October 20, 1999
Press Release from ACTE President

“Stop Thinking Commissions,” ACTE President Tells Membership: “Get on with it and stop crying.”

New York, Oct. 20 — Commissions on airline tickets will dwindle away to nothing, and will eventually be followed by every other kind of commission paid on rental cars and hotel rooms, according to Earl Foster, president of the Association of Corporate Travel Executives. Speaking in response to the most recent round of commission cuts, ACTE’s president was amazed that any business travel management professional (travel managers, travel agents, or suppliers) could be caught unaware by this new airline industry development.

"This association developed a special series of travel management forums last year, specifically stating that commissions were on the road to extinction and that everyone had better have another plan in place," said Foster. "The commission concept is giving its last gasp. Consumer resistance is futile and pointless in the face of the inevitable."

The ACTE president advised the industry that planning for the future would be far more profitable than arguing with it.

"Are we slated to continue complaining each time an action of this type arrives, and then put our heads in the sand again until the next time?" asked Foster. "Will the agency never get it? Will the corporates who don't understand continue to try to have deals with everyone instead of developing long-term relationships that allow savings to both parties?"

In Foster's estimation, the commission concept was always somewhat skewed and has given travelers and consumers the notion that-aside from the cost of transportation-every other step in the process is free.

"When I entered the business travel management field, I couldn't understand for the life of me why I outsourced my business to an agency, set up specific goals and service-level metrics-and then asked someone else to pay for them," said Foster.

Foster believes that the history and nature of the commission structure have led to some expensive built-in problems and trends that made booking procedures doubly expensive. "

We all made a basic error back in the days of regulation, when we convinced people that travel was free except for the cost of the ticket," said Foster. "We never told them that commissions existed and that agencies were making a profit from their business. Now that deregulation has taken us to the point of where we are today, economic realities have some short-sighted business travel industry practitioners crying foul."

Foster explained that fee-based arrangements (which have become the industry standard) are the most practical approach to purchasing travel, and resolve a plethora of problems. "

A growing number of companies are studying the procedure where the fee will be charged to the traveler, who will then be required to expense it," said Foster. "Some of us do this now in an attempt to change the behavior of our travelers. Once travelers know it costs something to book travel they will modify their behavior and eliminate the waste in change numbers. Today there is around a 40 percent change rate and no business can sustain themselves at that rate."

Foster stated that corporations need to develop long term relationships with only the requisite number of suppliers needed to accomplish our business.

"We do that with everything else we do, and travel is no different," said Foster. "Commission cuts became inevitable when we asked the airlines and other suppliers to take cost out of the price and to improve their efficiency. I continue to encourage the airlines and all suppliers in general to eliminate all forms of commissions including soft dollars sooner rather than later. Let's all understand where the costs are and work to get them under control."