Service Fees Send Revenue Soaring for Phoenix Agency
by Maria LenhartAfter implementing a service fee business model nearly a year ago, Pink Paper Travel has boosted its revenue by almost a third and is now poised to hire additional agents for its newly expanded office space.
Charging fees also makes it possible for the agency to provide a more complete package of services to clients, and this has created more satisfied customers.
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“Just like every agency, we could see more and more of the commission taken away from us,” said Patrick Boyhan, owner and manager of the Phoenix-based Vacation.com agency. “I knew I had to effectively put a service fee in place that would be equitable both for the agency and the consumer.”
Trip planning agreement
Boyhan devised a form, the Trip Planning & Booking Management Agreement, which every client is required to fill out before travel consultation begins. In addition to other details, the form asks customers to provide their credit card numbers.
It also explains that Pink Paper Travel charges a service fee of $30 per hour, with a one-hour minimum. After the first hour, billing is based on 15-minute increments.
“The fee is payable whether the client ends up booking the trip or not,” Boyhan said.
Professionalism, transparency
Previously the agency only charged service fees for travel transactions on which it did not earn commissions. But not charging service fees on all transactions meant that the agency sometimes spent a lot of time and effort without compensation if the client didn’t go through with the booking.
“You end up planning the trip for free,” Boyhan said. “So we were out not only for the commission, but for all of our research.”
Charging a service fee on all transactions, whether or not they are commissionable, is also a more professional and “transparent” way of doing business, he said. “I want the client to know exactly what to expect from me and what I need to expect from them. Lawyers charge for their expertise, so why shouldn’t we?
Client reaction
Charging service fees has been a success from the start, with fee revenue during the first week totaling “enough to cover the rent on our office,” Boyhan said. The additional income soon enabled him to rent additional space.
Now fees comprise about 30% of the agency’s total revenue. This will make it possible for Boyhan to expand his workforce, which currently consists of three independent contractors. He plans to hire three full-time agents and bring on more independents.
While a few clients balked at paying a service fee, the vast majority did not object, according to Boyhan. “Most of our clients are higher end, and they understand that it’s part of the cost of doing business.”
More satisfied clients
Charging fees also has made it easier for Pink Paper Travel to provide extra services such as making dinner reservations or securing theater tickets for clients, and this has boosted client satisfaction, Boyhan said.
“It really allows us to provide a complete package of services to our clients. For example, I recently charged a client $45 for making dinner and activity reservations in Maui. They were so happy to have this service that they referred more business to us.
“And if we’re asked to book a non-commissionable air ticket, for example, it doesn’t matter to us as we are being paid for our time.”
Changes and cancellations
Pink Paper Travel does not charge for time spent making changes that are beyond clients’ control.
“If a tour gets cancelled unexpectedly, we don’t charge for the time needed to make changes,” Boyhan said. “This happened recently with tours to Tibet, which got cancelled due to actions from the Chinese government. I had 80 people who needed refunds or their itineraries changed. I didn’t charge a service fee for this – as it wasn’t their fault.”
The service fee agreement includes a stipulation informing clients that they will be billed for changes they initiate. “If someone wants to change the hotel, for example, we tell them that this fine, but we will charge for the time it takes to cancel and book a new one.”
Referrals and repeats
Most of Boyhan’s new business comes through referrals and a lot of it is repeat, said Boyhan, who opened his agency about five years ago, after working as a home-based agent.
Although he has an office suite, he does not get walk-ins, conducting business primarily by phone, videoconferencing or email.
Boyhan’s choice of name for his agency came about because “I wanted a name that was fun but mainly easy for clients to remember,” he said. “I was reading the Financial Times which is printed on pink newspaper and came up with the name: Pink Paper Travel.”
