Taking the Plunge: A Travel Agent’s Guide to Charging Fees
This is the 2nd of 3 articles in our 2018 Service Fee Report Series. You can read the rest here:
- "Hosted Travel Agent Fee Report, 2018"
- "Independent Travel Agent Fee Report, 2018"
- "How Seller of Travel Laws Impact Service Fees [+Free Service Fee Template]"
The verdict is in: home-based agents were reluctant to charge service fees in 2017. How do I know this? No, it is not from my trusty crystal ball. It’s info from the results of HAR’s recent 2017 Travel Agent Service Fee Survey, which indicated that 33% of (primarily) hosted agents charged service fees in 2017.
I know how hard travel agents work. Hence, I’m of the opinion that’s a wee little number. Especially compared to 2016, where nearly 10% more agents reported charging fees. In fact, travel agents at every level of experience reported charging fees at a lower rate.
My hope with this article is to address some of these issues, and to support you, dear travel agent, to at least consider charging a fee. My dream fantasy for you? To see an uptick in service fees in our next annual survey (heck, how about a giant leap?)
This article will provide:
- A pep talk on service fees, and when you should definitely charge them.
- An overview of different service fee types (and which structures might be best for new agents)
- Profiles on 3 Agencies that charge fees and what they have to say on the matter
- Recommendations for Fee Processing Systems
- Entertaining videos to lighten the mood
The Pep Talk
When you seek medical care, you don’t go to a doctor and tell them that you’re just going to pay for the labs and prescriptions. No. You pay your doctor oodles of money because they’re trusted professionals who went to school for a long time to gain the skills to (hopefully) successfully diagnose your symptoms and steer you toward recovery.
Travel agents are professionals too . . . professionals who deserve to get paid for the time, knowledge, expertise and research that goes into booking a great trip for a client. After all, you’ve invested in your professional development with conferences, FAM trips, trainings and more. Because of this, travel agents save their clients hours upon hours of their own researching, planning and booking (seriously, it’s borderline obscene how much time people spend planning vacations). And you don’t do it with the wave of your magic wand or click of a single button. You’re able to do this because you’ve worked really really hard at it.
While commissions are fine and dandy (and likely the bread and butter of a travel agent’s income), it can be difficult to earn a sustainable income on commissions alone. It’s the nature of the beast.
Unfortunately, the travel industry doesn’t default to compensating travel agents for the added value they provide beyond the logistics of booking (except for maybe corporate travel, where charging a service fee is par for the course). Charging a service fee, among travel agents we surveyed, was the exception—not the norm.
But my whole goal with this article is to encourage travel agents to normalize charging a service fee or consultation fee, and at the end of the day, it’s the travel agents’ responsibility to advocate for the value of their time, research and expertise in order to normalize service fees in the eyes of travelers.
I’ll be honest: I’m not a motivational speaker. Far from it. But I do understand how difficult it can be to ask for money. It’s not my M.O. Maybe it’s not yours, either. But do you remember Ron Tidwell from Jerry Macguire? He took no issue asking for money, and I just want to take a moment for you to gain some motivation from him:
Should I Charge a Fee?
Some agents choose not to charge fees, and of course this is okay. For some agents, charging no fees is a part of their marketing platform––a way to sell themselves to clients. Others just don’t feel like it, or don’t feel comfortable charging fees. For others, they express that the commissions they receive provide ample enough income and just don’t need to charge them.
But here’s four instances where I tend to feel really strongly about charging a fee:
- When booking air-only travel: Leisure agents can take cues from their corporate agent counterparts and go ahead and charge a fee for air-ticketing. Booking air-only provides almost zero commission for leisure agents. But it takes time (and sometimes causes headaches.) If a client isn’t willing to pay a ticketing fee for an air-only booking, then maybe they’re not the client for you.
- Non or Low-Commissionable Bookings: If you’re booking leisure air travel (not using GDS), independent hotels or smaller vendors that don’t provide a commission, this is another instance where it’s a really good idea to charge a fee.
- Booking Non-Commissionable ancillaries or add-ons: Travel agent Ria Maratheftis from The Travel Nook said this better than I ever could, “If we provide personalized ‘concierge’ services such as in-depth itinerary planning with non-commissionable components, i.e. (Sporting events, concerts, theatre tickets, Disney dining reservations, Ride Fastpasses, wedding planning, etc.) then we will typically charge a $100 per person blanket fee to expedite the research, ticketing, shipping & ongoing maintenance.” (Want a trick to book your Disney extras? Check out our Disney Early Reservation Date Calculator!)
