Travel agent Tim Richmond has developed a “retainer” business model that he employs with his clients, and has recently been training other travel agents in his methodology.
As travel agents, we often look to other industries for their practices and techniques trying to come up with a compensation model that will make us profitable. The latest thought is to add service fees or as some would call them plan to go fees to all bookings.
I am a strong advocate of charging a fee, not for my service, but for my consultation. There is a lot of fear out there about charging fees. One of our industry partners has embraced the fee model and I fear travel agents are traveling down that same path.
Our mystery partner: The AIRLINES
At one time, when you bought an airline ticket, included in that price was a seat reservation, the services of a reservation agent, free checked luggage, a meal, maybe a movie and even on international flights, a cocktail. At one time travel agents sold travel and promoted that their service was free. The cost for their service was included in the price of the vacation. Many agents still work this way.
Airlines started out by charging fees for reservations made using one of their reservation agents. Travel agents started charging fees for making an airline reservation. Airlines started charging a fee or copayment to book your frequent flier miles or to use them for an upgrade. Agents charge fees to book frequent flier miles or process upgrades for their clients.
With the down economy and high fixed costs, airlines started going bankrupt and merged with stronger partners or quit flying at all. Travel agencies started merging with other agencies, closed completely or closed their retail location and went homebased.
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Airlines now are charging fees for checking luggage, seat assignments, meals, movies, a cocktail on the flight, pillows and blankets. Travel agencies are starting to add fees for arranging tours, cruises, independent vacations and for any product they are selling to the client. They are even calling them “service fees”. Fees meant to cover their time for research and their knowledge of the product / destination.
Ask anyone who flies now and most will say it is a horrible experience. Mention the additional fees they have to pay for something that was always included in the price in the past and you are bound to hear words not fit for publication. Now, the travel agent wants to charge a “service fee” or plan to go fee even before the client has decided what they want to buy. After years and years of your service being free, is it any wonder clients balk at paying you more? Travel agents are selling the same hotel room, car or other vacation that the client can find it on their own from other sources. Some of these sources even sell this same product for less. In my opinion, as long as travel agents continue down this road, soon they will be spoken about like the airlines, with words not fit for publication. Or client will continue to find alternate source for buying the product.
I am all for charging fees. I am just opposed to charging service fees. Service should be given freely, generously and with a smile. The time for your consultation and research, before during and after the trip, your relationship with the client, your relationship with suppliers and your knowledge are what you should charge for a fee. Those are the items that are unique to you.
For me, that meant I would “rebate” back the commission I earned a selling a product, or I use my relationship with the supplier to negotiate a net rate or lastly if I cannot find it for less than the client has through some other source, then I will book through that source as long as I can verify the legitimacy of that source.
Now comes the question, how to determine what the fee should be? Should I have a menu of fees, X amount for a cruise, Y amount for a tour, Z amount for hotel / car reservations, etc? Or should it be an hourly fee? I could not see either of these working, as it still felt like I would be nickel and dime the client each time. Travel is a diverse product. My client may take a long vacation once a year, but then do smaller trips throughout the year. By charging a fee for these smaller trips (which were very low in commission), clients just found it easier book them on their own. Or if the client books a high-end cruise and highly commissionable vacation, do you lower your fee since the commission would be high?
Hourly fees don’t work, as some clients are experienced travelers and do not need much of my time, but still have come to expect all the information I provide them. They are just used to this information and know how to use it or they may be familiar with the destination and do not have as many questions. Other times, even the smallest vacation can be time consuming filled with questions, so the hourly fees could add up. I want my clients to always feel they can spend as much time with me as they want, so instead I charge an annual fee or “retainer”.
At the beginning of the year, they pay me this retainer; there are no other fees to arrange any travel for them for that year. This can be a large family vacation to just booking at campsite. As mentioned above, price is not an issue, as I will use whatever resource gets my client the best price. This builds more loyalty, as the client knows I will handle any of their travel needs, not just those with commission or those that I normally would have charged a service fee. This retainer is usually less than the fees they paid me when I used a fee per booking / airline ticket.
This business model does not work for the once every three-year traveler. I recommend someone that travels at least 3 to 4 times per year and at least one of those a large vacation. I was tired of being the sales, marketing, service and distribution channel for suppliers and then not even earning enough money for doing it for them. I choose to sell and market myself. The income I derive from that is solely determined by me, not the supplier and it is compensation for my time, knowledge, relationship and consultation.
8 thoughts on “Fear of Flying – One Travel Agent’s Business Model”
I love this concept. My clientbase, however, is not big enough for me to implement it. In the meantime, I use a fee for service with my main business as a travel advisor for clients taking a vacation to UK and/or Ireland. My initial consultation is free and I introduce my fee structure at the beginning of this. (I don’t charge for the quick ‘off the shelf’ AI holidays that pay commission) I quickly assess the client and the amount of work likely to be involved and propose a fee, usually $200. I then let the client know that I will deduct from that fee any commission I make from bookings that are commissionable and that they may end up not having to pay me anything. At this point I also introduce the importance of having good insurance cover, and that insurance is one of the commissionable elements that will bring down my fee. My fee is also offered as ‘satisfaction guaranteed’. I will not charge anything if they are not happy with my services, but fares, etc. and commissions are not refundable. I assure them that I will probably save them money by sourcing their travel components at best prices while not compromising on supplying them with quality product. Letting them know that my goal is a satisfying and hassle-free vacation experience is my theme during the ‘free initial consultation’. It seems to work well and I have yet to have a client even come near to claiming the fee refund.
