By Emily Peters
A few months back, we explained why it’s so important for travel agents to charge fees. But we know what some of you were thinking: easier said than done.
We feel your pain. Fortunately, we’ve put together a 2-part roadmap to help you safely introduce fees to finally earn what you deserve—without scaring off your clients.
Determine your rate.
The first step in introducing travel agent fees is to determine how much your time is worth. Divide the last 6-12 months of commissions earned (based on how actively you book) by the number of estimated hours worked during the same time frame. Tip: You can base this off of pending commissions if needed.
Using an 80/20 split with between agent and host agency, we took an average gross commission of $10,000/year for an agent working 20 hours a week.
|Total commission earned the last 12 months||$10,000|
|Commission to host agency at 20% split||$2,000|
|Commission to agent at 80% split||$8,000|
|Number of hours worked last 12 months at 20 hrs/wk||960|
|Hourly rate based on last 12 months (comm/hours)||(8000/960) = $8.3 per hour|
Are you happy with your number? If not, determine your rate increase based on the average amount of time you devote to a typical booking. This can take shape as an hourly and/or flat rate—whatever makes sense for you.
Select your travel agent fee structures.
Any fee you introduce should be able to reduce costs, save time and/or increase profit. Evaluate the current challenges you’re facing with clients. Do many of them abandon the booking process after you’ve already planned their trip? Do some make lots of little changes over the course of a booking? Do others have a mix of large and small bookings sporadically throughout the year?
Consider the following structures based off your findings:
- Plan-to-Go Fee: An up-front fee charged before you begin your research. This fee would be applied towards the total cost of the booking once the client commits.
- Pros: Clients are more likely to commit since they have a little “skin in the game.” They’re less likely to be intimidated by the fee since they understand it will cover part of their trip, ultimately not costing them anything extra.
- Cons: Though this fee saves you time by eliminating lookie-loo clients (time you can spend on more promising leads), it will not directly result in additional income since the money will go towards the trip itself.
- Trip Management Fee: An up-front, flat rate or hourly fee that is charged specifically for your consultative and trip management services. This would fee would NOT be put towards the total cost of the booking. (In other words., the Trip Management Fee would not cover the cost of a flight, hotel, tour, etc., but go directly to you.)
- Pros: Unlike the Plan-to-Go Fee, revenue from this fee goes directly to your bottom line.
- Cons: Since the money will not go towards the client’s trip, you’ll need to work harder to clearly illustrate the value of your services.
- Retainer Fee: A significantly higher up-front fee that allows your client to have unlimited access to your services over an established period of time.
- Pros: Immediate money in your pocket which can tide you over between smaller fees and pending commissions.
- Cons: Usually reserved for high-end clients, retainer fees require you to be at their beck and call as their travel needs arise—which means willingly sacrificing some of your personal freedom and/or attention to other clients.
- Service or Transaction Fee: A smaller fee limited to one specific service: booking a plane ticket, making a schedule change, etc.
- Pros: Every portion of your time and expertise can be safely accounted for, especially for clients that make lots intermittent changes to their trips.
- Cons: Keeping track of all these smaller fees requires more diligence from you in terms of accounting, invoicing and collecting.
Though there are other fee structures to consider, these are the most commonly used and easiest for your clients to understand. Choosing one or a blend of structures will allow you to tailor your services for each client’s needs, but still make sure you’re fairly paid.
There’s more to the story, so join us next week as we explore how to (safely) introduce your new travel agent fees to the world. Stay tuned!
Are you ready to start your independent travel business with MTravel? We are here to help! Contact us here or call us at 800-870-5799. Be sure to check out our website at www.MTravel.com and follow us on Facebook, LinkedIn and Instagram.