Emirates move creates stir in market

Emirates' decision to abolish the base commission of UAE travel agents – which currently rests at seven per cent – starting October this year, has created a stir in the travel market. Emirates Business found out how travel agents are planning to cope with the situation, especially if more Middle East carriers were to follow suit.

While some travel agents fear this move by Emirates could may well put them out of business, others are busy identifying alternative revenue streams.

"We will soon be out of business this way, even though it was expected since most European carriers have already abolished the commissions before. And especially now since Emirates has taken this step, all other Middle East carriers are bound to follow suit," Narouz Sarkies, General Manager for Belhasa Travel and Tourism said.

A zero-commission atmosphere has existed globally for a while. European carriers took the lead in 2006, which was soon followed by the US carriers. However, most travel agents in the Middle East still depend heavily on regional carriers paying them seven per cent commission on ticket bookings.

But while some agents are counting their days, there are others who seem to have reconciled to the fact, and are already looking at alternative revenue streams. "We were expecting this and in general we are prepared for it. The zero-commission move could actually prove to be beneficial for clients as they would be able to pay for exactly the service they require. We can now offer them a menu of services and charge a transaction or a service fee instead, in order to make up for the lost commission," said Martin Kotzur, head of sales at Thomas Cook Al Rostamani.

The company is, however, planning to persuade Emirates to postpone its decision until January next year. "That is because we already have all our contracts placed with our clients until the end of this year," said Kotzur.

Sharaf Travel's General Manager V Jayaram echoes similar thoughts. "Emirates' decision to abolish the commission has been accepted by travel agents. We will have to mark up our service charges and we will have to identify new streams of revenues."

Also, while it might be good news for customers, it is bad news for the smaller travel agents.

"There will be no big impact on the corporate and professional travel agencies in the region. But for smaller agents, it might be a problem as they do not have much money with them and so they won't be able to cover their expenses.

"Internet bookings, meanwhile, will also highly impact cash agencies," said Samer Ascha, General Manager at Sharjah-based Skyline Travel and Tourism.

"Though Emirates has cited increasing fuel prices as a reason for the move in its intimation letter to travel agents, in my opinion it is just the profit decision from their management.

"Keep in mind the fact that there was no fuel price crisis two years ago when European carriers implemented the zero-commission rule," he added.

An industry analyst said: "If looked at practically, it is good news for most established travel agents in the region as they can make a lot more money this way. And it would also ensure that a lot of unprofessional companies would be put out of business, resulting in improved quality of travel agents."

Clearly, it is time all agencies put in place a service-fee plan as an alternative to the lost commission.