Recently I had a conversation with a potential independent contractor, and the discussion naturally turned to compensation. His business model was strongly focused on selling only those cruise lines that paid the highest commissions. It made me wonder how much travel advisors focus on their commission when recommending cruise lines to clients.
This is the time of year when travel agencies start to re-evaluate their preferred suppliers, making decisions on what to change in the upcoming calendar year. Part of that analysis involves our relationships with BDMs, our clients’ past experiences, and how we are compensated. If clients continuously have bad experiences on their vacations, it’s not good for business if we keep using those suppliers. If we don’t feel that a supplier is supporting us sufficiently, we are not inclined to continue giving them our business. And, of course, we factor in how much commission we earn.
When looking at commission structures, not all cruise lines pay the same. It may depend on what consortium your agency is affiliated with, or if you work independently. But, all cruise lines have some kind of tiered commission structure. Many of the main stream cruise lines start at a 10% baseline commission and, then based on revenue traveled, they will increase the commission. Cruise Line A may bump you up to 11% commission once you reach $10,000 in revenue while others may not increase your commission until you have reached $20,000 or $50,000 in revenue. Commissions typically max out at 15-16%, and require an annual revenue of close to a million dollars to reach the top tier.
It makes sense for an agency to focus their marketing on select suppliers, often referred to as preferred suppliers. Focusing your marketing dollars can help you increase your bookings with those suppliers, in turn increasing your commission level. However, when it comes to booking clients, is the commission you can make the driving decision maker? I would argue that it shouldn’t be. When all things are equal, deciding which cruise to recommend based on commission is not harmful. But, recommending Cruise Line A simply because that’s a higher payday for you won’t keep you in business for long.
Many consumers are already wary of travel advisors, thinking that we’re only interested in making as much money as possible from the sale. It’s possibly why consumers resist giving us a budget. If they tell us their budget is $5,000, they assume we’re going to quote them a $5,000 trip and not a $3,500 trip because we make more if they spend more.
This is one reason why I charge a fee to my clients. I explain to them that I have a fiduciary responsibility to them. By compensating me by paying a fee, I am not primarily focused on how much I will make from the booking. I will book what fits their needs, not what fits my wallet. At the same time, I don’t work for free.
And when deciding on who my preferred cruise lines will be, I am focused on the experience my clients will have, my BDM relationships, and the support that I feel I’m receiving from the cruise lines. Support like Vicki Freed’s recent announcement that Royal Caribbean is increasing their sales force to support the travel agent channel, spending millions of dollars to do so.
Susan Schaefer is the owner of Ships ‘N’ Trips Travel located in Tennessee, and specializes in leisure travel with a focus on group travel and charity fundraisers. Through their division Kick Butt Vacations, she focuses on travel for 18 to 23-year-olds. Susan can be reached by email at email@example.com or by phone at (888) 221-1209.