Airline changes have an impact on campus

An industry-wide move by Canada's major airlines to bypass traditional travel agents in order to deal directly with customers is being felt on campus.

Last October, airlines reduced the commissions they pay to travel agents by nearly 40 per cent. Cuts went into effect by December, resulting in the need for travel agencies and travel management companies to examine how this loss of revenue will impact their business.

That move has sent many around McMaster, including faculty who require travel for research purposes, scurrying to find more budget-conscious options.

“It hurts all customers,” says Terry Galan, director of purchasing services. “It's precipitated the implementation of user fees and has caused the bankruptcy of smaller agencies. And it's only going to get worse with only one larger airline.”

Prior to 1996, commissions received from airlines, car rental companies and hotels subsidized 100 per cent of the cost of travel agency services. Since then, airlines have identified an opportunity to transfer more of the distribution costs to the customer by reducing travel agency commissions. Those cuts have resulted in a 55 per cent reduction in total commissions paid to travel agencies.

Travel management organizations, like Global Travel Solutions which operates McMaster Travel Services, have been forced to find new sources of revenue. In December, GTS closed its corporate office on the second floor of Gilmour Hall. It now operates from one location in the basement of Gilmour Hall.

It is expected that service and management fees will form the basis of a new economic model for travel agencies.