GTMC: Commission down, bonding up for rail sales

Agents selling large volumes of rail travel face an imminent cut in commission and a looming requirement for sales to be covered by a bond or insurance.

Commission on rail bookings will fall from 5% to 3% on July 25, but to 4% for companies that offer financial protection to rail operators, most likely through bonding.

However, from next April commission will be 3% across the board and travel management companies will not be able to sell rail without financial cover.

The Association of Train Operating Companies (Atoc) hopes the staggered cuts and two-tier commission structure will encourage TMCs and rail-ticket suppliers to sort out bonding.

Atoc head of distribution Steve Fosh said: “Train operating companies have become aware of the potential losses [from failure] in the recession.

“They lost £200,000 from agencies and TMCs going bust last year. There is £500 million a year going through TMCs and everyone is conscious of the level of exposure.”

Three-quarters of rail operators’ revenue through third parties is already protected. Online retailers such as must have a bond and ATOC has required new entrants to the market to bond since 2003. “But we have this chunk of revenue completely unprotected,” said Fosh.

He conceded a two point cut in commission “is a lot of money“. But Fosh told Travel Weekly: “It’s our belief TMCs won’t sell less rail.

“Corporate travellers need TMCs to do their bookings and TMCs can charge a fee.” In practice, many TMCs already charge fees and pass commission on to corporate clients. sales and distribution director Adrian Watts told the Guild of Travel Management Companies conference in Hong Kong: “The TMCs we work with are all bonded. But non-trainline TMCs have just 10 weeks to sort something out.”

Atoc is in talks on making cover available without the cost of bonding. Fosh said: “We are trying to find other affordable means of cover – credit insurance or a reserve fund requiring a levy [on sales].” These are among the financial-protection options employed in the leisure sector.

Some GTMC members complained about the cost and difficulty of arranging bonds in the current climate and suggested it was late in the day to be looking at alternative forms of financial protection.

But Fosh said: “This is not last minute. We have been talking to GTMC members about this since mid 2009.”

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