From Retainers to Hourly Billing, Two Travel Agents Outline Fee Models

At Whirlaway Travel in Westchester, Pennsylvania, Jamie Jones is just getting comfortable with the fee model she finally instituted in earnest two years ago. “When I became co-owner eight years ago, I said, ‘You guys don’t charge enough for all you do,'” she said. Since then, the luxury-focused agency has moved steadily toward “a consultative basis” that charges fees upfront — a change that “actually has been very well received.”

In this increasingly popular model for travel agents, Jones offers new clients a brochure outlining her consortia’s hotel benefits “and some other value adds,” and then explains the Whirlaway process. Following the advice of travel agency consultant Nolan Burris, she asks “a ton of questions” to help define what “luxury” means to this particular customer — “Is it a Four Seasons or a nice Holiday Inn?” — to establish a price point and get a feel for how much work the trip will involve.

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Then, she draws up a service agreement, starting at $250 for a couple headed to an all-inclusive resort or a cruise and up to about $1,000. A trip Jones booked today for a family of four looking for suites in two hotels in Italy, for example, will carry a fee of $1,050. The average service fee is about $600. Of potential customers, “75-80 percent are fine with it, and the others are not a good fit for us,” she says.

Next, she asks for a non-refundable portion upfront, with the balance due at the time of deposit. “Then, we work for them until they are happy with the trip, and include components where we may not make any money, maybe a B&B for a portion of the trip,” she said. “We are really clear that every trip is unique; we really listen to what their needs are, we don’t do packaged vacations. We want the client to know that our alliance is to them.”

At one point, Whirlaway Travel considered other models, such as billing by the hour — and while Jones tries to track that as an internal measurement, to ensure the agency’s profitability, it is not an exact number she feels comfortable passing onto clients, as a law firm might. “Being mindful of how much you need to make per hour is helpful,” she says, “but tracking hours when you are working on two or three things at a time is very difficult.”

She does try to make the number transparent to clients, though. “I find that clients, especially young clients, want to know how we get paid,” she says. “We try to separate our service from the cost of the trip.”

Since getting serious about fees two years ago, “I’d say our average revenue per reservation went from $500 to $1,500, and the quality of the trips has definitely increased, as well.” With a staff of three full-time agents and one part-time agent, plus one assistant, the agency now clocks annual sales of about $4 million. Sales rose by more than $1 million last year over 2016, and are running 30 percent higher year-to-date in 2018, “so it’s definitely working.”

Pushing the envelope with an annual fee model
In Washington, D.C., however, Kathleen Sullivan’s Anthology Travel has taken a much bolder step. When she quit her job as a paralegal at a huge international law firm two years ago, her goal was to “apply the skillset I had learned there” to the business of selling travel.

Doing her research before jumping in full-time, she looked at the different business models others used, and quickly determined that neither the planning-fee model nor the commission-only model was really sustainable. So, she hired a business coach from outside the travel industry — and together, they came up with a model based on an annual fee, scaled to the number of days per year the client expects to travel.

With most of her clients coming from Washington’s global law and consulting firms, her first step is to determine “what his goals are, what he is looking to do this year and in the next two to five years, and how many days he thinks realistically he can travel” in the coming year. Indeed, part of the draw for this busy group is that it commits the family to actually take a vacation, she said.

But, she acknowledges that “it’s a new way of looking at the client relationship, and I understand the resistance from people who have been in the business a long time. It involves a lot of trust. With every trip, I learn more about my customers and personalize things more. I know what kind of coffee they like. I have one family where the dad smokes but the kids don’t know, so I have to build in time for him to run out for coffee.”

Despite her legal background, it’s not about tracking every quarter-hour any more. “There’s a lot of flexibility in client time; they can say they want to go to the Galapagos, then call me back a week later and say no, they are going to South Dakota, and I don’t feel like I have not been paid for my time.”

Sullivan has one customer on the most flexible model, $5,000 for as much travel as he wants. “About a dozen” other clients are on annual contracts where they pay for 10 to 30 days of travel over the next 12 months. The fee is “about $150 a day if you do it a la carte, or a 20 percent discount if you are willing to plan more than one trip.” One customer brought in a group, for which Sullivan took the commission on the room block and did not charge an additional fee; one wanted just an all-inclusive resort, for which she charged $250. Through June 23, which marked her first full year in travel, she booked about $400,000.

Sullivan acknowledges that her business model works in part because she is based in Washington, “where people are accustomed to paying for personal services, where they have personal chefs and trainers and are themselves people who charge for their time. They understand that charging a fee takes anything that might put my interest over theirs out of the equation completely.”

But beyond that, as a young woman just entering into the travel business, she sees it as the only way to ensure that her new profession will sustain her until she is ready to retire.

“I consider commissions to be an incentive for me to book through one channel rather than another, not compensation for my time,” Sullivan said. “To me, commissions seem to be predicated on the good will of third parties, and they are less likely in the future. It seems like you are putting a lot of eggs in someone else’s basket.”