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State change may force busy Homer tour booking office to close doors

Posted: October 23, 2013 - 3:08pm
Photo by Michael Armstrong, Homer News
Phil Morris, left, and Pat Merrill, right, of Alaska Ferry Adventures & Tours stand by Morris’ truck advertising the tour company’s website.

BY MICHAEL ARMSTRONG

STAFF WRITER

A longtime Homer tour and ferry booking agency could close at the end of the month, costing eight full-time jobs, if the Alaska Marine Highway System doesn’t back off a proposed change in how it pays commissions to travel agents. 

Alaska Ferry Adventures & Tours is a 27-year-old, employee-owned company that markets what office manager Pat Merrill calls “ferry cruise tours.”

Working out of rented space in a city owned building at the end of the Homer Spit, Alaska Ferry Adventures & Tours helps locals and visitors book tours on the Alaska Marine Highway System — the state ferries that include the M/V Tustumena, which returned to service this week after a 1-year retrofit. The company also helps people book land and other side tours, like its 14-day Heart of Gold Tour, which includes trips to Glacier Bay, Whitehorse, Y.T., Fairbanks and Denali National Park. 

Customers calling Alaska Ferry Adventures & Tours don’t have to wait to reach an agent, said Phil Morris, one of the owners of the company.

“It’s called customer service,” he said of his staff. “You call them up, they answer the phone. We don’t have phone trees.”

A proposed change to how travel agents earn commissions on ferry bookings could cost Alaska Ferry Adventures $100,000 in commissions for reservations made by Alaskans.

“I’m not willing to take that risk,” Morris said. “That assumes the economy holds up. It’s a big hit.”

The largest independent agent booking ferry reservations, Alaska Ferry Adventures & Tours makes a 10-percent commission on ferry sales. For sales made for other tour companies, it earns between 15- and 20-percent in commissions. The Alaska Railroad, another state owned transportation company, pays a 20-percent commission.

Facing $3.5 million in cuts to its budget, the Alaska Marine Highway System had to look at ways to save money, said Jeremy Woodrow, a spokesperson for the Alaska Department of Transportation and Public Facilities, the department AMHS falls under. Since the ferry system figured most Alaskans making reservations would know to either go online or call reservation clerks, the service provided by travel agents for Alaska reservations wasn’t needed.

“They pretty much have to find as many efficiencies as possible to cut costs,” Woodrow said. “Do Alaskans really need to use travel agents to book their travel on the marine highway system?”

AMHS does see travel agents as valuable in bringing Outside bookings.

“The Marine Highway sees agents as a useful partner for people wanting to travel to Alaska from outside Alaska,” Woodrow said.

Under the proposed commission schedule, a tourist from Boston could call Alaska Ferry Adventures & Tours, book a ferry from Homer to Kodiak, and it would get the commission. If someone in Anchorage made the same reservation, Alaska Ferry Adventures & Tours wouldn’t get the commission. As with air travel, ferry passengers have to give their names on tickets, so their home town would be known.

Morris said that creates an awkward situation for Alaska Ferry Adventures & Tours agents. In screening calls they’d have to ask customers their zip code or if they are Alaskans.

“The whole premise is bizarre,” Morris said. “We can’t figure out how to do this and be fair to all our customers and respond to customer service in the way we have in the past.”

Alaska Ferry Adventures & Tours would be most affected, but travel agencies in Skagway and Vancouver, B.C., also would be hit by the change. Merrill said Alaska Ferry Adventures earns about $380,000 in commissions for 4,000 ferry trips it books annually. That’s about as many trips as the AMHS Juneau office makes, Morris said.

“They were looking at this hick office that had developed a business as big as the central office in Juneau,” he said.

Alaska Ferry Adventures & Tours also brings income to local communities. For Kenai Peninsula companies, that’s about $150,000 in sales. Juneau companies earned $170,000 for hotel and flightseeing tours. For Skagway, including the White Pass Yukon Route railroad, it’s $125,000.

Woodrow said the sales commission changes had been under discussion since last May. Morris and Merrill didn’t hear about it until Sept. 30, when a Canadian company affected, Gateway Travel, forwarded them a Sept. 24 letter to travel agents from Capt. John Falvey Jr. general manager of the Alaska Marine Highway System, Ketchikan, explaining the change in the commission rate structure.

Merrill said she called the Juneau AMHS customer service manager to ask why Alaska Ferry Adventures & Tours hadn’t been notified directly, and she was told that maybe AMHS didn’t have a correct email address — even though her company corresponds frequently by email to AMHS.

Falvey did acknowledge the travel agents’ contributions.

“I would like to personally thank you for the excellent services you have provided and AMHS will continue its partnership with the travel agent industry to reach non-Alaskan travelers,” he wrote.

Morris contacted Rep. Paul Seaton, R-Homer, and Sen. Peter Micciche, R-Soldotna, about the change. Seaton listened in on a teleconference with AMHS officials and travel agents. Initially, AMHS proposed another onerous measure, not paying commissions until after a trip had been taken. That meant the travel agent would collect payment from customers in the fall or winter, pay a 2-percent credit card fee, forward payment to AMHS and potentially not receive the commission fee until a trip was taken in the summer.

“I just thought those things were quite unreasonable,” Seaton said.

AMHS backed off from that plan, though.

Seaton said he also called DOT-PF Commissioner Patrick Kemp to make sure he was aware of the changes made by AMHS.

“I wanted to make sure he knew what they were proposing would be the loss of eight, year-round jobs in Homer, and other agents might quit business with the ferry system as well,” Seaton said.

Seaton said he didn’t know if Gov. Sean Parnell also had been informed of the changes. A message to Parnell’s press office asking if Parnell knew of the changes was not returned by press time.

If Alaska Ferry Adventures & Tours closes, the AMHS would have to pick up the work load from reservations going online or to state-worker staffed call centers. The AMHS has an old computer system it has $8 million budgeted to upgrade. Seaton said it’s not likely the AMHS would hire more staff because of tight budgets. Even if it did hire more workers, Seaton wondered if that would be more efficient.

“Would we be better of having private enterprise doing this on a commission basis or hiring new state workers?” he asked.

The Legislature has taken the position that the state doesn’t want to expand its work force, especially if it puts private industry out of business and when it can do it more economically, Seaton said.

Woodrow defended the commission sales change as being a necessary budget-cutting move. The AMHS is not in the tour business, he said, but the marine highway business.

“When the Marine Highway System looked at cutting costs, they had to balance whether communities were going to keep getting ferry services or not,” he said.

The commission sales change would take effect May 1, 2014. Travel agents would get commissions for all ferry sales and travel done by April 30, but not for reservations and trips made by Alaskans after that. Morris said summer travelers will start making plans soon, and that income from those sales helps support operations through the winter. If he can’t count on
in-state commissions, he would have to close.

The change in how commissions for Alaskan-made trips are paid isn’t final, Woodrow said.

“I think it’s one of those things the ferry staff is looking at to find a middle ground to help out the travel agencies,” he said. “We’re looking at how to balance this so the policy can still move forward and everyone can be satisfied, or at least know.”

Seaton said he hoped the AMHS system would back off on its plan.

“I hope things work out so we can maintain those eight, full-time jobs in Homer,” he said.

Michael Armstrong can be reached at michael.armstrong@homernews.com.

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