(Esey) How Do Travel Agents Make Money?

I am asked this question a lot. When people learn that I work in the travel industry, they usually ask me questions because they can’t believe travel agencies are still in business or because they want to become travel agents themselves! (They are, in fact, the new favorites of today’s time-pressed, information-overloaded passengers!)

1. I’ll get into more detail shortly, but for now, here’s a rundown of the stages that illustrate how travel advisors get paid:

2. A traveler plans and finalizes their schedule in collaboration with a travel advisor.
The travel agent makes all of the travel arrangements (booking the flights, hotel, rental car, tours, cruises, etc.) that are included in the traveler’s itinerary.

3.  Advisors make reservations for each leg of the trip using their accreditation number on a vendor’s unique travel agent portal (or by calling the vendor and providing their accreditation number).

4.  The agent may further charge the passenger a supplemental consultation or service fee, depending on the nature of the booking and the agency.

5. The travel agency is identified by its accreditation number to the vendor. The vendor retrieves details about the agency using the accreditation number, such as the commission level of the travel agency and the mailing address for the commission check.

6. The booking is made by the travel agent, who receives credit for it via their accreditation number.

7. The travel agent receives payment of the commission. Most of the time, the vendor gives the travel agent a commission after the customer has left. The travel agent receives their commission on the majority of cruises following final payment, which usually occurs 60–90 days prior to the sailing.

Therefore, if your question is primarily about travel agent compensation, it pertains to how agency-employed travel agents get paid. It’s the wrong article, but you’re at the right place. 🙂 This is our in-depth post about the pay of travel agents.

It helps to have some historical background in order to address the question of how travel brokers make their living. I swear I won’t ramble on; the history of the industry is actually quite intriguing.

Back in the good old days, airline commissions accounted for a sizable amount of travel agencies’ revenue. Tickets were the lifeblood of any agency since they were pricey, in high demand, and could only be purchased through agents or the airlines.

And commissions from cruise lines, hotels, and tour operators? Those were merely the cherry on top.

Because they represented travel providers, they were travel agents in the truest sense of the word. The commissions they received from the sale of travel-related goods provided them with income. But when

Travel agents’ primary source of income vanished in the 1990s when airline commissions were reduced and capped. It ached. A great deal.

Because passengers could now be reached online through online travel agents (OTAs) like Booking.com and Expedia, airlines were able to reduce their commission. Airlines used to drink and dine travel brokers, but now they were left out in the cold. Hurt.

In light of the swiftly evolving travel industry, travel brokers have to quickly devise a fresh approach to generating revenue. And so begins the story of “How Do Travel Agents Make Money?” in the present era.

A Change in Business Structure
Agencies had to change how they planned and booked travel in response to commission reductions and online booking for customers. To be honest, this decimated the travel agency community. Numerous organizations who failed to adjust swiftly enough were forced to collapse.

Alright, alright. I want to reassure you that there is a happier ending before you go through an entire box of Kleenex. Continue with me. 🙂 The travel agent industry has stabilized, although being smaller than in its heyday.

STOREFRONT TO HOUSED IN A HOME

The number of travel agencies began to rise approximately in 2013. An infusion of new people ready to take advantage of the flexibility and travel opportunities a career as a travel agent provides replaced the concern that there wouldn’t be enough travel agents to replace those retiring.

View these industry statistics:

• The American Society of Travel Advisors (ASTA) reported in 2013 that over 55-year-olds made up approximately 70% of the agency staff. Furthermore, during the previous ten years, the proportion of agents over 65 had almost doubled, from 17% to 32%
• Year after year, stats from our HAR’s income surveys indicate that the median of an agent lands in the early to mid-50s, with the majority working from home. (In 2022, the median age was 55).

 Did you notice that? In 2013 there were 70% of workers over 55; by 2022, however, 50% of workers were under 55! Although HAR is usually smaller, non-storefront agency and ASTA is generally larger, retail shops, the two organizations do tend to draw different types of people. Nevertheless, the tendency is evident. There is no longer a threat to the existence of travel agents. (Hazzah!!!)

a primary cause of this recent influx? the increase in remote-working agents. Whatever trendy word you choose to use, call them location-independent, home-based, or solopreneurs. Even if they are tougher to find without a storefront, this new industry sector is becoming more and more significant.

CHANGING TO A VARIABLE INCOME

Travel agencies must contend with the non-commissionable fees (NCFs) levied by numerous large cruise lines in addition to losing airline commissions. Yes, it goes without saying: These are other fees that aren’t subject to commission. Even though a cruise sale might be $2,000, only $1,400 might be commissionable. The worst part is that an advisor will still work very hard to get those NCFs booked for their client.

Corporate and leisure travel agency business models are evolving to rely less solely on commissions. Why was it changed? In addition to commissions from airlines and other vendors being smaller than in the past, the sector has seen significant ups and downs due to recessions, pandemics, and 9/11, among other events. (Am I absent?)Travel agents are so strong, wow!

During these periods, commission income was spent on exhilarating experiences. For instance, advisors put in a lot of overtime during the coronavirus pandemic, canceling trips, going above and beyond to get their clients home safely, dedicating a lot of time to staying current with constantly changing travel regulations, and rebooking trips even though commissions stopped. Yes, they were practically working for free by putting in extra hours. Advisors learned the value of diversifying revenue streams to help stabilize income as a result of these significant problems.

