Trade assesses cost of services

ASATA is reviewing
conducting a cost-ofservices
study to match
the trade’s current business
needs.
Ceo of Asata, Otto de Vries,
says circumstances such as
the introduction of the new
government travel policy and
SAA’s decision to restructure
its override commission
agreements with agents (see
TNW May 27, 2015) have
changed how travel agents do
business.
It has been at least ten
years since Asata has
conducted a cost-of-services
study. It would look at the
actual costs of all the types
of services agents offer to a
specific account.
“We want to find a model
that is fit for purpose,” says
Vanya Lessing, ceo of Sure
Travel. “Essentially, we hope
to be able to say, ‘here are
the different types of models
that are operational – what is
the best model for you?’.”
Most agents work on a
model that is based on the
value the agent provides to
the client, says Vanya, with
the current business model
being a service fee model
based on transaction fees
and management fees.
However, a large amount
of income was derived from
overrides and commissions
due to the value agents
brought to suppliers. “In a
way, the previous model,
specifically in the case of
government travel, the service
fees were being subsidised
by income earned from the
supplier. With no supplier
income, those service fees go
up,” says Vanya.
“There are still many
agents who are reliant on
overrides and then bastardise
the market with inaccurate
service fees and thus the
true price of travel is not
costed correctly,” says
Marco Cristofoli, md of
Harvey World Travel Southern
Africa. He says most Harvey
World franchisees charge
an appropriate service fee
and that the industry needs
to reduce its reliance on
overrides in order to level the
playing field.
“I’m amazed that the
industry is still so reliant on
overrides,” says Garth Wolff,
ceo of eTravel. He says that
although the consortium
earns income from overrides,
eTravel ITCs are advised to
see override agreements as
“cream” and not as their
main income. Garth says,
with the decrease in override
agreements the industry has
seen, travel agents are going
to be forced to make up their
income in service fees and
how that fee is constructed.
“I can tell you, though, that
overrides aren’t going to
disappear,” says Garth. He
says airlines need a sales
force to sell their product
and that, regardless of what
one calls the payment the
trade receives from airlines
to act as a sales force,
airlines will quickly realise
that selling through the trade
will prove less expensive than
employing a separate sales
team.