Travel Agent Commissions, Explained. [Infographic]
⭐️ har's Travel agent commissions article highlights ⭐️
- Travel Agent Commissions, Big Picture: Curious about averages commissions for different travel products? See our infographic here!
- How Do Travel Agent Commissions Work? Commissions are typically tiered according to annual sales and/or passenger sales.
- Host Agencies and Travel Agent Commissions: A host agency can help a travel agents receive higher commission levels due to substantially higher sales thresholds among their independently contracted (IC) travel agents.
- Types of Travel Agent Commissions: There are 2 primary kinds of commissions for travel agents, flat commissions and tiered commissions.
- Airline Commissions: Airline commissions are a different beast altogether as they tend to offer little or no commissions for leisure agents! (Read here to find out why)
- Negotiated Contracts: Going with a host or consortia can help you leverage their contracts with suppliers.
- Commission Confidentiality: You might not know the exact commission rate you'll receive until you sign on with a host. Here's why.
There’s no two ways about it, travel agent commissions are complicated—the numbers are not black and white numbers and there is no set way of doing things. Simply put, there is no "average" travel agent commission. Heck, if that were the case we'd be wrapping up this article by now!
We’re going to try to simplify things but since the system is complex, explaining it can be tough. As you read this, just remember that commission levels vary by a travel agency's sales, an agency's consortium, franchise or host agency affiliation, vendor, destination, how the booking is made, and more (and that's just to name a few).
This article is a rough guide to travel agent commissions. It will give you a thorough, yet general, idea of travel agent commissions and what to expect. If you're a sucker for details, don't worry. Once you join a host, franchise or consortium, their commission guides will have all sorts of juicy details on specific commission levels.
Now, let's start breaking this stuff down, shall we?
Travel Agent Commissions: The Big Picture
Let's start with a visual to give you the 40,000 foot view of travel agent commissions. You can see some hard numbers and how things are broken down in an easy-to-digest infographic. After you've check that out, we'll deep dive into how travel agent commissions work to make sure you know all the ins and outs!
How Do Travel Agent Commissions Work?
First things first: where do travel agent commissions come from? How do they get from supplier to host to travel agent? How does a supplier know who gets what?
At its simplest, a supplier/vendor recognizes a travel agent from any Joe Blow on the street because travel agencies have an accreditation number.
These magic accreditation numbers are how travel agents get commissions! When you call/log-in to make a booking, the supplier asks for your travel agency's accreditation number. This how they know who to send the commissions to. It's like when you call any doctor office and they always ask for your name and date of birth to identify you. Travel suppliers ask for an agency's accreditation number to pull the agency up in their system.
Host Agencies and Travel Agent Commissions
In the case of a host agency, all of the travel agencies in the host's network use the same accreditation number (the host's). The supplier/vendor, will recognize all of the host's independent contractors (ICs) as "one" large agency since all of their ICs agents are using the host's accreditation number.
When it comes to consortia and some franchises, the difference is each individual agency has their own accreditation number.
If that's a little confusing, let's try to give a similar example in the real world . . .
I like to think of the host agency model being like the relationship between a general contractor and a homeowner. A homeowner paying a general contractor is like a supplier paying a host agency. Instead of paying the electrician, plumber and architect separately, they pay the general contractor who in turn pays the individual companies (that's the agents!). Likewise, the supplier pays the host agency commission for their aggregate sales, who in turn pays the individual independent contractor (IC) travel agencies their commission.
Using a host's accreditation is one of the major benefits of using a host agency . . . not only does it spare you the hassle of getting your own accreditation, but a host agency is able to negotiate better commission levels than an individual agent because of their higher sales. The general rule is, the more your agency sells of a vendor, the higher the commissions. Which is a great segway into our next section!
Two Kinds of Travel Agent Commissions
1. FLAT COMMISSION RATES
A flat rate travel agent commission is the simplest type of commission. The flat rate is just what it sounds like: every travel agent gets the same no matter how much they book, what consortium they belong to, or how cute their dog is. Flat rate commissions are actually standard and predictable! Hooray!
Here's a few types of vendors with a flat rate commission:
→ Hotel-only bookings and car rental companies: These types of bookings 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.
→ Boutique tour operators: Smaller or boutique vendors will typically pay 10% commission or give agents net rates. They won’t have sales tiers (more on that soon). If you’re sending a boutique hotel or small tour operator tons of business, there may be room to negotiate a higher commission.
→ Disney: Okay, so they're not exactly a boutique vendor! But Disneyland and Disney World have a flat rate commission of 10% for all agents. No matter how special you, you consortia or host agency are, you're not going to be able to negotiate a better commission.
Same with the Disney Cruise Line and Adventures by Disney products. Their commissions are tiered—we'll talk about tiered commissions in-depth in just a sec—but the sale thresholds for those are the same for every. single. agency. out there.
2. Tiered COMMISSION RATES
It only seems fair that if you sell more of something, then you get a higher commission, right? Well a lot of vendors think so too! Tiered commissions essentially mean that the more you sell, the higher the commission you get. Sounds simple?
I hate to burst your bubble, but tiered commissions are so complex so I'm going to put them in the spotlight after our intermission . . .
Ugh. 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!
Tiered Commission Rates. How Are They Determined?
So why would travel agent #1 receive a 12% commission for selling vendor X, while travel agent #2 receives a 16% commission for selling the same product?
There are two major factors that will determine travel agent commission tiers:
1. Aggregate/ Annual Sales Volume
For some vendors. the commission level (or tier) they pay an agency is determined by the sales volume under that agency's accreditation number. A vendor may increase commission based on annual sales of an agency (or their host agency).
