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That's the Ticket

A great support network is just what you'll need in the rapidly changing travel industry.

Some travel agencies are going nowhere, except out of business. Even when you're associated with industry leader Carlson Wagonlit (pronounced Vaagonley) Travel (CWT), being a travel agent keeps getting tougher.

For instance, in 1997, major airlines put a $50 cap on commissions for round-trip air fare and reduced the standard fee from 10 percent to 8 percent of the ticket price. Travel agencies complained, but it was to no avail as the airlines again cut commissions to 5 percent last year. As a result, travel agencies have had to depend less on airline ticket revenue. Fortunately, CWT franchisees had the benefit of their franchisor's foresight and, for the most part, stopped relying on airline ticket sales.

Now the industry appears to be moving toward offering vacation and travel packages, which offer better commissions. Naturally, almost every travel agent I interviewed had started doing this-making it a little like a shrinking pond full of fish fighting for the same morsels.

According to a CWT spokesperson, it's the little fish--namely, independent travel agencies--that are going belly-up as a result of their lack of brand identity. Consequently, CWT added 48 franchise locations in 1999 that had formerly operated under independent names. CWT now has about 1,537 U.S. locations, and franchisees say that brand recognition is essential to their success.

On the other hand, CWT has experienced a cumulative attrition rate in excess of 200 franchised locations over the past two years. I spoke with a few of those who had abandoned ship. Many chose to affiliate with travel consortiums like vacationtravel.com. But even though the consortiums have the power to negotiate with travel vendors, they don't come close to CWT's host of resources.

CWT was also the first to include a booking engine on its site (www.carlsontravel.com), which links you to agencies in your area. Unfortunately, the site isn't as slick or informative as those offered by Expedia.com or Travelocity.com, but CWT plans to work on that.

Does this mean the Internet rules the travel industry? Not necessarily. According to the American Society of Travel Agents, 77 percent of 500 "wired" travelers polled who did not book online preferred to speak with a salesperson. CWT believes that its customer service will continue to distinguish it from the dotcoms, and does not view the Internet as a threat. In fact, Tracy Fiers, a veteran travel agent and CWT franchisee, says the Internet helps business by eliminating low-margin airline ticket buyers, freeing up time to counsel more serious travelers.

To become a CWT franchisee, your initial investment will range between $54,000 and $151,000, and your start-up phase could last eight to 12 months. Royalty payments begin at $500 per month for the first year, then increase to $700 per month for the second year, eventually reaching $875 per month. If you're converting an existing agency, costs are considerably lower.

This is a complicated, highly competitive business that operates on low margins. Instead of buying a franchise as a novice, your best bet might be to work in a CWT agency and learn the trade while earning a salary. While Fiers says "people who want to jump in as a novice should have their head examined," she considers CWT the perfect place to go when you do have the experience.


Todd D. Maddocks is a franchise attorney and small-business consultant. You can reach him at TMaddocks@aol.com.

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This article was originally published in the May 2000 print edition of Entrepreneur with the headline: That's the Ticket.

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