By now, you know travel agents make money in a variety of ways, not just from commissions. How do you know this? Because you’ve read our article on how travel agents make money, duh! However, as great as that article was, it left you wondering, what’s an average travel agent commission?
The Basics of Travel Agent Commission Levels
There’s no two ways about it, commission levels are complicated—the numbers are not black and white numbers and there is no set way of doing things. And there is no “average” travel agent commission.
We’re going to try to simplify things but since the system is complicated, explaining it can be tough. As you read this, just remember that commission levels vary by—to name a few—agency, vendor, destination, how booked, and more.
The truth is, this article is a rough guide—you’ll really only know all the details once you’ve joined the host agency/franchise/travel agency/consortium and have access to their commission guides.
Now, onto trying to organize this mess into understandable, bite-sized pieces. Wish me luck!
3 Types of Travel Agent Commissions I Can Think Of
1) TIERED COMMISSIONS
Some vendors have tiered commission levels. The more business your travel agency brings the vendor, the higher the commission level (up to a point, anyhow). So, how do they measure the business you’re bringing them? Vendors typically use either agency sales or passenger count as the defining factor of their tiers. You’d see something like this (these are hypothetical numbers):
Or, if we’re talking passenger count:
Let’s add another level of complexity (heck, why not?). When you are affiliated with a consortium, the consortium will negotiate lower sales/passenger thresholds with their preferred suppliers. If they’re going to promote this vendor to their members, they want a better commission deal for their members. Makes sense, right?
That means their members won’t have to sell quite as much to bump up to the next commission level. That also means being a member of a consortium is probably more attractive to an agent than being on their own, where they’d have to sell more to reach the same commission level.
For instance, if the vendor tiers above were for an agency that didn’t belong to a consortium/co-op/franchise you would have to sell $75,000+ to get to 12% commission. But, if you were a member of a consortium/co-op/franchise, they might have negotiated so you only have to sell $50,000 to reach the 12% commission tier. A deal!
Still with me? My mind is wandering too. Let’s take a break and look at a cute picture of my dog, Rigel. This is his “business dog” look.
Sigh. Handsome lil’ devil, isn’t he? Sorry, that’s all the cuteness for now; back to work!
Since many of the readers of this site work with host agencies, we’ll mention that for host travel agencies, you’re tier is not dependent on your agency’s sales, but the cumulative sales of all of the agencies under the host’s umbrella. That’s an extremely attractive reason to join a host agency, here’s a few more reasons aligning with a host is beneficial.
- Vendors that typically have tiered commissions: Tour operators, cruise lines, rail, travel insurance
- Average travel agent commission range: 10-17%
Things to note:
- Third party travel insurance: Pays higher commissions than other products. It’d be fair to expect commissions in the ballpark of the 20-40% range, depending on if it’s a basic or a premium policy.
- Disneyland and Disney World: Pays a flat 10% no matter what your revenue. Disney Cruise Line is a tiered structure but in late-2015, Disney Cruise Line commissions for bookings made onboard were capped at 10%. Adventures by Disney product line do pay on a tiered commission structure.
- Commission on Net vs. Gross: Some vendors pay commission on the net rate (less taxes); some pay on gross.
- NCFs: Most cruise lines have NCFs (non-commissionable fees, which are a chunk of fees in addition to the taxes that commission is not paid on)
- Airfare may not be commissionable or commissionable at a lower rate (read more about air commissions, specifically, here)
- Phone vs. Online Bookings: Some vendors may pay different commissions based on how the booking was made.
- Destinations: Within the same vendor, different destinations may have different commissions
- Price Matches: Some vendors may do price matches. If they do, expect to be paid at a lower commission level than normal.
2) FLAT COMMISSION RATES
There are some vendors whose travel agent commission model is a flat rate. Yes, there are some vendors where the commission is actually standard and predictable! Hooray!
Hotels and car rental companies typically pay travel agents 10% commission and that’s that. There are small variances but car and hotel only bookings are probably the most predictable commission level in this whole mess.
And that’s really refreshing because when you get into tour operators, you’ll find a whole slew of commission models. There is the tiered structure mentioned above but there are also tour operators that pay the same commission rate, regardless of an agency’s sales or passenger count. I’ve found it’s usually the tour operators outside the Sun-n-Fun sphere that utilize this model. It’d look something like this:
Local, boutique tour operators that pay a travel agent commission will typically pay 10% commission and won’t have tiers. If you’re sending them tons of business, I’d encourage you to negotiate, but most travel agencies can expect 10% or net rates when it comes to boutique tour operator commissions.
What vendors typically have flat commission rate: Tour operators (boutique and non-sun-n-fun), hotels, rail, car
What you can expect for the commission range*: 10-17%
3) AIRLINE COMMISSIONS
I always say airlines are another animal and honestly, they’re not my forte. So I’ll say this. Never expect an airline commission for domestic air.
For international bookings, airlines do offer travel agent commissions through two routes:
Consolidators are Wholesalers of airlines to travel agents. They specialize in air and have private contracts with the airlines. Travel agents can get airline commissions with these contracts or they can have access to net rates and/or private fares that they can then mark up.
Airline Contracts: Your host agency or consortium/franchise/co-op will most likely have private air contracts that allow for commissions on certain airlines. Not every international ticket is going to be commissionable, it depends on things like city pairs, class of service, the carrier, etc.
Understanding Commission Confidentiality
As you can imagine, commission contracts between travel agencies and vendors as well as consortiums and vendors are confidential. They’re like trade secrets and can give one travel agency/consortium an advantage over the other.
Knowing that, don’t be surprised if when you ask a consortium for their commission guides, they don‘t hand you over a detailed pamphlet listing all of their commissions. Same if you’re looking to join a host. This article hopefully helps you gain some insight into why they may be so tight-lipped.
All that said, if you do sell a lot of a certain vendor(s), it’s perfectly acceptable to inquire about commission info for your top vendors.
Ready to go ahead an start making some commissions as a travel agent? Sign up for our 7-Day Setup Travel Agency Challenge. Our daily emails for a week will walk you through the process of what you need to do before signing on with a host.
So, What’s Your Take?
Like I said, this is some complex stuff to explain because there is no set way. For those new to the industry, are there things still confusing you? For you experienced agents, does your experience jive with what my experience with commissions has been? Did Rigel distract me so much with his cute business casual attire that I missed something or got it wrong? Let me know in the comments!
Editor’s Note: This article was originally published November, 2013 and was completely updated and revamped on April 18, 2016 to make sure we’re giving you up-to-date info. Enjoy!
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Hi, I’m Steph! I specialize in working with people looking to start and/or grow their travel agencies. I’ve worked with thousands of agents and helped them learn more about the travel industry… and I’m happy to help you out too. If you’ve found this article helpful, please help give it some love via like/tweet/share or drop us a comment! Learn More About Steph>>