- Booking FITs (or anything customized): Booking FITs are time-intensive and customized for your client. By nature, it takes more time to create and book FIT itineraries, and you should be compensated for that time.
This just scrapes the surface, and of course we’ll get into other reasons to charge fees. But if you're making any kind of non or low-commissionable bookings (or components), I highly suggest charging a fee.
More Arguments for Charging a Fee:
Many agents in our Service Fee Survey reported not charging fees for other reasons. Here’s the top four reasons agents do not charge fees, that we’ll address in this article:
Another reason agents included as a “write in” for not charging fees was due to seller of travel laws (specifically in FL and CA). So we’ll add that puppy to the list too.
So let me play the role of Jerry McGuire’s Ron Tidwell in why you might still want to charge fees, despite these reservations!
1. Worried About Attracting New Clients: I understand this. Some respondents to our survey mentioned they live in a small town with other travel agents and that charging a fee would essentially be a death sentence.
But charging a fee—especially for trips that take research, support and planning or are low or non-commissionable will not only scare away tire-kickers, but also support you in creating a loyal customer base that values the added value you bring to their trip. What you don’t want to attract is this kind of client:
2. I Don’t Have Enough Experience to Charge Fees: Just because you don’t have much experience, doesn’t mean you don’t put a ton of legwork into creating and planning a trip. A new travel agent might spend hours on planning a trip, but still make it look effortless. Their process might be a closer mirror to the consumer process, with more extensive research and time taken to make sure everything is done well. But just because you don’t have much experience, doesn’t mean your time still isn’t valuable. If you fall into this category, here’s a few things to consider:
- Do not charge an hourly fee: If you’re a brand-newbie, charging an hourly fee won’t make sense. Instead, consider a (combination of) per-person fee, flat fee, and/or service fees for booking air-only and low or non-commissionable bookings.
- Apply the fee to their booking: If you are lacking confidence, tell your client that you’ll apply the fee to their vacation package/ trip once it’s booked and confirmed that they will book through you. You could do this just for the client’s first trip, or for all trips if you’re still worried about charging a fee.
3. Afraid I Might Lose Clients: A happy and loyal client will recognize the added value you provide for them. And while attrition might be a part of implementing a fee for the first time, it’s likely that you keep and attract clients who will recognize the value of your services.
4. I just don’t know enough about fees to charge them: Rest assured, once you get to the end of this article, this will not apply to longer. So read on, dear travel agent.
5. My Seller of Travel State Regulations Does Not Allow It: In most states with Seller of Travel regulations (in fact, many agents from FL or CA reported charging fees in our survey), you need an SOT license. According to travel lawyer Mark Pestonk, the "issue is whether an IC, who otherwise qualifies for an exemption under a seller of travel law, will lose his or her exempt status merely by charging a fee to clients."
It’s worth noting that hosted agents can still charge fees so long as they are processing those fees through their host agency (that have SOT). You can read more on Seller of Travel Laws here. Check with your host agency specifically about how this can work. Plus, we'll dig into more of Mark's insights on charging fees in a Seller of Travel state soon!
6. My Host Agency Doesn’t Allow Service Fees: As an independently contracted agent, you have the choice as to whether or not to charge fees. Even if a host agency doesn’t have the capacity to process service fees, there are still ways to charge them. If charging a fee is important to you, this might play a big factor for you in choosing (or even switching) host agencies.
Different Types of Fees (Which One Is Right for You?)
We break down fees into two categories:
1. Service Fees:
Service fee charges are per-booking charges for air-ticketing or a segment of a trip (car, rail, hotel, etc.). The service fees doesn’t include a charge for research or planning a trip, it’s a charge for the logistics of booking. Different service fee charges can include:
- Air ticketing, domestic
- Air ticketing, international
- Tour package
- Air-inclusive package
- Accommodation Only
- Frequent Flyer
- Car Only
- Ancillary Services
- FIT Segments
- Shore Excursions
- Special Coupons
Service fees are pretty much a given among corporate agents, but much less common among leisure agents.
