In tough economic times we hear about a business’s need for change in order to adapt to the economic climate. The travel industry it seems has been in perpetual change for the past fifteen years. As much as this industry has changed, the basic fundamental–compensation for agents, has not. We are still relying on the outdated business model of commission from the suppliers. Some agents do charge service fees or plan to go fees; but the majority are only doing this on airline tickets or inconsistently, at best. We see more “deals” out there from suppliers and this has the net effect of lowering compensation for agents, at times up to 50%. We are working just as hard, if not harder, yet reaping less for all our work. It is time for a change–a change that will benefit both agents and suppliers.
Call it a “Net Environment” if you prefer. I don’t like the word “net,” as it assumes that I am going to mark up a product to sell. We need to get out of the retail mind set and concentrate on selling of ourselves–our service, value and knowledge.
Here are the advantages:
- Suppliers – This immediately adds to their bottom line. Travel is a small margin business for both the supplier and travel agent. This would bolster the suppliers’ bottom lines financially. It would eliminate the agencies who rebate and damage the pricing integrity of the supplier. It cuts down on the need for them to discount their product to remain profitable. Suppliers will be better able to identify the specific travel agents selling their product and better able to support them in their marketing efforts.
- Agents – It would reduce the number of Internet travel agencies. No longer could they compete on volume by rebating back some or all their commission and just charging a small booking fee. It would eliminate most of the network marketing type travel agencies. While travel commissions generally do not make up a large portion of their income, it is one of the carrots dangled to entice people to join. It is how they prove they are offering a business opportunity. It would eliminate the time consuming process of tracking down commissions from suppliers or not being compensated at all.
A commission-less environment would eliminate the weak agents, those without a specific niche or knowledge will not be able to compete and potentially erode the profession. Those coming into the industry would need to be better trained as both an agent and as an entrepreneur. It is painfully evident that we cannot come up with a way to regulate ourselves, so this would allow the market to do it for us. Most host agencies and consortia as they are configured today would be gone. What would evolve are marketing consortia that agents could join to market and educate the public, supported by agency dues and coop dollars from suppliers.
The question remains: “How do agents get compensated?” They will be compensated by service fees, an annual retainer, or a combination of both.
The buzz words of the travel industry are “service” and “value.” When airlines eliminated commissions travel agents adopted a service fee based model and consumers paid (and continue to pay) the fees without hesitation. Travel agencies are still a large seller of airline tickets. Consumers value the unbiased service offered by agents. Often I hear the argument that price is king, and clients will not pay the fees. If that were true, then they wouldn’t pay $50.00 to an agent to book an airline ticket. They would go online and book direct with the airline. They pay this fee as there is a value to the service an agent provides. As long as compensation is tied to the supplier, agents will be serving two masters; their client and the preferred arrangements they have with suppliers. Travel agents will still have an identity crisis–are they a seller or service? Travel agents will still be order takers or “agents” of the suppliers. If we go to a service fee model then our loyalty is strictly to the client, and compensation will come from those deriving the benefit. This frees the agent to use any and all resources available to arrange the perfect trip for a client, without concern of compensation.
Often I am alone on this opinion, as travel agents fear change. They long for the good old days when commissions were paid on everything. The market has changed drastically. The industry fights amongst itself against change under the disguise of consumer protection. Yet most times the consumer is unaware or does not care what was going on within the travel industry. Travel agents have very little clout against suppliers, and often end up losing the battle allowing the supplier to impose their will. Instead of constantly using our resources to keep the status quo, let’s use these resources to educate the consumer on our value, service and knowledge. Instead of “working” for the suppliers, let’s work for ourselves and have control over our compensation.
It is time to stop being an “agent” of the supplier and time to be the true travel professional.
Tim Richmond is a 20 year veteran of the industry and owner of Craig’s Travel in Southern California. The agency is affiliated with Nexion and TSI and specializes in customized vacation planning. The agency is 100% leisure. Email: firstname.lastname@example.org Website: www.craigstravel.com