TRO is proud to introduce a second writer for our informative Luxury Travel Tips column, industry expert Dan Chapelle. Dan is the owner and President of WealthyTravelAgent.com and will be offering valuable tips and insights to explode your luxury travel business potential.
There has been a lot of talk again in the trade media lately about service fees. I will go on the record and say fees should be an essential part of your business model to help ensure profitability. We all know the name of the game of any business is to make a profit. If you don’t, well… it is just a matter of time before the inevitable happens.
Fees can be a touchy subject. Too many travel agents still believe the compensation provided in the form of a “commission” is enough. Realistically, it is not even close – especially if you depend primarily on contemporary products for your sales.
There are arguments to charge or not to charge fees, but I think most agents are missing the point of fees as well as a huge opportunity. Luxury buyers in particular do not have an aversion to fees. In fact, they are used to paying fees for a variety of things, so they tend to expect them.
If you have a particular skill or expertise that customers are seeking out or you are expected to plan their vacation, by all means charge an upfront fee. In this case, you are adding value to the transaction and you will be compensated whether the prospect buys from you or not. This service differs from the call asking you to give a price on a cruise or tour. These folks may be price shopping, but part of the basic expectation of a travel agent is the ability to quote a price.
In my opinion, most agents are missing the proverbial boat by not charging “change and cancellation” fees. Every time you touch a booking, it costs money. So take a lesson from the playbook our friends at the airlines have mastered this and create a fee list. Present it to you customers in the qualifying process, post on your website, and include in the terms and conditions on your invoices.
Here is a situation that happens all the time: You booked a customer on a cruise for $1500 per person. They call a couple of months later, having received an email from the cruise line dropping the price for same category to $1100. If at all possible, you will try to get them the price, but in doing so, you will lose the commission on $400. Assuming you earn 13%, that’s -$52 or -$104 for the cabin. Now you are doing twice the work for $104 less than you originally agreed. Make sense? Not to me. The objective is to do less for more, not the other way around.
Assuming you were upfront with your fees, the customer will expect you to charge for this change. In fact, they have probably already done the math to make sure they are still coming out ahead. Let’s say that fee is a very reasonable $100 per person. Here is where it gets fun!
You rebook the cruise for $1100 pp plus the $100 pp cancellation fee. The customer gets a net price (including your fee) $300 less of $1200 and you will actually earn almost $100 more on the booking than if no changes were made.
Many agents will claim to charge fees, but waive them out of fear of losing the booking. Here is the thing: you can’t just say you charge fees and then turn around and waive them for whatever reason. You have to follow through and actually charge them. Otherwise, you have no pricing integrity and the whole exercise is a waste of time (and money). Remember, they key is to disclose the fees upfront and you shouldn’t have a problem collecting. Follow this simple procedure and you are on your way to greater profitability!
Dan Chappelle is President of WealthyTravelAgent.com where he develops sales leaders for the travel & tourism industry. He assists sales professionals achieve their full potential by expanding their vision, shifting their mindset, and transforming their businesses to produce tangible results. An internationally known travel industry expert, sales executive, and speaker, Dan has earned an enthusiastic following among travel agents and industry leaders worldwide. He has been featured in numerous trade and consumer publications and is an instructor for the Travel Institutes’ Professional Educators Program, providing insight for travel professionals. You can contact Dan by email at Dan@WealthyTravelAgent.com.