A Travel Agent Fee Evolution: Transaction Fees Give Way to Charging for Great Serviceby Maria Lenhart /
Charging fees on airline tickets and other non-commissionable items has become standard practice for many travel agencies. But it’s only a small part of how the fee-based model can help travel agencies succeed in a world of shrinking commissions and digitally savvy consumers.
Moving beyond transactional fees into full consultancy mode is the key, says travel industry consultant Nolan Burris, president of Future Proof Travel Solutions, who has been counseling agents on the potential of service fees since 1999. Travel Market Report sat down with Burris to get his take on how and why agents are taking the fee concept to new levels.
You have been an advocate of travel agencies embracing the fee-based model for some years now. Are you seeing any changes in how agents are approaching fees?
I’ve definitely seen a big jump in one key area: agents that have gone well beyond charging simple “transaction fees” of $25 to $50. They have successfully repositioned themselves as professional consultants with premium fees ranging from $250 to $1,000—some even higher.
I’m often asked what it is they do for that sort of fee. The answer is simple: their fees have nothing to do with making bookings. They are entirely about extreme high levels of service, highly detailed consulting and research, and even incorporating non-commissionable and otherwise “time wasting” things ignored by traditional agents.
In general, are you seeing progress among travel agencies when it comes to embracing the fee concept?
Definitely. It’s no longer just agencies getting started with fees, but dominated by those moving to more premium levels of fees.
In our online video course series, the ones focused on fees consistently get the most views. Our most downloaded tool is the one that helps agencies calculate profitable fees. Our most commonly received email questions are about fees, and the most requested workshops at events where I speak are related to fees.
Are leisure agencies as well as corporate coming on board with fees?
Absolutely! In fact, while corporate may have been the first to adopt fees (due to zero air commission), leisure agencies tend to successfully charge the highest rates.
Once agencies start charging fees, how do they evolve from simple transactional fees to more comprehensive ones?
There is a very clear pattern of progression. At first, most agencies approach fees as a “commission filler” to make up for cruise NCFs, low margin products, etc. In other words, they charge minimal fees to get back to where they once were with revenue. The focus is primarily on covering costs.
Then the light bulb goes on. They see that even a little extra revenue can make a big difference in their ability to provide better service. In a world where anyone can get a booking with a finger tap, service is more important than ever as a competitive edge. But it’s hard to offer that when struggling with reduced commission, or even full commission on cheaper products. It’s at this stage that I see agencies think about increasing their fee amounts.
Where do they go from there?
The third stage is when agencies charging minimal fees realize that you can’t “wow” customers with an extra $10. To totally wow them with remarkable service, you have to be able to pay for the things that it requires: systems, spending quality time with each client, extra training, rebranding, marketing, dealing with non-traditional products when requested, etc. At this stage, many still think in terms of simply covering the cost of such things.
The fourth stage is where I’m seeing the biggest spike. This is where the focus has moved beyond simply covering costs or making up for lost commissions. Instead, this is where agencies start looking at their fees and the service they provide as a product in and of itself, separate from the cruise or tour. They see it as a product upon which profit should be earned, separate from whatever may or may not be booked.
What kind of new services do they add to justify increased fees?
More agents are now looking at the “whole trip” experience, not just transportation and accommodations. They do things like restaurant research, activities planning, cultural arrangements (museums, sports, concerts) and such, as an integral part of their trip consultations. This is when fees generally go from $25 or $50 to $250 or $1,000.
Statistics show that typical vacation-takers spend as much or more money once they arrive as they do on the upfront cost of the trip. This includes restaurants, local tours, activities and more—most of which is non-commissionable.
Are some agents embracing premium service fees from the very start?
The biggest surge is in agents, especially independent ones, who have skipped right past stage one, two, and three. This new breed of travel consultants has seized on the opportunity to earn revenue through consulting fees. After all, those things represent the actual experience of the vacation. It’s where customer satisfaction and repeat business comes from. Why leave it to chance?
Has the need to charge fees become even more important in the past few years?
There is definitely more of a “need” to charge fees, but in my opinion, it’s the wrong reason. One can easily make up for lost commission revenue by focusing on certain types of products, maximizing preferred suppliers, and hitting performance targets. However, none of those are reasons a tablet-tapping customer would call a travel consultant. In fact, surveys show it causes them to be suspicious of the advice they receive; it’s the old “no such thing as a free lunch” assumption.
I truly believe the most important reason to charge fees has nothing to do with “need” or reduced commission. Instead, it’s to be able to fund creating a superior human consulting experience they’ll never find on an app or website. I also believe fees help travel consultants take control of their own financial futures instead of leaving it in the hands of faceless multi-national corporations. Not to sound dramatic, but we should have learned our lesson from the airlines and NCFs.
Of all the agents I know who have made the leap to substantial fees, I don’t know a single one that would go back to relying exclusively on commission.