What’s Holding Some Suppliers Back from Advance Commission Payments?by Dori Saltzman /
Last week Travel Market Report explored why some suppliers are heeding the call by the travel advisor community to make advance commission payments available. But not all suppliers are making changes.
Here, we look at why advance commission payments aren’t as easy as advisors might wish, and why some of the complexities of paying commissions ahead of travel are holding suppliers back from making the switch.
Why Some Suppliers Are Holding Back
Unless you’re building a reservation and payment system from scratch – like Explora Journeys did – figuring out how to make advance payments (and call them back if necessary) isn’t easy. It’s a common response from suppliers, but it’s not just an empty excuse.
Even building from scratch wasn’t a walk in the park, said Chris Austin, chief sales officer at Explora Journeys.
“From the reactions of our partners at Versonix, they gave us kudos on the creativity of the idea and then it wasn’t something that was a one-week piece of work. If time is a factor of complexity, I would say that even on a brand-new platform, they had to think through this.”
Each of the suppliers we spoke with mentioned the number of touch points that go into such a system.
“There’s different departments that you have to work with,” explained Christian Leibl-Cote, executive vice president, global business at Collette. “Call center, accounting, the executive team, all working on this together… It’s not a simple thing.”
Each also found its own way to manage its program.
“We had to look, as a company, what is feasible for us to do from an efficiency standpoint,” said Ann Chamberlin, vice president of sales at Scenic and Emerald. “We realized those are some things we couldn’t do [payment on deposit], that would be more difficult to do.
Instead, the Scenic and Emerald went with commission on full payment and agencies have to be approved.
“It isn’t carte blanche,” she added. “We needed to go with an enrollment because we wanted to make sure that we were capturing the agency information correctly and ensuring the owner of the agency was approved.”
At the Globus family of brands, advance commissions are handled manually, chief sales officer Camille Olivere told TMR. The company has been paying commission upon full payment for several years, but recently added payment on usage of letter of credit as well.
“It is difficult,” she said. “We don’t have technology to address this. We do it manually.”
That’s not something most suppliers can do.
“For some of the larger cruise lines, I can certainly empathize. It would be a huge challenge for them. Investing in technology that doesn’t have a direct impact on revenue is a challenge as well,” Olivere said.
“Suppliers have to take a look at their own systems and their efficiencies,” Chamberlin said. “While I think all of us want to do right by the trade and help them recover quickly and get money into their hands more quickly, but there’s also the process behind the team to generate that.”
In other words, companies need more than a desire to support the trade. They need money and human resources.
“I think it is quite a legitimate comment,” Austin said. “It’s not just a fabricated answer because people don’t want to do it.”
The Elephant in the Room
Among the many complications with advance commission payments is what Chamberlin called the “elephant in the room” – commission recalls. It’s part of why Scenic and Emerald went with a sign-up program. Their vetting applicants to ensure they’ll get the money back if a recall is required.
“We have the owner involved because they have to sign off on the program. We felt we get a commitment,” she said.
“This is the nature of our industry,” Olivere told TMR. “That goods that are purchased can be returned until they’re past the final payment period.”
Recalls, she added, are one of the main reasons Globus family of brands pays on full payment and not deposit.
“We think that’s the best way to ensure that an agent doesn’t become in debt because at any point there can be a cancellation… I think that travel advisors need to be cautious in what they’re asking for because getting too much money in early, when you have that risk of cancellation. Then you become in debt and that’s not a good place to be either.”
Collette decided to skip the issue entirely. The tour company never recalls the advance commission paid on deposit.
“The big difference for us is we don’t call it back,” Leibl-Cote said. “Even if we cancel the trip or the customer cancels. What we want to do is recognize that the agent did all this work. And you have earned that $200.”
Explora Journeys chose a middle ground. The cruise line provides a six-month window for the travel advisor to find a new booking to cover the commission payment.
“We’ve been told, yes, if it happened, they’d be able to find another client,” Austin said. “Of course, in the eventuality that they hadn’t [found another booking], then yes, full transparency, we would do a commission recall.”
(Austin and Chamberlin added that their companies’ flexible, fee-free change policies also help prevent many cancellations.)
Host Agencies – Another Layer of Complexity
Adding another layer of complexity to getting commission payments into advisors’ hands earlier is that of the host agency. All suppliers pay commission to the parent agency that’s booked with them. How those commissions are then passed on to individual advisors is up to the parent company.
In some cases, suppliers can work with hosts to ensure that commissions get passed down.
“We’ve had to finesse [our program] a little bit with our host agencies,” Chamberlin said. “Some of them operate on a commission split basis and what would happen in the event of a commission recall. So, we are working on an individual basis with the host agencies that are interested in the program where they can pay their ICs if that works for their business model.”
Though she didn’t mention Avoya by name, co-CEO Jeff Anderson mentioned in an interview with TMR that Avoya does work with suppliers to be able to offer ICs advance payments. Many other host agencies won’t, for all the same reasons many suppliers hesitate to do so.
Wave of the Future?
When asked if they believe they’re part of a new-wave of advance commission payment policies, the supplier executives TMR spoke with said they believe other suppliers are watching.
“They’re curious,” Chamberlin said. “It it’s successful with us, then I think they’ll be more.”
Austin said much the same. “Some may look to see if their share is moving to those other brands that have created these programs,” he said.
Leibl-Cote agreed that the industry will see more companies starting to do some advanced commission payments, but added “everybody’s going to have different rules.”
Olivere said the wave has already started. “There’s more suppliers doing that [commission payment upon full payment] now than prior,” she told TMR.
Among the suppliers paying commissions ahead of travel are some of the biggest names in the cruise industry. Carnival Cruise Line, for instance, pays commission on receipt of full payment (and does recall the payment if there's a subsequent cancellation).
Other suppliers are making an effort to move their timelines up, even if not as early as, say, Collette. Windstar Cruises is upgrading its systems to be able to pay commission 14 days prior to departure. (According to Windstar, plans for the upgrade were in place before COVID-19 and it’s expected to launch in spring ’23.)