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Travel Agents Face Tough Challenges in WashingtonFebruary 23, 2010 By: George Dooley
While the economy may improve in 2010, the travel agency industry will face tough legislative challenges that will impact every sector of the industry including independent agents. It will also put a premium on ASTA’s ability to represent the industry in state capitals, befor Congress and among regulatory agencies.
“The industry faces a relentless tidal wave of tax and fee proposals from a multitude of sources – federal, state and local - including hotel occupancy tax proposals that will challenge the industry and our ability to respond,” Paul Ruden, senior vice president for legal and industry affairs said in an interview with Travel Agent.
Ruden, joined by Colin Tooze, vice president for government affairs, urged travel agents to get involved. They noted key federal legislation, such as and aid to small businesses, that will directly impact travel agents.
“Be warned," Ruden said. "Every level of government is looking for new revenues. As independent businesses the expectation is of rapid change that has to be monitored, evaluated and dealt with. Travel agents must have a voice and ASTA gives them the representation they need. Relations with other sectors of the industry, including the airlines, are also changing.”
One example is Senator John Kerry’s (D-MA.) who introduced legislation in December to change the IRS rules governing independent contractors and employers. Kerry’s bill focuses on “a current tax loophole, which allows employers to misclassify some workers as independent contractors." From Kerry’s perspective this denies employees valuable rights and protections.
Ruden and Tooze sees the bill as an attempt to close a tax revenue loophole that would add millions to federal coffers with the potential to disrupt if not damage the crucial relationship between host agencies and independent agents.
The bill is co-sponsored by Senators Sherrod Brown (D-OH) and Paul Kirk (D-MA). "During times of record budget challenges, we need to close loopholes that undermine federal and state budgets,” Brown said.
"For too long, Congress has allowed American workers to be short-changed by being misclassified by their employers as independent contractors instead of employees, at a cost of billions of dollars each year to the Treasury,” Kirk added.
While the fate of the Kerry “Safe Harbor” legislation in the House or Senate is unknown, its clear that it is one of a host of issues that have to be addressed in the year ahead. "Congress has a crowed agenda in 2010 and any group that hopes to influence legislation will have to act quickly and professionally," Tooze said. "In ASTA’s case we have proven our ability to move on behalf of our industry and agents."
Complex industry issues are another area of concern. One recent example was United Airlines’ attempt to shift credit card cost from United to travel agents. ASTA was able to act quickly, gaining support from members of Congress to question United’s policy and to focus industry wide attention – much of it critical - on United’s action.
“The United case underscores the importance of ASTA’s grassroots network of agents and the importance of having the staff, resources and credibility to reach members of Congress on any given issue,” Ruden said. “This will be a crucial asset in the year ahead. Not only do ASTA members – and non members - alert us to local challenges but provide the leverage ASTA needs in Washington.” ASTA’s Chapters are a vital asset, he notes.
Ruden believes that the United policy would force agencies to obtain and use their own merchant accounts and settle with the airline in cash. By cutting off travel agents from the United merchant account, many agencies could be forced out of business, while those who are able to open merchant accounts of their own would be forced to pass additional fees on to their clients. In 10 states, however, law forbids retailers from passing credit-card surcharges on to consumers.
States and Cities
While Congress is looking for every opportunity to raise revenues, so too are states and municipalities. “Many states and municipalities are seeking new revenue sources and are eager to increase fees and taxes on the travel industry” Ruden says. “Including hotels and car rental firms. They often see travel as a non-voting interest that can be tapped. Worse, these are often stealth taxes or fees that are passed without regard to the economic impact on travel and tourism and in the dead of night. The industry is often put in a reactive position.”
Tooze and Ruden agree that often the proposed fees and taxes are drafted without any grasp of the economics of the industry or the economic contribution of travel agents. And again they rely on ASTA member agents to alert them and to generate action to oppose unfair or discriminatory fees and taxes.
A recent effort by New York City to impose fees on transactions is cited as another example of what Ruden believes was not in the city or the industry’s best interests. It garnered immediate opposition from ASTA, the hotel industry and tour operators.