Here's an example (numbers are hypothetical)
Annual Sales Commission Level (example):
- 10% . . . $0-$49,999
- 13% . . . $50,000-$249,999
- 14% . . . $250,000-$499,999
- 15% . . . $500,000+
From the numbers above, you can see that as a solo travel agent, it's a heckuva lot easier to reach 15% when you belong to a host agency! So even though you may have a commission split with your host agency, in the end, many agents stand to rake in more dough with a host because they are earning more commission.
When you look at the big picture, it's also worth noting that nearly all host agencies also belong to a travel consortium (such as Travel Leaders Network, Signature, Virtuoso, or Ensemble). With a host agency's aggregate sales among ICs and their consortia relationships, host agencies are able to bring in higher commission tiers with vendors than an individual travel agent.
2. Passenger Count
While many vendors use sales numbers to determine an agency's commission level, there are a handful of vendors that use a different marker. Instead of looking at the total sales coming from an agency, a vendor will look at how many passengers you're sending their way.
You’d see something like this (these are hypothetical numbers):
Passenger Count Commission Level:
- 10% . . . 0-20 passengers
- 11% . . . 21-49 passengers
- 13% . . . 50-199 passengers
- 15% . . . 200+ passengers
A Note on Airline Commissions
I always say airlines are another animal and honestly, they're not my forte. So I’ll say this. Don't expect an airline commission for domestic air. Although, in August 2017, American Airlines did announce they would pay travel agents a $2/segment for airline ticket commission — which is the first time airlines have offered agents commission on all air tickets since the 1990s.
Kinda huge. But really, is it just me or is the $2/segment airline commission incentive not really doing it for anyone else?
For international bookings, airlines do offer travel agent commissions through two routes:
These are wholesalers. They specialize in air and have private contracts with the airlines. Travel agents can make money with these contracts in one of two ways: commission and marking up net rates.
2. Airline Contracts:
Your host agency or consortium/franchise/co-op will most likely have private air contracts that allow for travel agent 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, time of year, etc.
As of Feb. 2018, Delta announced cuts in commissions on international flights to travel agencies according to Travel Weekly. The cuts vary depending on routes and ticket class, with the deepest cuts impacting travel agencies that sell luxury and business travel. It remains to be seen whether other airlines will follow suit.
Moral of the story? Airline ticketing alone is not a reliable source of commissions—especially for leisure agents.
Travel agents can book air-only reservations a variety of ways, most notably through consolidators (often used by leisure agents) and for corporate agents, through a Global Distribution System (GDS).
Now, let's chat about how companies like host agencies, consortia, and franchises help secure better commission deals for their agency members . . .
Negotiated Contracts: Host Agencies, Consortia and Travel Agent Commission Agreements
Alright, you've probably figured out that the travel industry is all about economies of scale. The more you bring to the table, the more leverage you have. So it's no surprise that hosts (a group of independent agencies using the same accreditation number) and consortia (independent agencies that band together for more buying power and access to marketing/tech tools) are able to negotiate better commission tiers.
For you, as an independent agency, these negotiated commission tiers are a big benefit of aligning with a host agency or consortium. When you (or your host agency) are affiliated with a travel consortium, the consortium will negotiate lower sales/passenger thresholds with their preferred suppliers.
Let me break it down in real terms. Most vendors will have commissions broken down into tiers. Maybe they say an agency has to sell $75,000 of their product to get 12% commission. But if a host, franchise or consortia has a negotiated commission agreement, their agents may only need to sell $50,000 to reach the same 12% commission tier. A deal!
Since many of the readers of this site work with host agencies at some point in their career, we’ll mention again that for hosted agents, your tier is not dependent on your individual agency’s sales, but the cumulative sales of all of the agencies under the host’s umbrella.
The value in this becomes a little more clear if we compare two agencies: one is a hosted agency that belongs to a $100M host agency, the other is a smaller agency that has $2M in sales. Both of our agencies belong to the same travel consortium. Both agencies have access to the same negotiated commission tiers because they're members of the same consortium. But, who is going to have a harder time of meeting the $50,000 commission tier the consortium worked out? You got it. The $2M agency because they have to rely on only their sales, whereas the hosted agency — regardless of how much of the vendor they actually sell — reaps the benefits of the sales of all of the other agencies in their host agency's network.
Host agencies and consortia will have the strongest travel agent commission agreements with their preferred suppliers. When a vendor is on a "preferred supplier list," it means that the host or consortium will have better contracts with them and likely sell a higher volume with that vendor.
Understanding Commission Confidentiality
As you can imagine, commission contracts between travel agencies and vendors, as well as those between consortia and vendors, are confidential. They’re like trade secrets that can give one travel agency/consortium an advantage over the other.
Knowing that, don’t be surprised if a consortium or host is tight-lipped when you ask for their commission guides. Sadly, they're not going to over a detailed pamphlet listing all their trade secrets. If you made it to this point, you can understand why :)
Or maybe they're tight-lipped because they're spies? I dunno. I say follow your gut on that one.
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. Even if a host/franchise/consortium doesn't spell out the commissions you'd get in detail, you can A). Ask for a list of the preferred suppliers and B.) ask for an idea of the sales volume with your favorite vendors.
More Ways to Earn . . .
Believe it or not, there are multiple ways an agent can earn money beside travel agent commissions! A few other income streams agents indicated in our last income survey included service fees, consultation or planning fees, markups from bulk rates, and selling insurance (which is technically still a commission, but worth a note!).
Here's a few resources to check out:
So, What's Your Take?
Like I said, this is some complex stuff to explain because there is no industry standard. For those new to the industry, are there things still confusing you? For you experienced agents, does your experience jive with this account of travel agent commissions? Or 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!