Next time, forget the ticket

PUBLISHED : Sunday, 26 December, 1999, 12:00am
UPDATED : Sunday, 26 December, 1999, 12:00am

Passport, ticket, money - is the mental check most travellers make before heading out the door. Soon that mantra could be changed to 'smart card, reference number, credit card' as travelling becomes more electronic than ever.

Within the next decade, travellers could find themselves passing through airports with little more than a swipe of the card, as electronic ticketing, automated check-ins and high-technology immigration counters find their way into airports. At the same time, the way travellers pay for their travel is set to change dramatically.

Electronic ticketing is now being offered for Cathay Pacific flights to more than 20 destinations.

United Airlines, which first offered electronic ticketing for its shuttle services in the US in 1994, now has e-tickets available for all routes. In October, 58 per cent of UA passengers used electronic tickets.

Alan Wong Ka-lun, Cathay Pacific general manager for Hong Kong and China, said this will make it much easier to travel and to book flights at the last minute.

When the passenger books a ticket, he receives a receipt with a reference number, while the airline enters his details directly on to the reservation system.

When he turns up at the airport, he needs only to tell the check-in desk his reference number or his name, and his reservation is traced on the computer.

'It does not matter if you lose the ticket,' said Mr Wong, as long as you have the identity documents to prove who you are.

Automated check-ins will take longer to arrive but already Lufthansa passengers with no check-in baggage can check-in automatically at Frankfurt Airport. Ultimately, a scanner will deal with the luggage.

Replacing immigration officers may take longer still, but in some US airports, business travellers on the INSPASS scheme can pass through using a smart card or by placing their palm over a hand scanner to establish their identity.

Possibly the first change business travellers will see will be in the way they pay their bills to the travel agent.

From mid-January, there may be a 'documentation fee', 'consultation fee', or 'transaction fee' on your bill in addition to the cost of the air ticket and hotels. The travel agent may even bill you for the hours spent arranging your trip.

Many business travellers are concerned about the emergence of fee-based charging, which has become common in the US and Europe.

A Sunday Money survey of members of the Association of Business Travellers revealed most felt uncomfortable about the change, although they did not expect it to raise costs.

In the travel industry, most people believe fee-based charging is inevitable.

Traditionally, the airlines have paid agents a commission on each ticket sold. The standard International Air Transport Association commission is 9 per cent of the ticket price but some airlines have reduced the commission rate or have abolished it altogether in recent years, to cut costs.

One of the first to reduce commissions in Hong Kong was United Airlines, which cut commissions to 7 per cent in September this year.

Cathay Pacific is to cut commissions from 9 to 7 per cent on January 16 and most other airlines can be expected to follow the lead of the flag carrier.

'Worldwide, the airline business, like other businesses, has been reviewing its cost structure to find the most cost-effective distribution model,' said Mr Wong.

Airlines' biggest single cost of distribution is commissions and it is inevitable those costs will be scrutinised as business becomes more competitive in Asia.

A small reduction in commission can have a big impact on travel agents' business. The agents will have to re-structure the way they do business and most are likely to introduce fee-based charging.

Some agents are already charging some customers in this way. Westminster Travel began charging fees to a small percentage of its clients, mostly its largest clients and those in the service sector, who tend to understand the fee structure better.

'Most of the international companies have been exposed to it,' said David Pettigrew, commercial director at Westminster Travel.

'The challenge is going to be the smaller clients.' The difficulty for many travel agents is going to be working out what fees to charge and setting those fees correctly.

'We've got to identify and isolate our costs of doing business,' said Mr Pettigrew.

Not only does that mean working out how much time the travel consultant has put into selling the tickets but also the cost of using computers, photocopiers, fax machines and even estimating the cost of the space taken up by the travel consultant.

Initially, he admits, some of the agents may charge higher fees to be sure they are covering the costs of doing business. But ultimately, the new charging structure can help reduce the costs of travel, particularly for corporate customers.

Under the old system, he said, the income of the agents was tied to their suppliers, in an arrangement that may not have always put the best interests of the client first.

Agents also found they could receive the same commission for issuing a simple single-leg Business Class return ticket as a more complex Economy Class ticket with multiple connections, which could take the agent much longer to arrange.

As commissions shrink, travellers will find themselves paying more anyway. Agents say much of the commission from the airline is passed onto clients as discounts, so if commissions disappear, so would the discounts.

Richard Willis, managing director of P&O Travel in Hong Kong, describes himself as an advocate of fee-based charging.

'Everything is more transparent,' he said.

Corporations will pick their agents on the basis that they can help reduce the travel budget, Mr Pettigrew believes.

'It engenders a much closer relationship with the client.'