What Is a Preferred Supplier in Travel?
I was tossing around the term preferred supplier in an email the other day when I realized, gosh darn it, I don’t think I’ve ever explained to those new to our industry what a preferred supplier even is! Doh, sorry about that. Let’s go through it so that you can toss around the term preferred supplier at your next travel industry event with abandon! So. Much. Fun.
Okay, the easiest way to think of a preferred supplier—or preferred partner, preferred vendor, bestest friend, or whatever label the agency/host/consortium/franchise has given it—is it’s when two companies decide to work together. Through negotiations they figure out how to make the relationship mutually beneficial so they can both increase their sales.
Your Unrelated Dog-World Example
It’s like Rigel with his dog bone supplier. We can get the product from lots of different vendors/dog stores but he insists that we go to the store down the road since they are his “preferred bone supplier.” It’s because he’s worked out a deal with them where he gets a free biscuit with every purchase. (He’s quite charming, you know.)
Informal and Formal Preferred Supplier Lists
Truth be told, an agency of any size can create a list of preferred suppliers—power to the people!—but there are what I’d call formal and informal preferred supplier lists. (Never heard of those terms before? Good! I just came up with the whole "formal" and "informal" thing and I’d like to be credited with their entering the travel industry lexicon. © 2017 Stephanie Lee)
Informal Preferred Supplier Lists
Let’s start with informal preferred supplier lists. For every single one of us, just like we have favorite restaurants and grocery stores, we have a list of vendors we like to book our clients with.
Maybe you like to book with that supplier/vendor because you really love their agent booking portal, or maybe it’s because you have a great relationship with their sales rep and the competitor’s sales rep gives you the heebie-jeebies. Who knows?
Whatever the reason, when it’s on a micro level (down to the individual travel agent level) that’s what I’d call an informal preferred supplier list. It’s you playing favorites. But—here's the surprise—you're playing favorites from the vendors within a formal preferred supplier list. And that brings us to . . .
Formal Preferred Supplier Lists
An informal preferred supplier list really isn’t very powerful if everyone is booking every which way, is it? *Sigh* No, it’s not. Call in the Fun Police, bureaucracy (as always) is gonna jump in to ruin all the fun!
As a travel agency’s or group of agencies’ sales grows, they have more and more buying power. Vendors like that. A lot. So if you are in that position and have tens or hundreds of millions in sales, it’d be smart business to leverage your sales with vendors so you can get better service and they (ahem, the preferred suppliers) can get more sales. That’s why high-volume travel agencies or travel agency groups will make a formal preferred supplier list.
It’s essentially these power agencies saying, “Viiiiiito, my friend, we can do business with a lot of suppliers, no? But I like you. I really do. If you do some things for us, eh, we can make this a mutually beneficial relationship, no?”
(Note: I do not know if these agreements occur in a deep, dark alley or not. When it plays out in my head, dark alley with a lone light bulb is the backdrop. The characters also have thick Sicilian accents like in The Godfather.)
Anyhow, in the travel industry, when someone is talking about a Preferred Supplier List, think two things:
- A formal list of vendors/suppliers that power agencies (or agency groups) have agreed to book
- The GodFather. And make sure to think in a thick and raspy Sicilian accent. (This is very important.)
Does my Travel Agency Need a Preferred Supplier List?
For new agents, it may be a little confusing. If you’re not a power travel agency, how do you get a preferred supplier list? Do you even need one?
Good news here! Chances are, you probably already have a group of preferred suppliers even if you’ve never heard of the word. Agencies with smaller sales (maybe this is you?) typically use their consortium, franchise, and/or host agency’s formal preferred supplier list.
What’s the Benefit of a Preferred Supplier List?
Which brings us to why would your agency use someone else’s preferred supplier list? Why, incentives, of course!
- Peace of mind. This is the biggest reason why agents will book with preferreds over non-preferred vendors. Your clients trust you. You want to know the company you’re booking them with has been vetted and offers a fantastic product. When the vendor signs the paper to be a preferred, they’re saying they’re going to provide a great experience for your clients and that they will help the agencies in that network (that’s you!) out if problems do arise.