2. Consultation Fees
Unlike service fees which is a flat transaction charge for booking a trip segment, consultation fees are a charge for your time spent researching, planning, booking a trip for a client as well as your time spend supporting a client during their travel. Consultation fees are becoming more popular among leisure agents and for good reason—it takes a lot of time to plan and book a trip!
Consultation fees are a good idea if you’re doing any kind of customized or non-commissionable booking, and creating a fee structure for consultation fees is more of an art than a science. Different consultation fee structures include:
- Flat Fee: A flat fee is the most popular consultation fee charge by a large margin. It’s one standard/blanket fee up front that covers the research and planning of the entire trip, regardless of how many people or days the trip is. A flat fee may function as an “initiation” for a client to render your services in planning a vacation.
- Hourly Fee: A charge per hour spent researching, planning, and/or booking a trip. This is probably not a great model if you’re a newbie since trip planning may take you a lot longer.
- Per Transaction Fee: This is where I contradict myself in saying that consultation fees aren’t necessarily a transaction fee. But these fees are popular among booking FITs, and will be a consultation charge that’s broken down by segment (for example, a $50 per air ticket or a $25 for rail, etc.). This helps agents get “reimbursed” according to the complexity of a trip (rather than an overall flat fee).
- Per Person: This is also self explanatory, and is a great tool if you’re booking groups. Some agents will also charge a per person per day of travel fee.
3 Travel Agents Chat About Their Fee Structures:
There's no one way to develop a service fee structure. It will depend on your agency, and what works best for you. When it comes to putting together a service fee structure, you can mix and match between different fees.
For example, you can charge a flat fee of $200 for researching and booking in addition to charging a service fee for air segments, or exchanges. Or you can charge a flat fee plus an additional fee per person per day. It's really up to you.
But don't take it from me. Learn from three agents who've been charging fees for some time! Below is some golden advice from a home based corporate agent, a storefront leisure agent and home based leisure agent! They offer amazing insights on:
- Why they decided to implement a fee
- How they came about the fee structure they implemented
- How they pitch fees to clients
- Advice on taking the plunge
Why am I still here? Let me give them the stage 🙂
Resources for Processing Service Fees
1. ARC's TASF
ARC provides a service fee processing system for travel agents. They charge a 3.5% processing fee for charges of $20 or more or $.70 for transactions less than $20. Their subscription costs $25.99 quarterly but is only charged when the account is active.
If you're charging for FIT travel (not just service fees or consultation fees) ARC's program will likely be the best bet for you, since non-travel specific processing systems like Pay Pal, Square and Quickbooks (listed below) may not process transactions when travel is being sold (since it's a high risk product).
2. Through Your Host Agency
If you don’t have GDS access, your host can run service fees through their system. Each host agency will have a different process for this, so you’ll want to check with them. Typically, your current commission split with your host will also apply to service fees. If your host does not have GDS, they may not be willing to process your fees, and you’ll need to find your own process system. Which bring me to . . . .
3. PayPal, Square, and QuickBooks etc.
Here's a rundown of some of the costs:
- Quickbooks: 2.9% for swiped transactions or 3.4% for manually entered transactions plus a $.25 per transaction fee. If you're rolling in $7,500+ per month in service fees, you'll need to dish out a monthly fee.
- PayPal: 2.9% plus $.30 per transaction.
- Square: 2.75% for swiped transaction or 3.5% + $.15 for manually entered transactions.
The tricky thing with conventional processing systems like PayPal, Square and QuickBooks is that sometimes travel industry professionals can be considered high risk, and certain processing systems won’t take the risk of covering you. (*Cough* — HAR may or may not have some personal experience with that!). However, so long as you’re not using the same processing system to sell travel, you should be able to frame your fees as “consultation fees.”
This process may not work if you operate in or are selling to a client that resides in a state with Seller of Travel requirements AND if you’re using your host’s SOT number. If this is the case, then you want to ask your host about processing your fees (more on this subject to come very soon!!!).
Our next article, How Seller of Travel Laws Impact Service Fees, has some expert info from Mark Pestronk on charging services fees in states with Seller of Travel Laws! Plus Jamie Jones, COO of WhirlAway Travel shared insights with HAR in order to create a customizable template for agents to make their own service agreement to share with their clients.
And how about you? Do you have recommendations for service processing systems? Will you share insights on how you developed your own service fee structure? Let us know in the comment section below!