which means that existing targets are completely out of reach. Suppliers will also be hesitant to use the gross-base model the following year, as the industry would then be working off extremely low bases from 2020 sales,” said Sharon. She said she was finding that suppliers were still hesitant to fully commit to new agreements while there was still so much uncertainty relating to the SA government-approved country list and the new travel protocols.
Gm of Travel Counsellors South Africa, Mladen Lukic, said there had been a huge amount of financial damage incurred in the industry during this period and that it was important that both suppliers and agents understood each other’s current financial positions before entering into new agreements.
“We are finding that our suppliers are eager to rebuild their businesses and grow relationships with the trade but it is essential that all parties place high importance on ensuring that customers are protected. We are going into negotiations with our eyes wide open and want to ensure that the agreements we put in place now are with people that we will have long-term relationships with. We also want to have clarity on the suppliers’ short- to medium-term plans and what their distribution channel policies will be” said Mladen.
“The industry has every reason to celebrate the announcement that South Africa’s borders are reopening months before the initial predictions. While this is the trigger that will restart the industry there are still several steps that we will need to work through before trade can actively resume. Clarity is needed on the approved country list before suppliers can reinstate routes and confirm frequencies. The industry will then need to fully understand the implications of the new protocols, both within South Africa and abroad, and will need to navigate how to assist clients in obtaining COVID test results within 72 hours of departure, for example,” he added.
Mladen believes the industry does not have a true understanding of travel demand or of how their customer bases have been affected by the pandemic, as agents have not been fully engaging with customers for the last few months. He said the situation in Western Europe was still dire for the travel industry, despite it having partially reopened three to four months previously, and any agreements that were entered into would need to be based on the reality of a situation which it was still too early to fully understand. It would be naïve to fully commit to new agreements at this stage, said Mladen.
Ceo of XL Travel, Marco Ciocchetti, said he expected incentive models to be completely different to what had been in place previously and said suppliers should be encouraged to bring in schemes that offered more immediate rewards to fast-track the rebuilding of the industry.
Coo of Tourvest Travel Services, Claude Vankeirsbilck, said the current situation gave a massive opportunity to change incentive models to create a win-win-win scenario for the supplier, agent and customer. He said the lockdown had provided the industry with some pause time to analyse these agreements and he believed they should be based more on what value businesses could add rather than on volumes. He said agents had also proved how much value they added to the supply chain.
Claude said he believed that airlines could be more willing now to ensure that agents were suitably rewarded within the limitations of their budgets (which have understandably, also been devastated during this period).