#ThrowbackThursday with Jeff Verman, Uniglobe Plus Travel Group

My winter of despair began instantaneously upon entering the travel industry. I had acquired my first business and had just successfully managed to remember the name of my three employees when I was told the economic model that had convinced me to get into the travel business – based on commissions from airlines – was ending. Commissions were to be “capped.”  

Commissions were my new business’ major source of revenue.  An “emergency” meeting of a group of affiliated travel agency owners convened within days. We were told there the solution was to charge service fees. Everyone had a grave expression on their faces, so I put on my best grave game face too, not fully realizing the impact on my newly acquired business. I remember a clear fear in the room.  I remember the pronouncement that while we had to start charging service fees, we should go to great lengths to not call them “service fees.” This term, they thought, was so odious to clients as to most certainly lead to the ruination of a business.

A heated debate ensued on the topics of how to explain service fees to our clients (without calling them service fees). This struck me as a particularly hard task when we couldn’t call them by what they were. But I remained at the back of the room in silence trying to absorb the bits of wisdom from the more experienced agency owners. Someone proposed “Administration Fee”. Another suggested “professional fee.” Someone else suggested “Processing Fee.” I admit I felt this was a great first test of my abilities – it would be positively horrible should I choose the wrong term for these service fees and thereby ruin my business!

We (well really, they) debated what to do if  a client refused to pay the service fees that we weren’t calling service fees. Everyone in the room – I mean everyone – thought there would be at least a few clients who would stop using our services. I could tell most were imagining worst case scenario responses from their most difficult clients. Being so new to my business, I was fortunate to not know who my most difficult clients were. I’ve always lacked a good imagination.

No one knew, with any accuracy, just how big the financial hit would be. Reporting, then, wasn’t exactly like what it is today. But a simple manual glance at something called a BSP report and you could quickly add up every little bit of soon-to-be-lost revenue once the commissions cuts were to be enforced. The picture this painted was ugly.

It had been a fun, vitriolic, angst-filled meeting. I left wondering how I would explain this all to my wife, especially since I didn’t fully understand any of it myself.

Once back in the office, looking at a single day’s sales, I began to see a picture of just what this would cost me. It took me a few minutes to conclude that indeed, without some alternative way of getting revenue, I would be closing my doors – the doors that had only weeks ago become mine.

Armed with the truth, I attempted my first fee sermon – to my own staff. It did not go well. The manager of my agency – with her some 20 years of experience – told me fees were absurd and no one would pay them. She pointed out I knew nothing of the industry and I should stop listening to people who don’t know the industry either.

Economics forced me to forge ahead. I was actually thinking my manager was right.  What did I know?  But it was clear it was either close the doors now; or hope she was wrong about client reactions.

Through a lot of hard work, we notified clients and set up a mechanism for which to charge clients our first fees – a hefty $12 for each and every airline ticket issued. To my relief, clients did not abandon us. There were a few who whined, much to my manager’s delight. But there was no immediate loss of business.

By the spring it had become clear that the gain in revenue from these service fees that weren’t called service fees was less than the loss of revenue from the commission cuts.  I vowed then and there to have a better understanding of the economics of my chosen business to not have to act with such blindness again.

For me, the moment of truth occurred when I was sitting near my manager, hearing her side of a telephone conversation with a client. I heard her inform the client of the $12 charge. She paused and then responded to the person “I don’t know why you’d pay it either. It’s really just an add-on service fee.” The words were spoken to the client, but meant for me.  

The client apparently had his/her say and continued on with the booking. Not only were clients still booking with us, but my manager had uttered the term “service fee” and nothing bad happened! 

The business model significantly changed overnight, and we survived it. My first manager found greener pastures and coincidentally my business started to grow thereafter. It may not have been the age of wisdom, but it wasn’t exactly the age of foolishness either.  I’m grateful to the guidance I received that day. My winter of despair was followed with a spring of hope – at least I can say this in retrospect.

PAX would like to thank Jeff for his submission. Share yours with us! E-mail terrilyn@logimonde.com.