How do travel agents make money? This is a question often asked especially by people who want to become a travel agent or those who respond incredulously when they hear someone works as a travel agent in this day and age.
The short answer is most travel agents make money either through service fees through or commissions. But it has not always been like this.On average a travel agent makes an average of $36,990 annually, according to the most current figures available as of January 2019. The advent of internet completely changed the playing field.
Moreover Airlines that used to drop big commissions on travel agents based on air ticket sales dropped commissions to travel agents. But with technological advances realized today, it means more and more people can easily book their own tickets and plan their trips at just one click. Actual paper tickets have become a thing of the past.
We've broken down the question of how travel agents make money into four main categories of travel agencies: leisure, corporate, custom, and the big players.
With airlines dropping commissions from air tickets sales like a hot potato, corporate agencies turned to service fees to offset the loss of airline commissions. Corporate travel agencies combine their earnings from commissions made from air, car rentals, and booking hotel for business travelers and even playing host travel agency. They make money largely from service fees, from airline commissions for certain classes of service or certain routing and from net/private fares.
The average fee for corporate air according to the 2016 ASTA Service Fee Report was $35 per airline ticket
Leisure Travel Agents
Leisure travel agencies focus on selling high-ticket products that still pay travel agent commissions such as vacation packages, cruises and other add-ons. This field belongs to anyone whether you host travel agency to the best holiday packages on Main Street or are planning to start travel agency from home.
They also make money through consultation fees and service fees in an attempt to diversify income sources and become less dependent on commissions from suppliers. Some agencies charge a straight up up-front fee for research or non-refundable fee for consultations.
Customized Itineraries (FITs)
More than book packages, travel agents can also create customized itineraries. Customized itineraries require more time investment. Agents that create customized trips naturally charge higher service fees, consultation and/or trip planning to compensate for their time.
Travel agents that specialize in customized itineraries might also increase their income through net pricing mark-ups and commissions. There's no one-size-fits-all fee when it comes to customized itineraries whether they are working alone or with a host travel agency with leads to unique packages.
The Big Travel Agencies - Host Travel Agencies
The top ranks of travel agencies possess generous revenue streams beyond fees and commissions. Based on their revenue, they can earn overrides from vendors if sales goals are achieved. These overrides can come from various vendors including cruise lines, tour operators, GDSs, car rental companies, airlines and more.
Given that they also offer the best host travel agency for the beginners, they get additional revenue from that.