Smart Compensation Plan Yields Bigger Paychecks, Higher Profit
by Marilee Crocker /This is the latest in a series on travel-agency staffing and compensation trends.
For years experts have exhorted travel agency owners to align compensation for staff agents with productivity and revenue generation. At Brentwood Travel in St. Louis, that approach has paid off in spades—yielding higher profits for the agency and much bigger paychecks for its agents.
“People who were making in the low 30s were suddenly making in the 40s,” said president and CEO Stephanie Turner, CTC. Today, experienced leisure agents on staff at Brentwood earn between $40,000 and $60,000 a year, which is significantly higher than industry averages.
Revenue goals
It was when the economy was sliding downhill in 2008 that Turner decided to overhaul her agency’s pay structure. At the time, leisure agents at Brentwood Travel were getting paid salary plus incentives. Most were earning in the low $30s, in line with industry norms.
“I knew they wanted to make more money, but I needed to get their sales up,” Turner told Travel Market Report. “I wanted people to focus on the things that were going to be good for the client, but make more money for themselves and the company.”
One of her first steps in designing a new pay structure was to calculate the minimum amount of revenue she needed each agent to bring in. “I set $70,000 in commission earnings as my lowest goal for everybody. I don’t even deal in gross sales. If you sell a $3,000 river cruise that doesn’t have too many fees and taxes, or a $3,000 Royal Caribbean cruise that has a lot of fees, you’re going to make more on one than the other.”
Turner told her agents that, after a phase-in period, they would earn a modest hourly rate as their base pay, plus a share of commission on every sale. In addition, if they hit the $70,000 revenue target, they would start earning more on the back end, ranging from an additional 0.5% up to 3% as they hit certain thresholds.
Ranking suppliers
A key piece of the agency’s revised approach to compensation was a tiered system Turner devised to determine just how much commission agents earn on a given sale. She ranked suppliers based on five factors: sales support, marketing support, ease of booking, problem-solving, and commission earnings.
Under the revamped program, which is essentially the same today, agents earn the highest percentage, 29% of commission, when selling luxury suppliers; 27% for A-list suppliers, 24% for B-list suppliers, and 20% for sales of non-preferreds.
Suppliers that provide the agency with maximum support are designated A-plus suppliers, and agents earn an additional 1% quarterly bonus for selling their products.
The sale qualifies for A-list commission levels if agents charge customers a fee on a sale.
Better salespeople
After some initial misgivings, agents took to the program. “Once they saw they could earn more money by selling better and smarter, they began to think about marketing, about relating to the client better, about being all-around better salespeople,” she said. “They think about insurance and shore excursions, about the total customer, about what works and what doesn’t. They’ve learned not to give away advice so freely.”
A major goal was to get agents to become more comfortable selling higher-priced products that were more inclusive, rather than selling based on price. Today, 85% to 90% of sales by staff agents are of A-list or luxury suppliers.
“They started looking at products differently,” Turner said.
Bigger profits & paychecks
All of the agents at Brentwood Travel also began to produce more and earn bigger paychecks. One who was making $30,500 a year is making more than $60,000 now, Turner said.
For productive agents, the largest share of compensation comes from their commission earnings. “If they’re earning $50,000, their base pay is a little over a fourth of that,” she said. And profit margins have gone up as well.
Like others, Turner expects travel agent pay to rise as the competition for talented agents intensifies. “If you want to get people, you’re going to have to pay them,” she said. “But I don’t think you have to hand them more. You have to let them earn more. If they earn more, they’re producing more, and you’re making more.”