Despite the challenges, there are real reasons for optimism. One is the strong relationship that ASTA has with other industry groups and the ability to form and join ad hoc coalitions of interested associations to influence legislation. This ranges from the Business Travel Association, the Interactive Travel Services Association (ITSA), the NTA, USTOA, and U.S. Travel, to name a few. STA also allies itself with consumer groups to represent consumer issues and works with global groups such as the World Travel Agents Associations Alliance (WTAAA).
Another plus for travel agents is ASTA’s unique representation of major agency groups in the Corporate Advisory Council (CAC). Not only does the CAC have representation on ASTA’s Board of Directors but represents a diversity of agency groups and interests. This includes agency groups such as American Express Travel’s Representative Network, Vacation.com, franchiser TravelLeaders , Uniglobe Travel and other powerhouse groups representing corporate and leisure interests of large and small agencies.
“Travel agents, including the independent agent, have to confront the fact that they have to be effectively represented in Washington and in state capitals” Ruden said. “Agents have legitimate economic interests and contribute to their communities. They generate jobs and tax revenues. They need an effective voice that ASTA can and does provide.”
Both Tooze and Ruden are attorneys. Tooze oversees all federal legislative activities and advocates for ASTA’s legislative positions before Congress, federal agencies, and the administration. He also monitors the 50 state legislatures and directs all federal and state grassroots efforts. As the assistant treasurer for ASTA’s Political Action Committee (ASTAPAC) he manages all fundraising and federal reporting activities.
Ruden’s responsibilities include all of ASTA’s internal and external legal activities, industry policy issues, state and federal legislation, consumer affairs and extensive media activity. He served as Acting Chief Operating Officer of ASTA for periods in 1992 and 1998-1999.
In June 2001, the Speaker of the House appointed Ruden one of the nine commissioners of the National Commission to Ensure Consumer Information and Choice in the Airline Industry. In 2001, he also served on the Department of Transportation Air Carrier On-time Reporting Advisory Committee. In 2008, by appointment of the Secretary of Transportation, he served on the DOT National Task Force to Develop Model Contingency Plans to Deal with Lengthy Airline On-Board Ground Delays.
Seller of Travel Laws
Another area often overlooked by agents is Seller of Travel laws that regulate agents and travel suppliers in 17 states, including the District of Columbia, that regulate the sale of travel. These – monitored by ASTA - typically impose stern compliance requirements, including registration, licensing and bonding measures, on travel agents. Familiarity with these laws is vital for travel agents.
Airline issues will remain at the forefront of ASTA’s concerns including tough issues of antitrust immunity. ASTA and ITSA, for example, questioned the decision of the DOT to grant sweeping antitrust immunity (ATI) to the members of the Star Alliance (United, Air Canada, and Lufthansa) and Continental Airlines. The recent decision on ATI for oneworld Alliance is also a concern for ASTA, which questions the power of airline alliances to dictate policies toward agents.
ASTA’s goal is to protect the traveling public and travel agents, doubting that imposing a wholesale exemption from U.S. antitrust laws, at least without taking concrete steps to preserve the continuing vibrancy of travel agencies, could lead to a loss in consumer-driven transparency, independence, and innovation.
While relations with the ARC are much improved, battles with the ARC will continue. This includes a diversity of ticketing issues such as last year's same-day voiding issue. Same-day voiding, if implemented, would have not only created operational challenges for agents, but would have also created competitive challenges with airline-direct channels that allow customers to refund tickets within 24 hours of a booking.
Loans and Capital
ASTA also pushed for the Obama administration's billion stimulus package, but noted that the final version of the bill omitted a key provision to help restore small business lending. The provision, which was contained in the House-passed version of the American Recovery and Reinvestment Act, would have provided travel agents and other small business owners with rapid access to much-needed capital without having to face the administrative delays posed by the current Small Business Administration (SBA) lending process.
Scores of other issues remain, including Secure Flight rules, data collection, security concerns and Transportation Security Administration (TSA), Federal Aviation Administration (FAA) policy, and the airlines' unbundling of service and endless fees for services. ASTA also watches GDS/CRS relations and the constantly changing world of online travel sales. Travel to Cuba will be another issue, along with ease of access to the U.S. by international visitors.
“Travel agents and consumer have an interest in a competitive industry that respects the contribution of the agent in the distribution chain,” Ruden said. “This remains central to ASTA’s interests that are focused on the business of travel. We have and will continue to question actions that undercut agents and burden agents with unnecessary costs. Transparency is essential.”