Travel Agent Takes on Costco Travel at Its Own Game

by Cheryl Rosen
Travel Agent Takes on Costco Travel at Its Own Game

Photo: Jonathan Weiss/Shutterstock.com


If there’s one thing that seems to be topping the New Year’s Resolution list for travel agents in 2018, it’s charging fees. But the models they plan to use are as varied as their business models – from a simple deposit to be applied to the booking, all the way up to a membership club modeled after Costco and Amazon.

It is the latter that is the most interesting. It comes from Stephen Scott, owner of www.travelhub365.net, who two years ago quit his job as a Royal Caribbean strategic accounts manager to become a travel agent. Like many new agents, he began charging fees only for airline tickets. But by 2017, he knew that was not enough – and he came up with an idea he has been testing for the past two months, and will roll out in full force in 2018.

Costco Travel Agent
Scott at his agency.

“Fees are definitely critical to our business; we learned the hard way that we need them to do the best for our customers,” Scott says. “You need to ensure that you place value on your time and your employees’ time, and recoup the cost of the advertising that you spent to get that customer in the first place. Our experience and our time are incredibly valuable and if we don’t put a cost to that upfront, we are setting ourselves up for failure.”

So, he looked around for the business models that are shaking up industries outside of travel, and started focusing on two of the most successful consumer companies of 2017: Costco and Amazon. What makes them both so profitable, he realized, is their ability to deliver great prices and great service because of their membership model, which brings in a steady stream of cash and makes their customers incredibly “sticky.” And he got to thinking, “Why can’t I do that?”

Membership program with fee options
Scott is launching a four-part membership program designed to let every customer choose a fee that fits his needs and his budget. For the one-time visitor interested in the lowest price, there is a single-trip planning fee of $200, for “a clear plan of 3 or 4 trip options at the lowest available rate” as well as “someone to look after their vacation, pre-trip to make communications with the hotel staff to alert them to the preferences of the client and to be there in case something bad occurs.” It includes 24-hour support and all the amenities offered through Scott’s Virtuoso affiliation and his hosting agency, First in Service Travel, a branch of Tzell Travel.

Customers who travel more frequently, though, can opt for a “best-price membership” for just $35 a month. Like at Costco or Amazon, that monthly fee guarantees them the extra amenities and great service expected by a company’s best customers – and ensures that when they are ready to shop again, they come back here, to get the most value from their membership.

Customers looking for more than just price, though, can sign up instead for a Luxury category membership – like Costco’s Business members or Amazon’s Prime. At $100 a month or $1,000 a year, it is designed for customers “looking for premium experiences that are Instagram-worthy and worthy of their dollars spent. These trips include free breakfast, upgrades on check-in, and special programs with suppliers like Belmond or Mandarin Oriental.”

Ask questions to segment customers
In addition to the cash up front, Scott has found that having to choose a low-cost or a luxury option helps “segment customers out from the beginning. Having that conversation up front, asking what exactly are you looking for, what do you really want us to do for you, helps us understand what to spend our time on.

"If someone says they stay at the Four Seasons regularly, their expectation of what we will be providing is going to be worth the additional membership cost, and they will pay for that luxury membership because they want access to the best of the best.

"Being a member of Signature or Virtuoso comes at a cost, and we need to pass that cost on to the consumer in some form. And I believe that if we can segment out our customers, we can identify what exactly each one wants; and if they see it as a membership, as something ongoing, they will continue to come to us again and again.”

After just two months of testing, Scott declined to say how many memberships exactly he has sold. "But I will say I know with our analytics tools how far people are going into the sales process, and we will continue to adjust the pricing until we get it right, until it attracts customers in all the categories."

Not surprisingly, perhaps, the majority of members so far are in the luxury class, “clients from other agencies who are used to paying $200 every time they book, so our $100 a month is a cost benefit. We are not trying to steal customers from Expedia or Travelocity, but to attract that high-end buyer. We are a sales organization wrapped in a travel shell, so we are tracking all activities in our customer lifecycle – and that led us to believe these options are the best way to go and should push the envelope higher to the luxury membership.”

To help reach that high-end customer, Scott is partnering with and advertising in Bella, a New York fashion magazine; and Travel Porter, a new fashion travel brand whose clients are female travelers looking to have a stylist assist them pick the right wardrobe for every destination, “so all of their customers are going somewhere.”

It's about being profitable
“I do feel that if we get this right, in the next 5 or 10 years agencies across the United States will also not just report revenue numbers, but also membership numbers. Think of Costco, Netflix, Hulu, all those subscription-type programs; Wall Street asks about their membership levels, and I think agencies also will get onboard with this model.

“It’s not only a question of being profitable as a travel agency, it's about being profitable as a business; we have to look at what businesses are successful. Imagine how this model would change the travel agency. Where now we only receive 10 or 12 percent, the profit margin on the membership fee is so much higher. And down the road when we have a thousand members, that’s income coming in whether or not the consumer books a trip.

“Believe me, I’ve been on the receiving end of those calls from customers saying they saw a better price on Costco. I don’t want to charge a fee just to charge a fee; like Costco, I am using the revenue to deliver the services they want from us — and that opens up a new way of thinking, about what’s good for the customer. Everyone is talking about a flat fee, but I am talking about a multi-tiered option that gets them to come back to you again and again.

“We need to beat Costco Travel at its own game. Because in reality, it’s our game.”

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