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Industry Faces Tough Policy Issues

August 26, 2010 By: George Dooley

From the proliferation of hotel occupancy taxes, travel to Cuba, unbundled airline fees and services to heath care costs and tax policy, the travel industry faces real time turbulence for the balance of 2010.

Throw in a contentious November election, along with economic uncertainty, and it’s a virtual certainty the travel industry will be challenged not once but many times by a series of tough-to-resolve issues that will demand industry attention and leadership – including the involvement of travel agents.

Consider the more than 400,000 lost travel industry jobs since 2008 (U.S. Travel Association estimate) and policies related to the BP oil spill and its impact on Gulf Coast tourism. The discouragement of corporate meetings and events— started last year— remains an issue as is slower than hoped for economic recovery.

Major industry associations will play a key role facing these challenges, including ASTA, NBTA, NTA, U.S. Travel Association, CLIA, the BTC and ITSA, to name several. Relations with Congress and federal regulatory agencies, as well as relations with cash strapped local and state governments, will be critical.

Also critical will be the industry’s ability to respond to the unexpected— such as hotel occupancy taxes or changes in tax laws impacting independent contractors. Security issues including Transportation Security Administration (TSA) policies will— including full body scans— will generate more controversy.

There are problems— many impacting the traveling public directly— but there are also opportunities. One example is opening up Cuba, with much of the travel industry seeing a multi billion-dollar opportunity to open an attractive new destination to millions of travelers.

The NTA has moved to support the Cuba opening as has the U.S. Tour Operators Association (USTOA). What is especially frustrating to many U.S. firms is that, by maintaining the travel ban, the industry is ceding the market to other non-U.S. firms. One expectation: continued efforts to open up Cuba.

Another expectation is that local and state efforts to impose hotel occupancy taxes will continue. Hoteliers, agents, tour operators and many others see efforts to impose hotel occupancy taxes— and other localized tax initiatives that vary by locality— to be harmful to the industry and its ability to generate jobs and tax revenues.

Efforts to educate city and state officials are often frustrating and place a premium on timely effective grass roots responses by local industry leaders, including ASTA’s Chapter network. The associations with networks of agents and ‘first responders’ who can quickly identify and react to new tax proposals—often discriminatory— will be a critical asset in the year ahead.

While some issues are predictable, the industry has learned that it will face the unexpected, such as the volcanic ash crisis that paralyzed airlines earlier this year or the earthquake that effected Chile. The H1N1 virus threat was another example of the unexpected.

Terrorism will be another challenge as security remains a costly often-intrusive factor in air travel. The industry can be expected to work with the TSA and the Department of Homeland Security (DHS) to improve coordination of security measures, including better distribution of information to travelers. These challenges will be ongoing, including implementation of Secure Flight.

The Interactive Travel Association (ITSA) also warns of another dimension: credit card fee issues that impact agents and travel distributers. ITSA has been working on three related credit card fee issues, including supporting the fair negotiation of so-called "interchange fees," or the fees credit card companies charge merchants for processing charges. “Unduly high and with opaque rules, interchange fees have typically been set and changed virtually at will by credit card companies,” ITSA says.

ITSA urges a change to credit card chargeback rules that would permit electronic verification of a charge by a third-party facilitator. This would reduce the high cost of so-called "friendly fraud," by customers changing their minds about, say, a trip, as distinguished from a commercially fraudulent scheme, ITSA notes.

ITSA and ASTA also joined forces to halt the effort by United Airlines to transfer the costs and risks of credit card verification and fees to small travel agents and others. United's efforts, problematic in and of themselves, would be a most disruptive precedent for the industry as a whole, ITSA notes and warrants close scrutiny.

Agents and their clients can expect to hear plenty about unbundled air fares and fees and can expect new policies from the Department of Transportation (DOT) who has surprised many with its pro consumer policies. The consensus: as airlines "unbundle" their fares, consumers and agents and CRS need to have immediate, easy and understandable access to all of the new fees. The Business Travel Coalition (BTC) has— among other groups— supported new DOT policies.

ITSA also warns of the impact of sellers of travel regulation that can be costly and of questionable effectiveness against fraudulent travel schemes. ITSA's viewpoint: “ ITSA is working with these various states to ensure that fraudulent travel schemes and other bad actions that may not be covered under existing law are targeted very directly and narrowly by any additional legislation and/or regulation. Overly broad and restrictive regulation will burden the system and penalize the overwhelming majority of sellers of travel who scrupulously observe the law, resulting in reduced consumer choice and attendant impacts on travel and tax dollars.”

There are of course scores of other issues from national park policy and funding, developing the inbound travel market from China, the prosperity of the airlines and the effects of ongoing airline mergers. There is also uncertainty on health care costs and policies impacting small businesses (including credit and loans) and the question of repealing tax cuts that could expire by the end of the year.

What's Your Opinion?

Can the travel industry and its associations met the challenges ahead? Is there enough effective communication and cooperation between groups to insure the industry’s legitimate interests are represented? Do they have the funding and grass roots support essential to any industry? Travel agents can stay tuned to address some tough, critical issues that will impact them and their clients. There will be a lot at stake.

Let us know. Post a comment below. Write us at our Facebook page. Send a tweet to our Twitter page. Join the discussion in real time at AgentNation. We'll share your feedback in future features.

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