Sales of visitor activities on Kaua’i can provide a healthy payback to sales agents selling the activities. Determining a cap on how much of a cut of the sale the activity owner has to pay to outside activities sales agents
Sales of visitor activities on Kaua’i can provide a healthy payback to sales agents selling the activities.
Determining a cap on how much of a cut of the sale the activity owner has to pay to outside activities sales agents was the subject of a meeting held by state legislators recently.
Stricter enforcement of existing activities sales regulations was also on the agenda.
According to Toni Marie Davis, the executive director of the Activities and Attractions Association of Hawai’i, a “few” members of the Legislature wanted to pursue a proposal to put a cap on the commissions a tour- or activities-operator pays to sales agents.
However, due to anti-trust laws, among other things, Davis believes the cap proposal is not “feasible.”
“It would be almost impossible (to get this cap),” said Davis. “Having government get involved in our daily business transactions is not the way to do business. Self-regulation is the way to go.”
Almost all private activity businesses and associations have commission relationships with sales agents. An activity desk acts like a sales office, providing information and marketing and selling activities to visitors.
Currently, the Hawai’i average commission percentage to activity sales agents is 25 percent to 30 percent, with the highest rate on Maui at almost 50 percent. Many activity companies on Kaua’i believe the average percentage rate is somewhere between 20 percent to 30 percent here.
“If these companies do not want to pay these high commissions, then they shouldn’t,” said Ray Frechette, Blue Dolphin Charters marketing director and sales manager.
“Companies can choose to participate or not,” said state tourism liaison Marsha Weinert. “If more and more say ‘no’ to 40-percent commission, then the seller is going to sit back and go, ‘I don’t have the inventory,’ and therefore look differently at the situation.”
Representatives of those companies backing the cap proposal believe that commissions need to get back into a more-manageable range in order for “vendors to stay in business and offer high-quality services.”
“Fifty percent (on Maui) is ridiculous,” said Penny Tomacder, marketing director for the Activity World Lihu’e location. “Once the percentage gets that high, then the price of the service goes up. Thirty percent is nice, and 20 percent is fair.”
Tomacder sees some value in capping the commissions.
“It (a cap) will maintain the fluctuations in prices in what they (these companies) are trying to promote,” she said.
Davis believes a flexible-commission structure is the “cost of doing business” in the industry.
“The trend (in the activity industry) has gone from 15 (percent) to 30 percent,” said Aloha Kauai Tours President Michael Hopkins. “It is pretty hard to give the customer great value with that high (30 percent) of a number.
“However, I also believe in free enterprise,” said Hopkins. “The percentage should be negotiated between the vendor and the agent.”
Within the next month, the activity industry will be polled, and the information gathered about the commission cap could be used during the next session of the state Legislative, convening next month.
“I have mixed feelings about it,” said Andy Evans, the owner of Captain Andy’s Sailing Adventure. “In one sense, if I were king, I would put a cap on them (the commissions).
“It is the key reality of how things should work. However, from a business sense, it wouldn’t be right. It should be a free-market situation,” said Evans.
“The guests that come to this island are the ones that really lose. Higher commissions mean that the guest pays more for the activity, and the result is that they may not come back the next year.”
In addition to a cap on commissions, state legislators also delved into the issue of a perceived need for stronger enforcement of regulations in the activity industry.
By law, each activity desk is required to set up a separate trust account for each client or activity provider it services. The ticket price a visitor pays for a tour goes into that company’s account. The vendor is required to pay the operator’s share of this within 30 days.
According to Davis, some vendors do a good job at following the law and paying on time.
But “some don’t pay on time. There are others who we don’t think have a trust account.”
The law provides that if trust accounts are not set up, vendors have to set up a line of credit or bond for an equivalent amount.
Business Editor Barry Graham may be reached at 245-3681 (ext. 251) or mailto:bgraham@pulitzer.net.
