By Bruce Piper
Last month’s release of the outcome of the Hayne Royal Commission into the Australian banking sector prompted what seemed to me to be some extremely misguided commentary from the travel industry. In a true “what on earth were you thinking” moment, at least one senior industry figure took the unfortunate opportunity to link travel industry remuneration to some of the dodgy financial practices highlighted by the Commission’s report.
At a juncture when anyone with a grain of sense would be scrambling to distance the sector from the shocking revelations of wilful exploitation of financial institution customers, a story covered in the Australian Financial Review suggested that travel agents would be well advised to boost their transparency and shift the industry business model to become based on fee income from clients, rather than commissions paid by suppliers.
The banking royal commission has recommended sweeping changes to how financial advisors and mortgage brokers are remunerated, including banning trailing and upfront commissions, which “could have transferable impacts for travel agents,” the report claimed. Within days the story had been picked up elsewhere, including in marketing newsletter Mumbrella where high-profile industry commentator Tim Burrowes noted “the travel industry is already talking about the conflict it faces in recommending holidays to clients while taking commissions on those holidays”.
Why on earth should travel agents, among all retailers, be forced to expose their margins? When you buy a new car, or a washing machine, or a TV, or do some home improvements, do the middlemen in all of these transactions tell you how much they are making, or the incentive trip they might win, in the interests of transparency? Of course not — this is how business works — you sell something which generates a profit. The timing of the commentary really couldn’t have been worse, with AFTA already involved in a battle with the NSW government where Minister for Better Regulation, Matt Kean, is attempting to lump travel agents alongside insurance brokers, real estate agents, financial advisors and “comparator sites” for electricity and health insurance, by mandating disclosure of commissions to consumers.
AFTA has lodged a comprehensive response to this NSW proposal which has, hopefully inadvertently, captured the travel sector. Comments such as those reported in the AFR are completely counter-productive, and the industry would be well-advised to be seen to be working together rather than pulling in different directions — no matter how desperate some people are to get a mention for their brands in mainstream media.