Air travellers face higher agents' fees
Hong Kong travellers face higher fees and new charges from travel agents as more airlines move to eliminate agent commissions, the Travel Industry Council has warned.
Service fees will vary but can be as high as 8 per cent of the ticket price, said Larry Lo Fai-wah, a director of the council which regulates the trade.
'If the day comes when there are zero commissions in Hong Kong, travel agents will definitely have to charge a service fee,' he said.
Recommendations by the council call for travel agents to add or raise most of their service fees from November 1. For example, customers who use an agent to issue free tickets or upgrade a ticket with frequent flyer points will have to pay a HK$500 fee per ticket, up from between HK$200 and HK$350 now. To make corrections to the passenger's name on a ticket, the customer pays a HK$250 service fee while the travel agent is charged about HK$150 by the airline.
These latest fees are recommendations offering guidance to travel agents and customers - unlike a council fee schedule in February 2003 that imposed minimum levels.
A HK$250 fee per ticket will also be added when agents help a customer book low-cost carriers or airlines that do not pay commissions.
Lo said it was likely Hong Kong would follow in the footsteps of Singapore, where travel agents do not receive commissions but generally charge a service fee of at least 5 per cent to 8 per cent, even for purchasing air tickets. The service fee varies depending on the travel agency under Singapore's competition law.
In April, amid vocal opposition by the local travel trade, Air France and KLM, which joined forces in 2004, stopped paying commissions to Hong Kong travel agents. Up to October last year, agents earned 5 per cent on every ticket they sold for the airline but this was lowered to 3 per cent and then scrapped completely in April. So far, all other carriers continue to pay commissions.
Advances in electronic data processing have saddled travel agents with extra costs and cumbersome procedures in selling air tickets. Everything from changing flights to redeeming frequent flyer points incurs additional costs that travel agents are finding increasingly difficult to offset, especially as airlines slash or eliminate agent commissions.
This has led to customers shouldering higher service fees as travel agents seek alternative sources of revenue.
On cheaper or promotional fares, travel agents make money by pocketing the difference between what an airline charges them for a ticket and the ticket's 'recommended selling price', Lo said. 'Ever since electronic ticketing started in about the middle of 2007, changing the date, flight and itinerary required the reissuance of a new ticket. This new ticket has its own costs,' he said.
These costs include a HK$3 per ticket levy payable to the council to provide compensation to airlines owed money when a travel agency collapses. Reissuing a new ticket also affects the travel agency's business because an airline only allows an agency to sell as many tickets as it has paid for in a 'bank guarantee'. If a travel agency pays a HK$2 million guarantee to an airline, the agency can only sell up to HK$2 million worth of that airline's tickets, Lo said.