How Do Travel Agents Make Money?
When people find out I work with travel advisors, one of the first questions they ask me is how do travel agents make money? Do they charge fees or do they earn a living from commission?
Usually, the people asking are either those who are interested in becoming a travel agent or they're thinking about trying one out and want to better understand the income model a travel advisors operates under.
I'll go more in-depth in just a second, here's a list of steps that show how travel agents make money:
- Depending on the booking type and the agency, the travel agent may also charge the traveler a consultation fee. (Our travel agent research shows about 50-60% of advisors charge some sort of a fee.)
- A traveler works with a travel advisor to plan and finalize their travel itinerary.
- The travel advisor books the trip, often within the agency's preferred supplier list.
- Advisors are recognized by suppliers because they give an accreditation number specific to their agency. The number signals to the vendor/supplier who the agency is and if the supplier pays the commissions, the travel agency's commission level.
- The commission is paid to the travel agent. For most trips, the vendor pays a commission to the travel agent after the client has traveled. For most cruises, the travel agent is paid their commission after final payment (typically about 60-90 days before the sailing).
Now, if you're looking for how travel agents make money that are employees of an agency, that falls more into the territory of travel agent salaries. You're at the right site, just the wrong article. :) Here's our article that deep dives into travel agent salaries.
A Short History
To give you an answer on how travel agents make money, it's important to know a little history. I promise to keep it short—it's actually pretty fascinating how the industry has changed over the years.
In the good 'ol days, a large portion of travel agency income came from airline commissions. Since tickets were expensive, in demand, and could only be ticketed by agents or the airlines, they were the bread and butter of every agency.
What about commissions from tours, hotels, and cruise lines? Those were just icing on the cake.
They were travel agents in every sense of the word because they were agents of travel vendors. Their revenue came from the commissions earned from selling travel products. However, when airline commissions were cut and capped in the 1990s — sad face! — the main revenue base for travel agents disappeared. It hurt. A lot.
Airlines cut their commission because they could now reach travelers via the web and online travel agencies (OTAs) like Expedia and Booking.com. Travel agents, who were once wined and dined by airlines, were left out in the cold. Ouch.
With this rapidly changing travel landscape, travel agents needed to find a new way to make money . . . and fast. And that's where our modern-day story of 'How Do Travel Agents Make Money?' begins.
A Shift in Business Models
With commission cuts and clients' ability to book online, agencies needed to adapt to the new landscape of planning and booking travel. The travel agency community was, quite honestly, fumbled for about a decade. Many agencies that didn't adapt quickly enough had to close their doors.
From Storefront to Home-Based
But kiddos, I got news for you! While the storefront travel agencies that once peppered towns across the US aren't as numerous, there is a BUSTLING group of agencies that are less visible, working remotely.
There's been a HUGE influx of new advisors, especially after the pandemic. Call them solopreneurs/home-based/location-independent — whatever hip term you want to use. They may be harder to see without a storefront, but this new segment of the industry is now a force to be reckoned with!
By and large, the most popular agency model has switched from the storefront agencies of the past to the remote agencies of today.
HAR's annual research reports found that 96% of hosted advisors and 84% of independent advisors worked from home in 2023.
Starting around 2013, travel agents started to see their numbers increase. When there was once a worry that there wouldn't be any travel agents to fill the shoes of those retiring, there was an influx of new blood, eager to take advantage of the flexibility and travel opportunities a travel agent career provides.
Check out these industry stats:
- In 2013, according to the American Society of Travel Advisors (ASTA), nearly 70% of the agency workforce was older than 55. Not only that, but the percentage of agents over age 65 had nearly doubled, from 17% to 32%, over the prior decade.
- Year after year, stats from ourHAR's 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 catch that?!? We went from 70% of the workforce being over 55 in 2013, to 50% of the workforce being younger than 55 in 2022!
While ASTA and HAR do tend to attract different demographics — ASTA was traditionally larger, retail storefronts and HAR is typically smaller, non-storefront agencies — but even so, the trend is clear. Travel agents are no longer in danger of going extinct. (HUZZAH!!!)
A big reason for this new influx? The rise of the agent that works remotely.
Call them solopreneurs/home-based/location-independent — whatever hip term you want to use. They may be harder to see without a storefront, but this new segment of the industry is now a force to be reckoned with!
Moving to Diversify Income
Along with the loss of airline commissions, travel agents face the challenge of many major cruise lines' non-commissionable fees (NCFs).
Yup, it's self-explanatory: They're miscellaneous fees that are not commissionable. While a cruise sale may be $2,000, it's possible only $1,400 of it will be commissionable. (That deserves a boo from you as the audience.)
Travel agency business models (both corporate and leisure) are moving to become less dependent on commissions alone. Why the change? Not only did commissions from airlines and other vendors lower than in the past, but the industry has experienced huge industry and economic ups and downs including 9/11, recessions, and pandemics. (Am I missing any? PHEW, travel agents sure are resilient!)
Commission income went on rollercoaster rides during these times. During the coronavirus pandemic, for example, advisors were working overtime canceling trips, bending over backward to get their clients home safe, spending oodles of time to keep up to date with constantly-changing travel regulations, and rebooking trips despite the fact that commissions came to a halt.
That's right, they were working overtime for essentially no pay.
