In an industry where travel advisors are challenged to set themselves apart in an often price-driven marketplace, implementing professional fees may be considered adding fuel to the fire. But it is now that the profession is being challenged to show further value to existing and prospective clientele, demonstrating that your service goes far beyond what consumers can find by logging on to an OTA.
Just as in any major profession -- lawyers, accountants, chiropractors -- fees are not only earned, but also demonstrate this value.
Are you nervous or apprehensive to take the leap into charging fees?
CT Magazine connected with Nolan Burris of Future Proof Travel Solutions, who has answered many of the top questions around the issue.
What is the difference between commissions and professional fees?
Commission is a perfectly valid financial arrangement between suppliers and agencies. It is a payment for the services an agency provides to suppliers (bookings, mutual support and mutual promotion). Fees, on the other hand, are for the services an agency provides to customers! In my mind, these are two entirely separate relationships and roles.
Some people may not know that commission was not always so integral to the industry. Prior to 1931, travel agencies across the globe operated exclusively on a fees-for-advice basis. Fees are not new; they are the root of our industry.
Why should I charge professional fees?
Great question! Among those agencies that now charge fees across the board, most state that financial realities dictated their shift. While the cost of operating a travel agency have continue to climb, average revenue from commission has steadily dropped. From reduced rates, NCFs, and lower average prices, there are plenty of financial reasons to consider fees.
I believe there are two much more important reasons to consider fees. The first is to gain more control over your own financial wellbeing. In a commission-dominant model, it rests entirely in the hands of multi-national corporations. It leaves agencies one unfavourable shareholder vote away from trouble. It happened before with air. We should know better by now.
The other reason is, in my opinion, is the most significant of all. Fees can help fund delivering an level service no app, website, or go-direct deal can beat. I’m not talking about beating prices, but slaying them all with service.
It’s a logical and strategic approach. Think about it: today anyone can get a travel booking with few tablet taps or swipes. Anyone calling or emailing a travel agency today is looking for more than just a booking. They want the right booking with the right supplier in the right destination. They want time-consuming things like, advice, expertise, guidance, support and more. These days, they also want things that may not pay commission. AirBnB is proof of that.
Fees free you from the confines of commissionable-products-only world. They allow you to take time needed to “wow” clients and prospects alike.
How could professional fees impact my bottom line?
Fees can more directly impact the bottom line in a positive way than does commission. Like commission however, fees are not all-profit. There is a cost to boosting service levels.
While suppliers decide how much commission you get, you are completely in charge of the fees you charge. So, the smart approach is to incorporate the cost of (potentially new) service delivery when determining fee amounts.
In the early days of fees, they represented between 10 to 15 per cent of total revenue. Today, there are agencies earning 50 to 75 per cent of their revenue from fees. That’s right: for some fees now outrank commission on their P&L. The higher that percentage is, the more in charge of their own futures they become and the less affected they’ll be by industry changes.
How do I justify new professional fees to my clientele?
I’ve never liked to think of it as “justifying” fees. Instead, I suggest treating them like any other product you hope to sell, but keep in mind, you’re not selling fees, you’re selling a collection of services and expertise.
Think of it this way; a luxury cruise line doesn’t even try to justify their rates. Instead, they market the beauty of their ships, their exquisite cabins, fine cuisine, alluring excursions, and impeccable service.
Don’t justify your fees. Sell your service. Of course, that only works if you actually believe your service is worth paying for. If you don’t believe that yet, you may not be ready for fees.
What are standard rates for service fees?
It’s like asking: “What’s the standard price for a cruise?” There’s no single answer to that question! Do you mean a luxury cruise, a mass-market cruise, a discount cruise, a nice cruise or a horrible cruise? It’s the same with fees. Agencies charging the most tend to be the most successful with fees, primarily because they do the most for the fees they charge.
Where some struggle to success with $25 service charges, others in the same city easily collect $250. It’s not what you charge that makes the difference. Still, the average fee for cruise or tour consultation and support (notice I did not say “booking) is between $50 to $100 per reservation. But, that’s just an average. Do you really to be average?
One more thing on fee amounts: don’t go too low. I’ve heard from many fee-charging agencies that they found it easier to charge $250 than $25. I think this is partially due to perception. Twenty-five dollars feels like an added service charge, but $250 feels more like a true professional fee. Also, can you really wow people for an extra $25? Probably not.
If I am an agent working for an agency, do I have a right to implement my own professional fees, even if it’s not part of the agency’s mandate?
I’m afraid I can’t really answer that. It depends on provincial regulations, independent contractor vs. employee, agreements between the agency and agent, as well as individual agency policies. However, I do have a very strong opinion on the subject: consistency matters - a lot!
Think about it from a customer perspective. If only some of the agents in an agency charged fees for some things, some times, the results could be disastrous. Imagine if you were in the line at the grocery store, buying the same product as the four people ahead of you, but you were each charged a different price. It’s not a good strategy for building customer confidence.
How should professional fees be split between the travel advisor and the agency?
Again, this entirely depends on the legal relationship of the agency to the agent. For independent agents, some hosting services allow fees to be entirely retained by the agent. Others follow the same split used on commission. Increasingly, many treat fees like any other revenue with a split average of 70/30 to 80/20.
Does charging fees make me liable if something goes wrong?
This has been tested in numerous court cases. In most, it has been found that the agency is no more or less liable than they already were. Normally, it has been found whether compensation is in the form of commission and/or fees, payment has been made for service, advice and support. Thus, liability applies no matter what.
So, regardless of fees, every agency (or independent agent) should maintain adequate insurance. Note that “errors and omissions” insurance may not be sufficient, even without fees. In many cases, this sort of coverage is only for mistakes, not necessarily giving bad advice. Fees or not: check your policy.
Nolan Burris is an author, former travel agent, failed musician and self-professed techno-geek. He is the mastermind behind Future Proof Travel Solutions. Visit his website here.