There are two major types of sales processes which involve separate agents: working with the travel agent directly, or working with a larger tour operator. In the first situation, you work with a handful of travel agents who have Checkfront partner accounts and can put your online booking page on their websites. What does an online travel agency offer?
The agents interact directly with customers, and bring your product to new markets. Working with inbound or outbound tour operators is a little more complicated, because there are several tiers of salespeople and, as a result, a larger commission rate. The big supplier type missing from this list is airlines.
Commission is almost always paid on a percentage basis. The percentage amount depends upon the supplier and sometimes the individual negotiation between the travel agency and supplier. Commissions are usually paid to the travel agency, not the individual agent. But when the airlines eliminated commissions on all international and domestic air, thousands of travel agencies took a huge hit to their bottom lines, so severe that many went out of business.
The introduction of online booking engines was a double-blow to travel agency owners. However, there was a silver lining. Savvy and wise travel agency owners saw the opportunity in distinguishing themselves from online booking engines by establishing their expertise. Nor do they answer the phone when something has gone wrong while traveling. As the the wiser travel agency owners promoted their expertise and service, they also started charging for it.
The products agents sell have built-in fees that result in a profit for the agency. The amount of the fees and the ways in which they are earned and distributed differ by the type of product sold and the suppliers who provide that product to the agency. Free independent travel or FIT is a travel product sold on a one-time basis.
For example, a three-night hotel stay, a car rental and a flight all booked separately and not as a prepackaged tour is considered an FIT booking. In this case the commission is not based on the entire trip but is calculated for each item individually and according to the contract the agency has with each supplier. The commission is present in the rate the agent quotes and is receivable by the agent only after the trip has been paid and completed as planned.
Agencies may also add small upfront fees to any and all travel arrangements at their own discretion. They can also coordinate the booking and payment of travel arrangements on behalf of their customers. Access the workshop: How to work with Incoming Tour Operators?
Online travel agents like Viator , Expedia and Musement are growing as more and more consumers and suppliers become aware of them. On top of that, OTAs usually demand the lowest possible price you can go, because they don't want you undercutting them on other platforms like your own website. But they are the new norm and if your business doesn't have a website or an online booking and payment system yet, this is a relatively inexpensive way to get your tours online.
Offline resellers can be a hotel concierge, a booking agent on the street with a small stand, your local a visitor bureau or tourist information desk. Commission for these types of distribution channels vary a lot more due to the location of their offices, the foot traffic they get and the clientele they're able to attract.
Interestingly, we found that offline and in-person sales bring in lower booking numbers that online channels, but they generate higher booking value. This means that they make more money for your company despite bringing in lower booking volumes.
Override commission is the extra commission you give to certain distributors to incentivize them to promote your tours over your competitors. Of course this commission is completely up to you, and you're free to use it as a tool whenever you like. Remember that you don't need to pay these commission charges separately. The same goes for other distributors.
This is the amount you pass on to your distributors, before they add their commission charges to the final price. Your net rate should take into account your fixed and variable costs, as well as your profit margin.
Check out a previous article I wrote to help you set the right price for your tours and activities. The gross rate is the final price your customers pay, which includes your distribution commission. Your commission rate is usually charged as a percentage, also known as a mark-up percentage. Experiment with different distributors. Each distributor will help you reach a different market, locally or internationally, niche or mass market.
Package your product to meet the requirements of the distributor you wish to work with and monitor your results on a quarterly basis.
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