You can’t turn around without hearing bad news these days. AIG handed out almost $200 million in bonuses with one hand while the other was held open for a government handout. PFK Hospitality just predicted a nearly 14% decline in hotel revpar (revenue per available room). Liberty Travel closed four of its seven Maryland locations. AAA Mid-Atlantic has reduced staff hours. One of the most notorious MLMs in the travel business just released a dismal report that stated that they may not be around for too much longer. If you are looking a feel good column, you aren’t going to find it this week. Sorry. You want happy? Click here! You want some reasonable advice? Read on.
As has been mentioned in this column before, I think we are in the midst of a perfect storm and the strong will survive. As an agent of your client, your first priority needs to be the best interests of your clients; but while doing that, you also need to look out for your interests as well.
One of the most vulnerable segments of our industry is the tour operator. They tend to have relatively high overhead costs, and they typically need to make substantial investments in marketing and in inventory which they do not own. If a tour operator has deposited $1 million with a hotel in Europe for the upcoming summer season and the hotel goes belly up—the tour operator will get slammed, and if they are not strong enough to absorb it, your client may get slammed as well. Cruise lines are somewhat insulated from this because they own their product and much more is under their control. A tour operator generally pieces a package together using an airline, ground operator, and hotels—all of which must work in sync with each other. With each additional component, the chance for a failure increases exponentially. And if you are like me, there is no way you (as the agent) can absorb even a part of a failure of this type.
Who is your client going to blame when their trip does not appear but their money has disappeared? Right or wrong, you will be involved. So, what is the solution? Pick the right supplier and sell travel insurance! When I say travel insurance, I am talking about a full fledged bonafide third party insurance policy underwritten by a surety that is rated by A.M. Best. Please, please do not make the mistake of thinking that a supplier’s trip cancellation waiver is insurance. It is not. And if the supplier defaults, your client has no recourse. I wrote a column for MSNBC a few years back detailing the difference. Some suppliers will offer true insurance, typically these are self insured products, so if a supplier goes under, no coverage. To be honest, in today’s market I suggest that a client leaves my agency with one of two things—a policy or a signed waiver stating that he or she refused the policy. And, I make sure that everyone in the party signs the waiver!
Determining the right supplier to use can be a little more tricky. Hopefully, you have realized the benefits and importance of having a core group of preferred suppliers. Treat these suppliers like your clients. Communicate with them. Work with them. And yes, track them. I routinely run reports on my clients and my vendors. I know that after a client travels to a Beaches resort, I will have a check in hand 12 to 14 days after their arrival date. I know that an individual booking with Royal Caribbean will result in a check 17 to 20 days after final payment is made. I know for a group, it’s 27-31 days after the group returns. When a supplier becomes irregular, I take notice and ask a few questions. I may post an inquiry on an agent only forum. Or, I may call my District Sales Manager and invite him to lunch. Much information can be learned for the cost of a sandwich and a cup of coffee. It is very important to be in tune with your vendors—if you are, you likely will be able to catch something before it happens.
No one is going to tell you which vendors are at risk or who the “bad” ones are; I have my opinions and other travel professionals have theirs. For the most part, you need to figure it out on your own, and to be honest, trusting your gut is probably a very good thing. I will go so far to say I cringe every time I see a post on a forum that begins, “I have never heard of Podunk Tours of Achmanistan…are they any good?” If you are not familiar with a supplier or at least know of their reputation, now is probably not the best time to learn.
One insurance carrier, Access America, helps you out a little. I spoke with Mark Cipolletti, Vice President of Communications and discussed their approved vendor list.” We do things a little differently than some other travel insurance suppliers. We do a white list and not a black list. In other words, we post the suppliers that we will provide supplier default coverage for, not the ones we won’t. We feel this approach is more helpful to the agent and the consumer as they select travel suppliers.” However, Mark did add one caveat, “Not being on the list is not meant to be an indictment of the supplier. We have simply chosen not to take on the additional risk. Of course this helps us keep premiums more affordable. If a traveler buys our insurance and chooses to use a non-covered supplier, they will receive all benefits except for supplier default.” You can view the list of covered suppliers on the Access America website.
We have a rough year or two ahead of us. To survive and thrive, we need to hedge our bets any way we can. Proactive marketing or simply keeping in touch with your prospects will offer your greatest chance of success. Making sure your traveling clients are protected fiscally will be another indicator of success. And finally, keeping tight tabs on your suppliers will hedge the bet. OK, so was that depressing enough for you? Here, go watch Matt!