Vegas resorts continue paying travel agents

By Liz Benston

Friday, June 28, 2002 | 11:13 a.m.

Shunned by major airlines, travel agents are finding they are still appreciated and respected by the Las Vegas casino resort industry.

As major airlines decided to eliminate base commissions to travel agents in March, delivering a major blow to smaller booking agencies nationwide, The Venetian resort in Las Vegas launched incentives to reward agents.

Agents can receive 2 percent in "suite credits" for every dollar in room revenues booked through The Venetian's reservation department or third-party reservation and marketing provider. Agents may use the credits toward a stay at The Venetian any time of year, including peak periods.

"You could characterize The Venetian as one of the most travel agent-friendly properties on the Strip," spokesman Kurt Ouchida said. "We believe travel agents represent a strong distribution channel for The Venetian that books at a good rate for the hotel."

Other major hotel-casinos on the Strip share a similar outlook, a sign of the gaming industry's dependence upon agents despite a proliferation of Internet sites offered by cut-rate wholesalers and hotel websites that allow customers to book rooms themselves.

Companies including Park Place Entertainment Corp., MGM MIRAGE, Mandalay Resort Group and Harrah's Entertainment Inc. say they are committed to maintaining 10 percent commissions for travel agents. "As long as it's a typical brick and mortar travel agency that's ... helping and motivating the traveler, we think there should be a form of compensation," said William McBeath, president and chief operating officer of the Mirage hotel-casino.

The outlook isn't limited to Las Vegas hotel-casinos. Major hotel chains, including the Holiday Inn, Hilton, Marriott and Sheraton brands, also are maintaining 10 percent commissions, travel agents say.

Agents can discuss entertainment options and hotel amenities with customers, whereas Internet sites require the customer do do such legwork. The service and convenience of using an agent is especially important for high-end properties, which attract more discriminating travelers who aren't as price sensitive, McBeath said.

Park Place -- the largest gaming company in terms of gross revenues and one of the most geographically diverse -- has seen an increase in hotel rooms booked directly through its website or through Expedia and other Internet wholesalers. Even so, the company has a long history with agents and has no plans to change its 10 percent commission structure, though individual properties may adjust commissions to fit market demand, Park Place spokeswoman Debbie Munch said.

"Travel agents are a big part of our success in Las Vegas," she said.

Mandalay Resort Group is similarly appreciative.

"Travel agents are good partners of ours," said company spokesman John Marz. "We market to the travel agent, we appreciate their business and we continue to support them in selling our rooms."

In addition to offering room credits, the Venetian also recently began giving 15 percent agent commissions for rooms booked at off-peak times, which occur in summer and at other times throughout the year.

The incentives weren't aimed at driving business after Sept. 11, Ouchida said, but were instead intended to offer long-term rewards to agents. "It's really a way of giving them something back."

By contrast, American Airlines, Delta Air Lines, Continental Airlines, United Airlines, Northwest Airlines, US Airways and a slew of other large carriers have eliminated base commissions in response to slow business conditions and the increasing availability of Internet airfare booking options. They continue to reward agents for above-average performance.

Las Vegas-based National Airlines, which has operated under Chapter 11 bankruptcy protection since December 2000, still pays agents the industry standard of 10 percent. Southwest Airlines, which is in relatively strong financial health, pays 5 percent. Travel agents have blasted the airlines for being short-sighted and for bowing to Wall Street, which viewed the cuts as necessary for money-losing airlines.

Agents also have praised the hotel industry for maintaining or increasing incentives. One outspoken critic, the American Society of Travel Agents, says the airlines shot themselves in the foot when they began to reduce incentives at least seven years ago.

"The hotels got impacted like everyone from Sept. 11, but they are intelligent enough to know that they they don't think the Internet is the answer to everything," said Richard Copland, the agency's president and chief executive. "The one thing the industry should be learning is that travel agents who are properly compensated can deliver business to customers."

Fundamental differences exist between the airline and hotel-casino industries with respect to agents, one Wall Street analyst noted.

Customers are nearly exclusively focused on price when choosing airlines, which offer similar services. But they are more likely to select a hotel based on particular features or amenities and with less regard to cost, said Steve Kent, a hotel and gaming analyst with Goldman, Sachs & Co.

That leaves more opportunities for agents to drive business to particular hotels, a worthwhile reason for hotels to pay commissions, Kent said.

"The hotel and casino industry is generally more profitable and can essentially afford to pay the commissions. It doesn't want to alienate any potential source of customers," he added.

Las Vegas trips have topped travel agent bookings nationwide for the past two years.

Around 30 percent of travelers polled in a Las Vegas Convention and Visitors Authority survey last year said they used an agent.

That's in line with averages at MGM MIRAGE, one of the largest Strip operators. About 25 percent of so-called "independent traveler" customers and about 60 to 70 percent of travel package and wholesale customers use agents.

That's a significant business segment, said MGM's McBeath, who also serves as a director of the LVCVA and chairman of Las Vegas Events, a nonprofit organization that supports event organizers. The company also uses Internet wholesalers, and offers them an average 5 percent commission for driving business to MGM hotels.

One Internet service, Expedia Inc., now collects more revenue from trips booked to Las Vegas than any other destination. The service, at www.expedia.com, is considered the largest of its kind on the Web.

Some gaming companies aren't as reliant upon agents.

Harrah's offers standard commissions for agents. Still, the gaming giant prefers to extend promotions and other marketing pitches to customers who book rooms through the company's website. The site is powered by intricate software that adjusts offerings and prices to customers' buying habits.

"Harrah's is a very familiar name and sells by itself," said Adrienne Blakeslee, the company's corporate director of travel services.

Harrah's also has had success booking rooms through online sites such as Expedia, Priceline and the Hotel Reservation Network, which can fill rooms on short notice and in between peak periods, she said.

Competition from a continuous stream of newer properties also is a factor, she added. "When a beautiful new hotel comes out ... we don't find (agents) to be loyal to our product -- nor do they have to be."

John Berman, director of leisure sales for Prestige Travel and Cruises in Las Vegas, said travel agents have value because they offer needed services at a reasonable price.

The agency's business rebounded just weeks after Sept. 11, regardless of any commission programs, Berman said. Lower hotel rates were a factor immediately following the terrorist attacks, though more interest in cruises and car trips have helped boost business more recently.

Other agencies haven't been so lucky. Several agencies of all sizes have closed in Las Vegas in the past year, reflecting closures nationwide, local agents say. The Airlines Reporting Corp., a processing clearinghouse for the airline industry, reports a total of 26,440,000 retail agencies nationwide through May, a 5 percent drop from the end of last year and a 14 percent decline from the end of 2000.

Hotel commissions are vital for agencies like Go Vegas First Class, a home-based, full-service travel service run by Rosemarie Hughey.

Hughey said she still must contend with hotel chains' websites. Similar to airline companies, the sites in recent years have allowed customers to bypass agents and book their own rooms. The sites entice customers with reduced rates, free breakfasts and other amenities.

Agents have a role to serve in the online world, she said. "When there is a problem, (customers) come to us. The travel agent doesn't get the recognition as a professional that we deserve."