Starting At $499, Fees Drive Revenue For Travel Agent

When Italy specialist Madeline Jhawar launched her travel consulting business in 2008, she knew from the outset that she would charge clients for her time. Today, revenues from trip planning fees outpace her commission earnings five to one.

TMR asked Jhawar, whose Menlo Park, CA, agency is called Italy Beyond the Obvious: Tailored Travel, to discuss her fee strategy and how she talks about fees with prospective customers.

Why charge fees?
Jhawar prides herself on meticulous research that yields custom itineraries built around clients’ interests and full of detailed recommendations on everything from lodgings and dining to local guides, food markets, specialty shopping and how to get from Point A to B.

A self-described “process person,” Jhawar has developed comprehensive checklists for every aspect of the trip-planning process. For a three-week trip, she’ll use 40 to 50 checklists that break out every step of her process.

“All those details are very time-consuming,” she said. “It doesn’t make sense to me to spend time on that and not get paid.”

Three-tiered fee structure
Jhawar’s least-expensive price is a flat trip-planning fee of $499, which buys seven hours of trip “coaching” spread out over several weeks. Coaching is via email in a highly structured process that includes a general consultation and specific recommendations for lodging, dining, local guides, activities, shopping and local transportation, but leaves clients to make their own bookings.

Most clients opt for the more expensive Gold package, priced at $200 per trip day. It adds booking services for hotels, guides and activities, local transfers, and one restaurant daily, as well as a detailed written itinerary.

Jhawar also gets plenty of customers for her Platinum package, which costs $300 per trip day. It features additional services such as 24/7 trip support and alternate daily itineraries, along with amenities such as laminated daily maps, a restaurant phrase book and detailed historical information on specific sights.

“I feel comfortable justifying my fees because of the depth of knowledge and expertise I’m able to offer. I add a tremendous amount of value,” said Jhawar, who lived in Italy for five years while working for a Fortune 500 electronics firm, speaks fluent Italian and in the 1990s served as a tour guide in Italy for Butterfield & Robinson.

Three ways to talk about fees
When Jhawar needs to explain her pricing to potential clients, especially those used to working with travel agents who don’t charge fees, she uses three lines of reasoning:

1. No markups or middlemen. “Everything is transparent,” she tells customers. “You pay me your fee directly, then I book everything with your credit card. There are no middlemen and no markup in between.”
2. Compares favorably. If customers find a packaged trip they like, Jhawar does a price comparison. “I break it down, itemize everything and add in my fees. I guarantee that with all those items, plus my fees, mine will come in lower.”
3. Return on investment. Jhawar also demonstrates the value she delivers in time savings, both during pre-trip planning and on the trip itself. On her website she estimates that a 10-day trip would take an average person about 80 hours to plan. Then she compares that to spending just two to three hours in consultation with her: “That’s about 77 hours of time saved. How much is your time worth per hour?”

She also tells customers that her well-organized itineraries will ensure that their time while traveling is well spent. She goes so far on her website as to cost out the savings, based on an estimate that her clients can accomplish 20% more in a day and at a lower stress level.

Jhawar said she describes her fees and fee structure in detail on her website in part because she values transparency. The practice also helps reduce the time she needs to spend explaining or justifying her fees to potential customers. “My goal is to minimize selling time. I need to be working on itineraries. I don’t want to be on the phone all day talking to people that are not a good fit.”

Calculating fees
To set her fees when she was getting started, Jhawar estimated the percentage of her time she would spend working for clients, i.e. her billable time, and how much time she would need to spend on non-billable activities such as sales and invoicing. She determined how much she wanted to earn annually and worked backward to come up with her fees.

At the beginning, her flat fee was just $200, but early success prompted her to increase her rates. “I was starting to turn people away, so for four years in a row I raised it –from $200 to $250 to $300 to $350. Then I raised it to $499, and I thought this is enough for the value that I’m delivering. I think this is fair.”

Along the way, the venture evolved from a part-time to fulltime occupation. Today Jhawar is busy enough to employ a fulltime associate in Milan who handles details such as bookings and confirmations.

Advice to other agents
Jhawar urges other agents to shift to a fee-based business model. “I don’t see a bright future for the commission model,” she said. “Understand the huge value you bring to your client and don't be afraid to charge for your value. Lots of people are completely open to it. The market is big, and there’s enough work for everybody.”