Testing the Waters with Dori: A New Travel Agency Model?

Ever had a conversation with a colleague that just gets you buzzing? Ideas are swapped, future possibilities examined, and your juices just get flowing?

At last week’s Ensemble Horizons conference in Las Vegas, I sat down with Dave Volman, president of Trip-Arc, the company which developed the ADX booking platform that’s been used by Travel Edge for some 10 years and is now available to Ensemble members.

I’d requested to speak to Dave because I was intrigued by something he’d presented during a keynote speech in which he’d introduced ADX Plus, a booking platform that not only will let advisors bundle various pieces of the travel puzzle, but also add a mark-up and make the agency the “agent of record.”

The more I thought about the idea the more my thoughts swirled. Is this an entirely new concept of travel agencies within the leisure market? 

Are there already agencies “owning” every aspect of their client’s bookings, charging above market rate markups (in lieu of or in partnership with service fees), and being less dependent on supplier commissions?

It seems to me like a very different paradigm of how travel agencies could operate.

Under the ADX Plus concept, advisors would charge one price for the clients’ travels, which would be charged directly to their credit card and processed by the agency. Unbeknownst to the client, each aspect of their travel (cruise, air, hotel, etc) would be marked up by 5%, regardless of whether the starting rate was net or retail. Advisors could also bundle in additional fees into the one price if they wanted.

Agencies wouldn’t have to worry about commissions nearly as much as before. They wouldn’t have to hit certain volumes to get the highest commission, which means they could be more discerning about which suppliers they used to create their clients’ travel plans.

Of course, the way my mind works, I immediately jumped to the possibilities of an agency model that doesn’t even get commission because the mark ups are high enough to support working entirely for the client. (Of course, how would Hosts agencies and Consortiums make their money if size no longer mattered?!)

The concept has the potential to be downright freeing for agencies.

But there’s lots of risk involved in such a model too.

“The laws of economics say if you’re pricing over market, your demand is going to be less,” Dave told me when I asked him about risk.

On the plus side, if each client is paying more, maybe you don’t need as many clients.

It’s kind of similar to advisors who offer membership-based travel planning, which includes not only the planning, but high-touch problem solving as well. Advisors can’t just charge over-market pricing without adding value to the mix. (With that said, many advisors already are adding that value. Some get paid a service fee for the value they bring to the equation, while others haven’t translated their value into fees and are, sadly, undercutting themselves.)

And, of course, the way the airline refund rules are set up right now, this model squarely puts the burden of refunds on the agency, regardless of whether they’ve gotten money back from the airline.

And it’s not just commissions from suppliers that the travel agency community relies on. It’s the marketing and co-op support too. Would that fit in a world where agencies can support themselves through retail mark-ups?

Ultimately, when I asked Dave whether he thought this was the path forward for the agency community, he told me it’s a path. One that probably needs to be in place alongside the more traditional route, because not every client will pay above market pricing, and not every advisor will be comfortable asking for above market rates.

What do you think of this new type of model? Are you already doing it? If not, does it sound enticing? Terrifying?

Can you imagine a world where you’re not dependent on supplier commissions? Do you even want to exist in such a world?

Would you be willing to take on the risk of being the agent of record?

I’d love to hear from you at dsaltzman@travelmarketreport.com.