These major pitfalls helped advisors realize the importance of diversifying revenue streams to help stabilize income.
One solution for advisors to counteract diminishing commissions was to diversify their income by charging fees.
So how do travel agents make money in a world where their commissions are lower (and even unpredictable at times)? One solution for advisors to counteract diminishing commissions was to diversify their income by charging fees. This helped agencies steer away from complete reliance on vendor commissions, helping them pad a bottom line that was once cushioned by generous airline and vendor commissions.
The Breakdown of How Travel Agents Make Money
Okay, before we really dig into things, it's important to understand that different kinds of travel agencies make money in different ways.
To make it easier, we've broken down the question of how travel agents make money into 4 main types of travel agencies:
- corporate travel agencies,
- leisure travel agencies,
- travel agencies planning custom itineraries,
- and 'the big players'
How Do Corporate Travel Agents Make Money?
Corporate travel agencies make money mainly from service fees, net/private fares, and from airline commissions.
Airline tickets are the lifeblood of corporate agencies (also known as TMCs or travel management companies). Were TMCs going to stop selling airline tickets just because airlines stopped commission? No way. They had to get creative to offset lower commissions. What did these corporate agencies do? They implemented a service fee when they booked a ticket.
In 2023, HAR research reports show the median service fee charge for international air was ~$60 and ~$40 for domestic air.
In addition to air, corporate travel agencies earn commissions from booking cars and hotels for business travelers (typically 8-10% commissions). Corporate travel agencies make money mainly from service fees, overrides from the GDS and airlines, net/private fares, and from airline commissions.
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, depending on the airline contracts they have access to, are able to earn commissions on both domestic air (typically 0-5%) and international air (roughly 10-22%).
How Do Leisure Travel Agents Make Money?
After the commission cuts, many travel agencies shifted their focus to leisure products that still paid travel agent commissions. These products were essentially vacation packages and cruises. Nowadays, these are your leisure travel agencies (the ones you probably think of when you think of a travel agent.)
Charging a fee helps agents boost a travel agency's bottom line and compensates them for their expertise.
As a general rule, leisure travel agents make money from commissions from vendors pay on vacation packages, cruises, air, and other add-ons. However, consultation fees and service fees are becoming more common as agencies try to diversify income sources to become less dependent on supplier commissions.
If you're wondering how many travel agents make money by charging a fee, what are the most common fee structures and ranges, you'll want to take a peek at HAR's research reports.
In 2023, 49% of hosted advisors and 67% of independent 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!
Confused about the difference between a hosted advisor and an independently accredited advisor? Learn what a host agency is.
Charging a fee helps agents boost an agency's bottom line and compensates them for their expertise. Some agencies have what's called a 'look-to-book' fee or a "plan to go fee." This is an up-front fee for research, which an agency may apply some or all of it to your booking once you book, and keep it if you decide to go elsewhere. Other agencies charge a straight-up non-refundable fee for consultations.
If you're coming to an agency with an air-only booking, you can pretty much bet there will be a service fee (median international air was ~$60 and ~$40 for domestic air in 2023). But travel agents also make money by charging fees for things like FITs (custom trips), air-inclusive packages, tours, accommodations only, and cruises.
How Do Travel Agents Make Money with Custom Itineraries?
Mass market trips like cruises, all-inclusive resorts, or group bus tours around Europe aren't for everyone. When you want an itinerary built just for you, travel agents call that an F-I-T trip — in plain-speak, you'd call that a custom itinerary. But why be simple like that when you could come up with an acronym, right?! ;)
Custom itineraries are more time intensive and may involve booking with multiple companies, some that may not pay travel agent commissions. Agents that build FITs typically charge higher consultation, trip planning, and/or service fees to compensate.
FIT travel agents make money not only through the fees mentioned above but also through net pricing mark-ups and commissions from the different vendors they're booking.
There's no one-size-fits-all fee when it comes to custom itineraries. But if you're curious about learning more about what kind of fee structures an agency might have, check this out:
How Do the Big Travel Agencies Make Money?
Let's first define what a big travel agency is before we talk about how they make money. When we're talking about a 'big player', we're talking about an agency that has tens of millions of sales revenue. There isn't really a cut-off on when you hit this threshold. The reality is that if you're in this circle, you'll know it. They're the 1% of the travel agency world. :)
While most agencies earn commission based on their sales tiers, these 'big players' travel agencies earn overrides based on their revenue, as well as earn commissions.
What's an override? It's best to think of it as a bonus.
When a travel agency meets a pre-determined sales goal or move market share, the vendor compensates them. These overrides can come from any number of vendors including airlines, GDSs, cruise lines, tour operators, car rental companies, and more.
In Closing
Now that you're aware of how travel agents make money, maybe it's time to consider it as a career? Join the free trial for our 7 Day Set Up Accelerator course.
So, next time someone asks you 'How do Travel Agents Make Money?' you can now give a thorough answer, full of information that will blow their mind.
If that's where you're at right now, great. That was my goal.
Feel free to ask any other questions about how the land of travel agencies work in the comments below. I grew up in the travel industry and have worked with many agents to start and grow their travel agencies. If you still have questions, drop us a line, join the conversation in the comments below, or connect with me on Facebook, Twitter, LinkedIn, or Instagram.
Editor's note: This post was originally published in July 2012 and has been updated annually to keep up with current data.