- Higher commissions. When your agency or agency group negotiates with the vendor to be preferred, they may be negotiating commission tiers with lower thresholds than what you could get if you went direct to the vendor. Hypothetical scenario: If you had $50,000 in sales with a vendor and didn’t belong to a larger agency organization, the vendor might offer you 10% commission and the next threshold is $100,000 in sales, where you would make 11% commission. However, if you were with a larger agency organization that had negotiated a preferred agreement with that same vendor, maybe they negotiated that all of the agencies in their network start out at 10% regardless of sales and jump to 11% commission at just $50,000 in sales. Oooo la la!
There’s other perks too.
Like some agency groups have worked with cruise lines for special excursions or amenities on select sailings (like the Travel Leaders Network Distinctive Voyages). Or maybe the agency group has negotiated with a hotel chain that their clients will get complimentary late check or free wi-fi at select locations.
But those are icing on the cake. The most important thing is your clients are going to be well taken care of.
And it’s not just my gut feeling here! A 2013 ASTA (American Society of Travel Agents) Suppler-Travel Agent Relationship Marketing Report found that 94 percent of respondents who engage in a preferred supplier relationship do so based on the supplier's reputation and quality of their product.
Are Preferred Supplier Lists Confidential?
Shhhhhh, I’ll tell you a secret.
The list of preferred vendors itself typically isn’t confidential but when you get into the details like commission tiers, value-adds, host agencies/franchises/consortia don’t typically go around publishing those on billboards. It’s one of those “Call for more Details” types of things.
So, a quick tip. If you’re looking to join a host, franchise, or consortium it’s okay to ask for a list of their preferred suppliers when you’re in your “dating” phase (more tips on finding the best host agency or choosing a travel agency franchise). They may give you their entire list of preferred vendors, or they may ask you which ones you like to book with and let you know if they’re on the list.
As you’re shopping around, it’s fair to want to know the commission tiers (more on how travel agent commissions work), value-adds, and client perks you can get expect if you join a particular host/franchise/consortium. Again though, hosts/franchises/consortia may hold some of those cards a little close, especially airline commissions and commission tiers.
If you find them a bit tight-lipped, try this. Instead of asking for the whole kit and caboodle, be specific. Come prepared with the vendors you expect to sell the most of and ask for specifics on those.
But a lot of hosts ARE NOT hush hush about their preferred suppliers. In fact, with our new site upgrades, many hosts list preferred suppliers directly on their profile. Want to learn about more features we've added to profiles? Look no further.
Sample Preferred Supplier Lists
Honestly, there is a lot of overlap with most travel agency organizations’ preferred supplier lists. As you start exploring, you’ll find many of the preferred vendors/suppliers on lists are the larger, mainstream tour operators and cruise lines. So, what I’m saying here is that if you have a favorite bicycle rental vendor just outside of Cancun . . . don’t count on them being preferred.
Preferred supplier lists in travel are typically broken down into these categories:
- Tour Operators
- Cruise Lines
- Travel Insurance
- Car Rental
And I know you’re probably curious as to what these mysterious preferred supplier lists look like! As I mentioned earlier, you won’t find the commission thresholds or other juicy details published for all the world to see, but here’s some examples of preferred supplier lists:
- Host Agency Preferred Supplier List Example: Montrose Travel
- Travel Agency Franchise Preferred Supplier List Example: Travel Leaders
- Travel Consortium Preferred Supplier List Example: Virtuoso
Recap and Closing
Oh my gosh. Did you ever know you someone could talk about preferred suppliers for so long? I certainly didn’t. That’s what happens when I’m stuck in bed for too long.
But seriously, the important takeaways from this article:
- Rigel is seeking applications for his doggie preferred supplier list. Please apply on his Facebook Page.
- I think I may be famous for coming up with the terms “informal preferred supplier” and “formal preferred supplier.” I can’t wait to be in travel industry text books one day! Eeeek!
- Booking Preferred Suppliers = Peace of Mind
That’s all I got, folks. Oh, except make sure to add Host Agency Reviews to your preferred website list!
Drop a line with questions, your experiences with preferred suppliers, or random Godfather quotes in the comments below. ? I love to hearing about all three.