Do you ever feel like you’re spending too much money on travel agents’ commissions for your tour products? It can be tricky to decide whether or not it’s worth it. After all, those fees add up quickly over time. But what if you could save that money and use it for direct marketing instead?

 

What Is Commission?

 

The first thing to understand is what a commission actually is. Basically, it’s a service fee charged by a distributor/Travel Agent who makes the sale on your behalf. The commission is the cost of selling your tourism product (accommodation, tour, experience, activity, attraction) through the tourism distribution system and can be considered a form of marketing to capture customers beyond your reach – especially in international markets where language barriers may be overcome.

Travel agents, travel wholesale agents, tour operators and some visitor information centres will expect a % fee for their services – this varies in percentage off the recommended retail price. The amount of commission paid also depends on how many other people are involved in selling your Product and the breadth of marketing reach.

 

Example – 

 

Tour / Activity / Accommodation	Retail Price	Travel Agents  Commission	Net Rate for operator
Bobs Boat Tour	$185 pp	25%	$138.75

 

 Ways To Lessen Commission Impact

 

So now that you understand what commission is and who receives it – can you afford to pay them? Sure, offering commissions might seem like it costs more than doing all the work yourself – but if you’re booking out at full capacity without their help, then there’s little gain for you anyway! But if there’s spare capacity, having access to those extra sales opportunities could make all the difference for your business.

 

Let’s Break Down The Tourism Figures

 

Let’s use our example of Bobs Boat tours again; the first points to consider are

• What is the maximum capacity for the tour?
• What is the cost to the operator for the tour for each day (fully inclusive, wages, fuel, food etc.)
• How much profit would you like in busy and quiet seasons?

You need to be truthful and realistic with yourself when asking these three questions; you will not make top dollar all the time; every tourism region comes with busy and quiet times, and you need to capitalize on this!

Ok, now we have our figures, what’s next? See my table below.

 

Tour	Guest capacity	Operation cost for the day	The profit you want to average per day
Bobs guided boat tour	20	$1800	$1000

 

In this example, Bob must make $1800 per operating day to pay for costs; anything over that is profit. Bob would like to make an average profit of $1000 per day of operation.

As every tourism business knows, you won’t be full every trip so we won’t be making $1000 profit each day of operation. However, bookings will slow as word of mouth slows if the tour keeps cancelling due to low numbers and not meeting a minimum of $1800 a day. You will also get bad word of mouth as each cancelled guest will tell at least someone else they were cancelled from your trip.

So many tourism businesses make this mistake, so how do I suggest fixing this?

Let’s start with the $1800, as this is the prominent figure (breaking even); your first goal should be to break even at least 99% of the trips you run. Stop looking at the top figure of $2800. It’s not your first goal, and is unrealistic to compete against larger companies.

Bob boat tours can take 20 people, so let’s run the math on my scenario

Break even full boat – 1800 divided by 20 paying guests = $90 per person
With profit, Bob wants to average a day on a full boat $2800 divided  by 20 paying guests = $140 per person
Bob’s Retail Rate is $185 per person. If he were to sell 100% direct with no discount, he would make $3700

as you can see, we now have a format for getting the ticket sales we need; while we would all love the direct with maximum profit, it won’t happen very often. From the above figures, you can now calculate occupancy percentage and also induce travel agent percents to get to the net rate figure you are happy with.

Guide for the below table –

Occupancy is based on a maximum of 20 guests  (100%)
Direct Sale is based on 185 minus 0% commission
Travel agent one is based on 185 minus 15% commission
Travel agent two is based on 185 minus 20% commission
Travel agent three is based on 185 minus 25% commission 
Travel agent four is based on 185 minus 30%  commission 

 

 

Occupancy	Direct Sale	Travel Agent 1	Travel Agent 2	Travel Agent 3	Travel Agent 4
60%	$2,220	$1,891.50	$1,776	$1,660.50	$1,545
70%	$2,590	$2,204.50	$2,060	$1,915.50	$1,771
80%	$2,960	$2,517.50	$2,344	$2,172.50	$2,001
90%	$3,330	$2,830.50	$2,628	$2,429.50	$2,231
100%	$3,700	$3,143.50	$2,912	$2,686.50	$2,461

 

 

From the table, it’s easy to see that not all options are viable; while travel agents three and four may book a lot of Bobs Tours as the commission is high, you can clearly see it’s not viable for your tourism business if they are filling over 60 % of your product (which they will because they make good money from you).

 

Its time to think outside the box and get more direct bookings

 

This is the stage I need you to start thinking about how much commission the agents get as a total dollar value for each trip and how you can use that for direct bookings.

Let’s work this out with Travel Agent Two on a 20% commission to show I’m not attacking agents that take high commissions.

Travel Agent Two will make a $424 dollars commission on selling 60% of Bob’s Tour each day it runs. Let’s say Bob runs five days a week. That’s a whopping $2120 Commission the Travel agent has in their pocket a week instead of Bob’s Pocket!  That’s a lot!

The argument here is the travel agent did the marketing, so they earned this commission. Yes, this would be correct back in the days before the internet. But this is not correct in this day and age.

Bob needs to think about how he can use the agents’ commission to market his product to get direct sales!

How do you do that? Well, that’s where I come in, and I can’t give that away for free, but I am happy to talk to you free of charge to see if you are a fit, and we can explode your direct sales!

No tricks or gimmicks; in fact, it’s essential marketing to customers who are looking for a product just like Bobs.

I will tell you this. I can guarantee your website is not set up to rank your tour; without training in search engines, you may as well take your shiny brochure and take it off travel agent displays.

I started designing and ranking websites because I realised website designers are just that, designers! 95% have no clue what on-page SEO is and are not formatting your website to rank your tour and the keywords you need to rank for to bring traffic to your website; why is traffic significant? They convert to direct bookings.

The ranking is one way, and I have two other ways that I won’t mention here (sorry, but I have business stalkers who try to copy me) that will drive direct sales to your website.

What do you have to Lose? Fill in the form below, and let’s set up a chat and see if you are a fit to get more direct bookings.

Stop increasing your retail to compensate for the Travel agent commission, and contact me today.