Advisors who wanted to offset declining commissions might do so by collecting fees to diversify their revenue streams.

Therefore, in a world where their commissions are smaller—and occasionally even unpredictable—how do travel brokers make ends meet? Advisors who wanted to offset declining commissions might do so by collecting fees to diversify their revenue streams. As a result, agencies were able to reduce their reliance on vendor commissions altogether, which enabled them maintain a profit margin that had previously been supported by substantial airline and vendor commissions.

The Income Distribution of Travel Agents
Alright, so before we get too technical, it’s crucial to realize that different travel firms generate revenue in different ways.

To make things simpler, we have divided the topic of how travel agencies generate revenue into four categories: corporate, leisure, custom, and “the big players.”

HOW DO BUSINESS TRAVEL AGENTS GET PAY?

) How Do Travel Agents Make Money?

Corporate travel agencies make money mainly from service fees, net/private fares, and from airline commissions.

Corporate agencies, sometimes referred to as travel management businesses or TMCs, rely heavily on airline tickets. Just because an airline stopped paying commission, does it mean TMCs would also cease selling tickets? Not in a manner. To make up for the decreased commissions, they had to get inventive. What actions did these businesses take? When they made a ticket reservation, they added a service charge.

) How Do Travel Agents Make Money?

Corporate travel agencies get commissions from booking hotels and automobiles for business travelers in addition to flights. The primary sources of revenue for corporate travel companies are airline commissions, net/private fares, and service fees.

The average service fee for air ticketing in 2022 was $39 for domestic air and $63 for international air for agents who booked corporate travel.

Travel agencies can receive commissions on both local and international flights (usually between 10 and 22 percent), depending on the airline contracts they have access to.

What is the cost of using business travel agencies? The average service charge for air tickets for agents that booked corporate travel in 2022 was $39 for domestic travel and $63 for foreign travel, according to our 2022 Travel Agent Fee Report

.TRAVEL AGENTS FOR LEISURE: HOW DO THEY GET PAYED?

Many travel businesses switched to offering expensive products that still paid commissions to travel agents after the commission cuts. In essence, these were cruises and holiday packages. These days, these are the travel agencies you use for leisure travel—the ones you generally picture when you think of travel agents.)

By charging a fee, agents are able to increase their profitability and get paid for their knowledge.

Typically, commissions that suppliers pay on flights, cruises, holiday packages, and other add-ons provide leisure travel companies with the majority of their income. However, as agencies work to diversify their revenue streams to become less reliant on supplier commissions, consulting fees and service fees are becoming more widespread.

If you’re wondering how many travel agents make money by charging a fee, you’ll want to take a peek at HAR’s complete fee survey archive here!

In 2022, 53% of advisors reported charging fees. Just to compare to the days of yore, only 33% of advisors charged a fee in 2017. Holy smokes, that’s a big increase

Charging a fee helps agents boost their bottom line and compensates them for their expertise. For agents hesitant to charge fees, some agents implement a ‘look-to-book’ fee or a “plan to go fee.” This is an up-front fee for research, which is applied to the booking when it’s made. Other agencies charge a straight-up non-refundable fee for consultations.

Air ticketing service fees are typically the most common among advisors. When you focus on non-air ticketing fees, these services ranked in the top 5 for advisors to appl

TRAVEL AGENTS: HOW DO THEY GET PAYING CUSTOM ITINERARIES?

Not everyone is interested in mass-market travel experiences like group bus tours of Europe, cruises, or all-inclusive resorts. In layman’s terms, you would refer to it as a personalized itinerary, but travel agencies refer to it as an F-I-T trip when you want an itinerary created specifically for you. But really, why stick to anything so basic when you could create an acronym? 😉

Custom itineraries require more planning and may entail reservations at locations that don’t reimburse travel agents for their services. In order to make up for their losses, agents who create FITs usually impose increased consulting, travel, and/or service fees.

In addition to the costs listed above, commissions from the many suppliers they book and net pricing markups are how FIT travel brokers recoup their costs.

With regard to personalized itineraries, there is no one-size-fits-all cost. However, if you’re interested in finding out more about the kind of price that might be most appropriate for your niche, have a look at this:

HOW ARE THE MAJOR TRAVEL AGENCIES GETTING PAID?

Before we discuss how large travel agencies generate revenue, let’s clarify what they are. When we refer to an agency as a “big player,” we mean one with sales revenue in the tens of millions. There isn’t actually a deadline for reaching this level. In actuality, you will be aware of your place in this circle. They make up 1% of all travel agencies worldwide.

These “big players” are able to receive overrides based on their income in addition to commissions, whereas the majority of agencies receive commissions based on sales tiers. The vendor pays them when they shift market share or hit a pre-set sales target. These overrides may originate from any number of suppliers, like as

To sum up

You need to be prepared to begin earning money as a travel agent right away now that you know how they do it! Participate in our complimentary 7-Day Setup Travel Agency Challenge. You will receive a weekly series of emails from us that will guide you through the necessary steps to launch and operate your agency.

Please feel free to leave any more queries in the comments section below regarding the workings of the land of travel agents. I was born and raised in the travel industry, and I have helped numerous agents launch and expand their travel businesses. If you still have questions, feel free to contact us, participate in the discussion in the comments section below, or find me on LinkedIn, Facebook, and Twitter.LinkedIn