AVENUES TO TRAVEL RIDING OUT THE STORM

A world of possibility lines the walls of Avenues to Travel's Northwest Tucson lobby. The exotic landscapes of Mexico, Asia and Hawaii jump off brochure covers, luring travelers with photos of white sand beaches and bejeweled foreigners dancing to hand-beaten drums … all just a plane ticket away.

Plane tickets are big business at Avenues to Travel. And plane tickets are going through big changes.

Scott Nelson, co-owner and director of marketing for Avenues to Travel, 7352 N. Oracle Road, said several factors have combined to cause problems for the travel industry. Corporate travel has declined steadily for more than a year, and recreational travel dropped off substantially in the months following the Sept. 11 terrorist attacks.

"Having been in the business 20 years, I can't remember a harder time in the travel industry. Airline ticket sales are down, hotel bookings are down, car rentals, cruises - all down," Nelson said.

Beyond the drop-offs in airline ticket sales, travel agencies have also been combating financial stress caused by the airline industry's decision to cut booking commissions to travel agents.

Traditionally, agents received a 10 percent commission on the base price of each airline ticket sold. This allowed agencies to book flights for travelers without charging the customer a fee. However, in the past six years, airlines have continually decreased the percentage of commission they offer travel agencies for booking passengers on their flights. At the end of March, airlines cut commissions altogether.

"The airline industry is sort of biting the hand that feeds it," Nelson said. "The agency community as a whole continues to book over 80 percent of the airlines' business."

The airlines cited loss of revenue as the primary reason for the commission cuts, but Nelson said Internet booking is the driving force behind the airlines' decision.

Ed Gilligan, president of corporate services for American Express Travel Related Services, said in an interview with The Wall Street Journal last spring, that airline commission cuts sent a "shock wave" through the travel industry.

"The cuts wiped out a third of (the industry's) profit margin overnight," he said.

The industry also suffered a massive blow when planes were grounded in response to the Sept. 11 terrorist attacks.

After the attacks, Avenues to Travel refunded more than $20,000 to customers who couldn't travel as a result of the attacks, Nelson said.

He said it took the public several months to feel comfortable flying again.

"We saw a 40 percent drop-off in business," he said.

Though Sept. 11 had an enormous impact on the business, Nelson says he is more concerned about the rising popularity of online travel Web sites.

The past several years have produced a plethora of online travel-booking Web sites. Both independent travel companies and the airline industry have spent millions of dollars developing user-friendly sites (see story page 9).

According to Nelson, online travel fever is contagious. He says more and more travelers, of all ages, are going online before calling his agency. They then come to Avenues to Travel with an idea of how much they are willing to spend on their travel arrangements based upon airline ticket and hotel prices they have seen on the Internet.

Nelson respects consumers who shop around for a good deal, but reminds customers who contact Avenues to Travel of the many advantages of using a travel agent.

"One of the biggest advantages is that you have someone on your side who knows the industry," Nelson said. He points out that haggling over a lost hotel reservation or a misquoted car rental price is the last thing most people want to do on their vacation.

Aside from acting as a consumer advocate, an agent can also save travelers time and trouble by helping to design a personalized itinerary. Plus most travel agents are travel junkies and travel all over the world for their own vacations as well as to industry seminars and conferences. As a result, they are familiar with hotel locations and amenities, local restaurants, and sightseeing musts for just about any destination. An agent can brief travelers on the "ins and outs" of their travel destination to reduce the chance of difficulty and increase the traveler's enjoyment.

"A couple of years ago, I booked a trip to Disneyland for my whole family," said Debbie Pearson, a divorced mother who frequently plans her family's vacations and who was queried by a reporter as she made her way through the maze of terminals at Sky Harbor International Airport in Phoenix last month.

"I looked around a little on the Internet, but I had to go to one area to find plane tickets, then another area to find a hotel, then the car rental. It seemed like a lot of trouble."

One-stop shopping is an obvious benefit of booking through a travel agency. Agents can make arrangements for anything a traveler might need, from rental cars and hotel rooms to tours and theater tickets. An agent can exchange American money for foreign currency, provide discount coupons and sell traveler's checks.

After giving up on booking the trip herself, Pearson opened the phone book and called a travel agency at random. She said the experience was a positive one.

"I used a travel agent and it was great. They booked everything, hotel, car, I didn't have to do a thing. It took me 10 minutes on the phone."

Pearson told the travel agent of her family's plans to visit Disneyland. The agent gave her discounted admission tickets to both Disneyland and Sea World at no additional charge.

Another benefit of making travel arrangements through an agent is a service called direct billing. Many agencies, including Avenues to Travel, work in conjunction with American Express. This allows travelers to settle bills and purchase traveler's checks directly from their American Express card, eliminating the need for cash transactions.

"We're a full-service agency," Nelson said. "Booking with an agent should be not only an issue of value and convenience, but also an issue of trust."

Avenues to Travel employees take customer satisfaction very seriously. The agency's primary goal is to satisfy its customers. Repeat business and word-of-mouth can make or break an agency, Nelson said.

"We book every reservation as if we were spending our own money," he said. "As if we were booking the trip for our own families."

Family is important at Avenues to Travel as Nelson's mother, wife and brother all work there. His mother, Kathie, started the business at its current Casas Adobes location in 1983 and Nelson began working their in 1987.

