Travel Agent Commissions, Explained. [Infographic + Charts]
Travel agent commissions aren't the only way travel agencies make money, kiddos! How do you know this? Because you’ve read our article on how travel agents make money, duh!
It’s also likely you’ve stumbled into our articles on charging service fees here and here as well. However, as great as those articles are, they left you wondering, what’s an average travel agent commission?
The Basics of Travel Agent Commission Levels
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.
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 the booking is made, and more.
The truth is, this article is a rough guide—you’ll really only know all the commissions details once you’ve joined a 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!
Host Agencies and Travel Agent Commissions
First things first: This is a small tangent, but will help you see the bigger picture on why a travel agent can meet tiered commission thresholds easier with a host agency versus a consortium and some franchises. Yes, I know we haven't talked about tiered travel agent commissions yet ... this is me building the anticipation for when I unveil them shortly. 😊(Not sure what a host agency is? Read this.)
At its simplest, a supplier/vendor recognizes a travel agent from any Joe Blow on the street because travel agencies have an accreditation number (specifics on accreditation numbers).
Those 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, ensuring 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 identify them.
The first thing to know is that the commission level a supplier pays an agency is determined by the sales under that agency's accreditation number. In the case of a host agency, all of the travel agencies in the host's network use the host agency's accreditation number. To the supplier/vendor, they see "one" agency because there is one accreditation number used by all the agents in that host agency. With a consortium and some franchises, each individual agency has their own accreditation number that sales are attributed to.I like to think of the host agency model being like the relationship between a general contractor and a homeowner. As a homeowner paying a general contractor, you're like a supplier paying a host agency. Instead of paying the electrician, plumber and architect separately, you pay the general contractor who then handles paying the individual companies. Likewise, the supplier pays the host agency who handles paying the individual independent contractor travel agencies. Make sense?
The fact that higher commission tiers are easier to reach with a host agency is a big reasons agents choose to go with a host agency. Here’s a few more reasons aligning with a host is beneficial. Looking at the big picture, it's worth noting that nearly all host agencies also belong to a travel consortium such as Travel Leaders Network, Signature, Virtuoso, or Ensemble.
Now, on to the different ways travel agent commissions are figured out!
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 does a vendor 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):
Annual Sales Commission Level
Or, if we’re talking passenger count:
Passenger Count Commission Level
0-20 passengers 10%
21-49 passengers 11%
50-199 passengers 13%
200+ passengers 15%
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.
Negotiated Tiered Travel Agent Commission Agreements
We're still in the tiered travel agent commission area, but let’s add another level of complexity because heck, why not?
When you (or your host agency) are affiliated with a travel consortium, the consortium will negotiate lower sales/passenger thresholds with their preferred suppliers. (Not sure what a preferred supplier is? Read this.) If they’re going to promote this vendor to their members and call them preferred, they want a better commission deal for their members. Makes sense, right?
Note: Of course there are outliers because this article couldn't be too straightforward. 😉 Ritz-Carlton's new yacht collection, launching in 2020, is forgoing the preferred supplier agreements with consortia and trying out a commission plan that puts "all agents on equal footing".
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 may have negotiated so you only have to sell $50,000 to reach the 12% commission tier. A deal!
Pro Tip: This is why finding a niche is so helpful. If you know a couple of suppliers you think you'll be utilizing a lot, you can ask host agencies and/or consortium what their commission tier and relationship is with said suppliers!
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!
No More Rigel, but the Show Must Go On!
Since many of the readers of this site work with host agencies, we’ll mention again that for host travel agencies, 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.
Let's compare this to a smaller agency aligned with a consortium. While the agency may have lower negotiated commission tiers because they belong to a consortium, meeting those tiers is more difficult because only their sales count towards meeting the commission tiers (vs. the entire host agency's network).
- Vendors that typically have tiered commissions: Tour operators, cruise lines, rail, travel insurance
- Average travel agent tiered commission range: 10-17%
Things to Note about Tiered Commissions:
- 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.
- Disney: Disneyland and Disney World pay 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. And if you're booking Disney, read our in-depth article about booking Disney from top Disney agents.
- 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 fare types)
- Phone vs. Online Bookings: Some vendors may pay different commissions based on how the booking was made. I think if you use smoke signals or telegram, the commission percentage is lower but you'll want to check that with the vendor.
- Destinations: Within the same vendor, different destinations may have different commissions
- Price Matches: Many vendors do price matches. If they do, especially if they're matching an online travel agency, expect to be paid at a lower commission level than normal.
2) FLAT COMMISSION RATES
Moving onto the second type of travel agent commissions. 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.
Ugh. And wouldn't you know it, as I write this, Hilton has now followed Marriott's lead and cut group commission rates from 10% to 7%. BOOOOOOOO! I know I had said above that tour operators were likely to have tiered commissions 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:
Product Commission Level
Land Only 15%
FIT Bookings 12%
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.
Vendors that typically have flat commission rate: Tour operators (boutique and non-sun-n-fun), hotels, rail, car
Average travel agent flat commission range: ~10%
3) 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? Would love to hear your thoughts in our FB convo below!)
For international bookings, airlines do offer travel agent commissions through two routes:
Consolidators: These are wholesalers. 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. (Confused about fares? Read our Understanding Airline Fare Types article!)
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, 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.
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 or franchise. Now that you're almost through with our article on travel agent commissions, you can see why they may be so tight-lipped.
And they might be 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.
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 travel agent 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!
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