One thing I may point out is the different geographic markets. It may be stereotyping, but the market in rural Kansas likely is not taking 3 to 4 trips a year with one of them being big. The market in NYC, LA, or DCA might.
I know that many oppose your model (I actually like it but can’t see it working with my niche as I tend to work off net and mark up) but I suspect that the vast majority of agencies today do not have the client base to support it.
If I had to guess (and this is a SWAG for sure):
75% of the clients are one and dones
20% of the clients are truly clients who will travel annually or less.
5% of the clients are the good clients who may be ripe for a program such as this.
John, I understand your demographic point, but you are making the assumption on that the 3 or 4 trips need to be big trips. That is not the case. Take a family of 4. They do a big trip to DisneyWorld, but use frequent flier miles for the air tickets. I charge $50.00 a ticket – $200.00. (Low by most agency standards.
Now Mom and Dad need a getaway and they want to book this cute little B&b with no commission. I charge -$25.00 for the B&B reservation and $25.00 for the two air tickets – total – $75.00.
The holidays roll around and they need air to Grandma’s. No hotel, nor car. 4 air tickets at $25.00 a ticket = $100.00
Already they have now paid me $375.00 in fees and I am at the low end of the scale.
What if the RV or camp? Would you make the reservation? if so, you probably would charge a fee. More likely you would not handle it. My goal is to build loyalty with the client and book all their travel. Small or large. Part of the reason many are one and done, is agents will not handle these other small transactions clients do during the year. Agents are out of sight, out of mind with the client.
The goal is to be a full service travel consultant, with concern not for commission, but arranging and consulting for all their travel for a nominal fee.
If marketed correctly, it will work anywhere. My best agent I am training on this program lives in Wood River, NE. A very small town, yet he charges more than I do in LA.
I may not have been as clear as I can. I am suggesting that in the US, we are generally conditioned to taking two weeks of vacation a year. The time and resources are limited to many families.
Example, Young family has 2 weeks vacation. Does it make sense to pay a retainer for the one week long trip they take to Disney with FF miles? There is a mindset (mostly false) that the best way for this family to do this is to go to whateverairline.com and redeem their points and then over to disney.com to book the reservation.
Now this family has another week, but as travel professionals, we are competing against the home depots, the swimming meets, etc for their free time. I might suggest this family might use 4 or 5 of their remaining 7 days to visit relatives around the holidays. This might involve a plane reservation, but again is the retainer worth it?
The other days are likely spent building that deck, driving the kids to the state swimming championships, etc.
I do think you need to have the demographic to make it work.
I do understand John’s remarks, but the growth of the DIY segment has been helped by the Internet, it is really agents are who to blame. We limit what we will do for clients. We only want to book the one week large vacation, we do not want to handle the road trip to the overnight swim meet or the trip to Grandma’s or maybe a night in a local hotel for an anniversary, birthday, etc.
Clients travel more than we credit them for. Just not always large trips. Depending on the retainer you charge, that one large trip a rebate the commission on, probably will cover the cost of the retainer for the year. Now anything else they book that had my agency fees or pays commission, is now returned to them. (This saving them both time and money).
We know by studies done, clients are seldom loyal and price shop. Something much easier now with the Internet, Smartphones, Social Media, etc.
I bring back that loyalty. I take away price as an issue from the start. I offer to book any and all travel, so now I help with that road trip, camping trip, weekend fishing, skiing, etc that many agents did not do.
I want the client to know I am their source for all their travel needs, not just the large trip. To often after they have booked all those small trips on their own, they see no reason why they can’t book that larger trip on their own also. (How many agents have heard the horror story of the client making on error will booking on their own).
To quote you from your article: ” I can safely say that as a whole, travel professionals are mediocre to poor salesmen.”
That does not bode well for making money in a commission based sales position. You do go on to list the great things they do on the consulting side. That is where the value is, that is what the retainer is for.
And lastly, it is about how you sell yourself, because that is the product I am selling. You have to be confident in your value and be able to explain that value to the client.
No, it is not for everyone, but I think far more agents could move to this model. They would need a fraction of the clients they need now and they would make more money this way and work much smarter than harder.
While I don’t disagree with charging fees, I do think that comparing it to the airlines charging fees is strecthing it a little. The airlines, for the most part have a captive audience. If you don’t want to pay their fees their attiude is “Great, find another way to get there”. The other comparisons are to doctors and lawyers. They charge fees because the fees are their only source of income. They do not get commissions. Again I am not against charging fees, just come up with some better comparisons.
As far as airline tickets, we used to do them but have stoped. We found a $25 fee is not worth our time, effort and all the problems and issues that can arise from selling airline tickets. we found our time is better spent on larger sales and we never run out of those to work on.
I do highly agree with charging fees for FITs, Weddings and trips that require a lot of research and work. 98% of our business comes from all inclusive resort packages and I am still up in the air about fees for those. We currently sell $3,000,000 a year in all inclusice resort packages.
Tim,
Sounds like you are positioning yourself as Concierge for Hire. Not a bad way to go if you enjoy the work and have the upscale client base to make it profitable. Personally, I find it more satisfying to grow niche markets, working with nets and over-rides – charging fees only when necessary (i.e.-issuing published air).
It is great that we can test various business models and share our resulting experiences.