Evolving Use of Service Fees Benefits Agents and Clients Alike

Part two of a series on travel-agency service fees. Here’s Part One.

While travel-agency service fees took root when the airlines stopped paying commissions, the fee-based model has since evolved far beyond charging to book an airline ticket. For many agencies, service fees are not only boosting revenue, but also resulting in greater client satisfaction.

“Fees have had a very positive impact on our business—they separate the buyers from the shoppers,” said Steve Lincoln, owner of Lincoln Travel in Bridgewater, VA. “In some ways, we owe a big thanks to Delta.”

His agency has charged service fees for over 15 years, starting with airline tickets and then growing to include the entire trip-planning process. Fees for an FIT can range from $100 to $400, depending on the complexity and time involved.

“I tell clients up front that there will be a research fee,” Lincoln said. “Sometimes there is pushback. Someone asked me why they should pay $100 for 20 minutes of work; I told them they were paying for 33 years of experience.”

In the vast majority of cases, clients are receptive to paying a service fee, with many expecting it, he added.

“Fees really help you develop a more professional relationship with a client,” Lincoln said. “It gives them more confidence, and you and they feel you paying more attention to their trip than you might otherwise.”

WhirlAway Travel & Cruise
WhirlAway Travel & Cruise Consultants in West Chester, PA, also turned to charging fees to book airline tickets shortly after the commission cuts rocked the industry. After joining the agency owned by her mother five years ago, Jamie Jones has helped take service fees to a level where they now comprise 30% of all revenue.

With new or potential clients, WhirlAway first offers a complimentary half-hour consultation that spells out its approach to fees.

“We are very clear that we work for our clients, not suppliers,” Jones said. “Before we do any work or recommend any hotel or cruise line, we require a non-refundable, upfront fee of $250 to compensate us for our time. This goes toward our total fee, which is determined based on the amount of work and complexity of a trip.”

While most potential clients are receptive to fees, some are not.

“That’s OK because it tells us that they do not value our time or expertise,” Jones said, adding that older clients are the most likely to push back. “Younger clients are not used to the old system, so they are very accepting of fees.”

Jones believes that the fee system has enabled the agency to provide better service and value for clients while still having a positive impact on the bottom line.

“We can book things that are non-commissionable because we know we will be compensated for our time,” she said, adding that the agency is also freed up to make supplier recommendations based on value rather than commission.

During a recent transaction, Jones charged a fee of $900 to arrange a family trip to Disney World.

“There was a hotel sale and I was able to save the client $4,000,” she said. “I lost some commission, but that was OK because my time was compensated.”

For a recent FIT to Scotland and England, Jones charged $600 to put together a trip that included whiskey distillery tours, a train ride on the Hogwarts Express, and dinner reservations.

“I was able to book some non-commissionable things and provide a better experience for my clients,” she said.

Daydream Excursions
Now celebrating 10 years in the travel business, Dave Rosenthal, owner of the online agency Daydream Excursions, made the decision to charge fees in 2011 after hearing a presentation by consultant and fees advocate Nolan Burris at an industry conference.

“With fees, I’ve found that you don’t have to worry about all the extra work involved where there’s no compensation,” he said. “It means I can provide better service. I can be your single point of contact, handling things like dining, transportation to the hotel, filing a travel insurance claim. These are all part of the travel experience.”

When clients wish to start the trip-planning process, they are asked to fill out an online survey that asks questions pertaining to their travel needs and the kind of trip they would like to take. After completing the survey, respondents receive an email with information on what it is like to work together to plan their trip; next they receive information on the fee structure and the type of services provided. From there, a consultation telephone call can be arranged.

“When they fill out the survey and click on the fee information, I know they are seriously interested,” Rosenthal said. “After I get their credit-card information, we review the survey in detail and I ask them more questions about what they want. Most important is why they are traveling.”

While service fees vary based on the complexity of the trip, the average fee per transaction is $259, he said. So far this year, fees account for slightly over 30% of total revenue, a major boost from just 10.5% a year ago.

In an era where commissions are shrinking rather than expanding, Rosenthal is finding that fees provide a much needed cushion and he believes they will only grow in importance in the future. He’s also found that most clients don’t mind paying them.

“You get more confident with fees as you go along,” he said. “People do realize that your time has value. In fact, I’ve even had a client yell at me for not charging enough.”