Great question if you are looking into becoming a travel agent! As most travel agents these days are entrepreneurs instead of employees, if you are considering the travel agent path for yourself, you obviously want to know how you get paid and if it’s enough to support yourself. In this article, I will break it down for you - both how travel agents get paid, as well as how MUCH they get paid, so you have a reasonable idea of what you are in for, financially.There are 2 major sources of revenue for self employed travel agents:
When a travel agent makes a booking on behalf of his or her client, most suppliers will pay a commission to the agency. The commission won’t be paid until AFTER travel is completed, although some cruise lines now pay commission after final payment is made. Supplier types that as a general practice pay commission include hotels and hotel chains, cruise lines, tour operators, car rental companies, travel insurance providers, airport transfer companies, shore excursion companies, tour guides and some European rail lines. The big supplier type missing from this list is airlines. The airlines stopped paying travel agency commissions in early 2000’s.Some of the smaller supplier types that pay commission on a case by case basis include home and villa rental companies, B&B’s, small, owner run hotels, and yacht and private jet charter companies.Commission is almost always paid on a percentage basis. The percentage amount depends upon the supplier and sometimes the individual negotiation between the travel agency and supplier. For example, Disney Park vacations always pay 10% commission, no matter what agency is booking it or the amount of sales produced by the agency. It’s a standard commission that is not negotiated. However, Disney Cruise pays a range of commission from 10% to 16%, depending upon the sales volume generated by the individual travel agency.Commissions are usually paid to the travel agency, not the individual agent. Once a travel agent makes the booking, it’s necessary to invoice the booking in his or her agency’s CRM system so the travel agency can look for the commission and give it to right agent.
2) Service Fees
The subject of service fees can often be controversial thanks to many “old school” travel agents feeling the heat of competition following the onslaught of online booking engines. Back in the early 1990’s travel agencies hardly ever charged service fees … because they didn’t have to. But when the airlines eliminated commissions on all international and domestic air, thousands of travel agencies took a huge hit to their bottom lines, so severe that many went out of business. Commission on air often made up 50-70% of an agency’s revenue.The introduction of online booking engines was a double-blow to travel agency owners. However, there was a silver lining. Savvy and wise travel agency owners saw the opportunity in distinguishing themselves from online booking engines by establishing their expertise. The online booking engines might be able to offer the most competitive pricing and speed/efficiency in booking, but they don’t have opinions, experience or connections. Nor do they answer the phone when something has gone wrong while traveling.As the the wiser travel agency owners promoted their expertise and service, they also started charging for it. For one, because they had to find a way to supplement the reduction in revenue. But also because consumers are accustomed to paying for expertise. It’s an equal exchange of giving valuable information, delivering service and getting financially compensated for it.Not all travel agents charge service fees, but it is becoming more and more common. Service fees can range drastically. Airline tickets often carry a service fee of $25-$50 per ticket. Full itinerary design can range from $75 - $500. Charging a service fee is more of an art than a science and some agents will charge per hour or per person.
3) Other Revenues
There are other forms of revenue for travel agents, but they are less common. One worth mentioning is net-based pricing. Kind of a cousin to commission, net based pricing is when a supplier gives the travel agent a “net price” for the itinerary and the travel agent has full discretion in how much is added to the net price. This puts the travel agent in full control of his or her revenue on a given booking. The other major benefit to net based pricing is that the travel agent receives his or her compensation when final payment is made and doesn’t have to wait until travel is completed.
How MUCH Do Travel Agents Get Paid?
Now to answer the million-dollar question - what is a realistic expectation of income for someone who wants to become a travel agent? The answer can range dramatically. The average salary for a travel agent is low, around $30,000 per year, but that’s for employees…not self employed travel agency owners. There is no statistic on this so I can only give you my experience and what I see with the travel agents in my community.For your first year, it’s realistic to set a goal of $100,000 in SALES…not revenue. That means you are likely to attract enough clients to generate $100,000 in travel sales. This is going to generate about $12,000 in gross commission, but you are likely to be on a commission split with your host agency, so you have to net out your host agency expense. Let’s say you are on an 80/20 split, your net revenue would be $9,600. This does not include service fees. I’ve had travel agents generate $10,000 - $15,000 in additional revenue through service fees in a 12 month period. Now maybe you can see why a wise travel agent will opt for charging fees. They can’t afford not to! There will definitely be business expenses, so your final net income will be lower than these 2 revenue streams combined.I know - not much to get excited about, but here comes the good news. Within 3 years, one can build up a decent business that will support him or her. Especially if he or she focuses on finding a few good groups. 2 or 3 groups can easily net $30,000 - $90,000 in revenue alone. Add to that revenue generated by individual bookings in both commission and service fees, with good planning and budgeting, a committed and focused travel agent can find themselves making 6 figures per year.Not everybody makes 6 figures per year and in fact, most don’t. But the reason why is that they are not focused, don’t have a solid client attraction plan, nor do they have any guidance in starting and running a business selling travel. That is why we are so proud of our Travel MBA program at Gifted Travel Network. We equip our students with all the tools, resources and guidance they need to be one of the lucky few who can get to making 6 figures per year in a business they love, built by them. For more information on our Travel MBA program, just go here: www.getyourtravelmba.com