The family philosophy, along with excellent business relationships, has kept Avenues to Travel afloat during the industry's hard times. To stay in business in the face of declining commissions and rising Internet competition, Nelson renegotiated business contracts with the company's vendors. He said the company's willingness to stick with certain vendors through downturns in the vendors' business gave Avenues to Travel a strong foothold when times got tough.

"You can't control the money coming into a business," Nelson said. "But if you take time to develop strong, long-term business relationships, you have a little more control over how much money goes out."

Thanks to its ability to negotiate its contracts, Avenues to Travel has managed not only to stay in business, but also to retain its entire staff. Not all agencies have been so lucky. More than half of Tucson's travel agencies have closed their doors since the airlines began cutting commissions.

To compensate for lost commissions, most travel agencies have had to begin charging their customers a transaction fee on the airline tickets they sell. The standard fee is $25 per ticket. Avenues to Travel limits its fees for individual travelers to two transactions, or $50. This insures Avenues to Travel customers against being overwhelmed by service charges.

Nelson says Avenues to Travel waited as long as possible before instating these fees.

"We were one of the last agencies in Tucson to instill fees," he says. "There was a lot of discussion within our business about it. We wondered if people would find value in booking with us and paying a fee when they could book it themselves for free. We only did it as a last resort."

The fees have not hurt business, which Nelson attributes to a loyal customer base and consumer common sense.

"We continue to provide services that Internet booking can't," Nelson said.

Despite the difficulties the industry has faced, Nelson thinks travel agencies as a whole will endure the commission cuts and begin to thrive again.

"I see this agency, and agencies like it, being very viable in the future," he says. "Every challenge you survive puts you in a better position to handle tomorrow's problems."

NET NOT ALWAYS EASY, CHEAP

Travel Web sites are designed to make booking the lowest air fare seem simple. With colorful cartoon icons and convenient drag-and-drop information boxes, entering a desired travel itinerary on these sites becomes as easy as pointing and clicking.

Package deals are advertised at greatly discounted prices, there are links to car rental agencies and hotels. Prospective travelers can tailor their trip without leaving the comfort of their desk.

However, Scott Nelson, director of marketing for and part-owner of Avenues to Travel, a Northwest Tucson travel agency, warns that Internet "deals" are often exactly what they seem -- too good to be true.

Dianne Barber, a marketing analyst with NPD Online Research, a consulting firm in Port Washington, N.Y., agrees. Barber's team conducted a survey commissioned by airline companies last spring that showed only 18 percent customer satisfaction with online travel Web sites.

Study respondents complained of technical problems on the sites, such as error messages and inaccurate flight availability listings. This caused confusion for online bookers, frequently causing customers to give up attempts to book a flight.

The NPD study showed a 20 percent "look to book" ratio. Travelers trying to find inexpensive tickets most often use the Internet travel sites as a testing ground, visiting many different sites in an attempt to find a bargain fare. Most travelers then contact airline customer service representatives by phone to book the flight.

Participants in the NPD study reported difficulty obtaining the same flights and fares they saw advertised on the Internet when they called the airlines directly. Customers were told that flights had filled in the time it took to attempt their bookings.

Other problems revealed by the NPD study involved travel web sites failing to offer the lowest available fares. Participants found that sites would recommend fares on a particular airline, when other airlines had lower rates on flights meeting the same specifications.

Customers who book flights online often complain about the effort involved in searching the Internet for a low fare. Computer download speeds vary; making what might seem like an easy task into a time-consuming chore. Even with a fast Internet connection, error messages are common.

Aside from the questionable convenience of travel web sites, travelers often wrongly believe they are saving money by booking their flights online. Airlines do little to correct this misconception. Despite the illusion of savings, travelers who buy their tickets online are generally unaware of discounts and promotions regularly used by travel agents. Because of this, customers who book their own flights online often overpay.

A study conducted by TOPAZ International Ltd., an independent third-party firm, found that traditional "bricks and mortar" travel agencies save travelers an average of $90 to $170 per itinerary when compared to online booking. The study ran from May 2001 through December 2001. Researchers examined airline sites and independent Internet bookers, including Travelocity, Expedia, Orbitz, Cheap Tickets.

The TOPAZ study found lower rates on the Internet less than 7 percent of the time. Often, lower fares found online required travelers to change carriers, use connecting flights or stop over in two or more cities rather than flying directly to their destination. Some Internet "bargains" provided nonstop flights, but to alternate airports or at alternate departure times.

Valerie Estep, president of TOPAZ International, Ltd., said booking on the Internet can cost travelers not only extra money, but extra time and trouble. She points out that Internet web sites are designed to offer low fares as incentives, but fail to take into account the value of a traveler's time and convenience.

Nelson said that while self-booking on the Internet allows travelers the illusion of control over their trip, often the opposite is true. He points out that travel agents do more than simply book reservations -- they act as a traveler's support system. In the event that a customer experiences problems while traveling, an agent can act on the customer's behalf, ensuring a quick and satisfactory solution.

"Most people don't realize that if you buy your ticket online, you're on your own," says Nelson. "If you book on the Internet, and your plans change, you have to go down to the airport yourself, stand in line, haggle with the people at the counter. If you book through an agency, the agent can do all of that for you."