Agencies Fine-Tune Service Fee Programs

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Until recently, the big question was "Should I charge fees?" This is rapidly giving way to another: "What changes can be made to improve my service fee program?"

The trend to service fees is not universal, but definite. A recent poll of 306 agents conducted by the American Society of Travel Agents found 70.9% now are charging fees. So once you've taken the big step, what's next? Do you keep quiet and try not to remind clients about your fees? Or should you keep looking for ways to fine-tune your fee program, perhaps even decide to raise fees for certain services?

Some agencies contacted for this article found they could increase their initial fees with virtually no resistance. Some found that by simplifying their fee structure, it had the same effect of raising fees. Some learned that by bringing their outside agents into the program, customers in the community got a more consistent message about that particular agency, a tactic that ultimately leads to higher profits. And almost all agents said they keep an eye on what other agencies in their area are charging to stay competitive.

At Vintage Travel in Napa, Calif., manager Kris Ohlandt found she could raise her fees without upsetting her customers. Her agency increased fees as follows: from $5 to $10 for airline tickets; from $10 to $20 for reissues and exchanges; from $15 to $20 for coupons, and from $50 to a 10% charge for cancellations.

"We raised them because we looked at what other people are charging, and to be cost-effective," said Ohlandt. "We are in the black now, absolutely because of service fees. Normally January is very slow; we made a profit in January this year."

Robert Henri, owner of Robert Henri Travel in San Francisco, was able to double his fee revenue by moving to a simplified schedule of $15 for everything. Previously, Henri charged from $10 to $25 for different services in addition to a $75-per-person charge on foreign independent travel arrangements. The only deviations from that simplified program are international phone calls and same-day mail services, which are simply passed along to the customer with no markup.

"We went to the $15 charge for everything to simplify it and make it easier to explain," said Henri. "You say to a client '$75 planning fee for FITs' and they run the other way. It's just easier to charge $15 for individual services and not get into a big number calculation with your clients."

Marci Smolowitz, partner in Travel Plus of Danbury, Conn., said she also simplified her fees to a $15 charge for everything. That helped her raise revenue (she won't say by how much), and since she formed an alliance with other area agencies who all agreed to charge fees, she quit worrying about customers who desert to non-fee-charging agencies.

In addition, Smolowitz said she found that by listing a $50 plan-to-go charge and a $5 delivery fee -- which she doesn't actually charge -- her customers are happy because they think they are getting a break. Smolowitz also improved her accounting of service fees by opening a separate checking account for fees and by buying a software program to calculate how much income comes from fees. "It's amazing to see how much that little account has grown," said Smolowitz.

Sylvia Berman, owner of Post Haste Travel in Hollywood, Fla., is ready to raise her fees as well. For airline tickets only, Berman started out with these fees: $5 minimum per ticket; $10 for tickets under $100, and $15 for refunds, exchanges, voids and reconfirming reservations. She charges for other services as well. "We originally set a goal of $100 per day on service fees; we've reached it and now we want to make $200 per day," said Berman. "We have to sit down and decide if we're going to double our fees or charge the corporate accounts that we don't currently charge -- that's a tough decision."

Berman said corporate accounts "are going to scream and yell. We are finding that corporate accounts, the new ones, are becoming really cost-conscious."

Jack Gunner, president of AST Ambassador Travel in Seattle, said improving his service fee program meant a reassessment of his corporate clients' worth. "With our fees, we have to examine the profitability of each account," said Gunner. "If they have a high number of international business trips, we may not charge them; but if they're doing a lot of low-cost or West Coast only, then we charge them a higher fee.

"We just started doing that because the competitive pressures are starting to come in. We've seen competitors come in and say to our accounts, 'We'll take you on a no-fee basis.' But I think those are the people who lack vision."

Bringing outside agents into the service fee fold is another issue that agencies must address in order to improve their programs.

Lloyd West, vice president of Plan-It Cruise & Travel in Marysville, Wash., employs six outside agents who work exclusively for his agency. "If [outside agents] are out there and not charging a fee and you are, they are in a kind of competition with you," said West.

His solution was to tell the agents they didn't have a choice -- but he sweetened it by giving them the same split on fees as he does on commissions. "Some of them are getting $300 extra per month," said West. "We talked to other agencies about it; some split it with them and some don't. If you share it with them, it's an incentive to charge the fee."

Randy Brown, executive vice president at Corniche Travel in Los Angeles, said his outside agents "were the most hesitant, but now that they are doing it, the client base is more than willing to pay for the quality service."

For those agencies that are still contemplating a fee program, doing your research beforehand could eliminate some of that fine-tuning many agents need after it's already off the ground.

Jeff Calley, owner of Travel Solutions in Seattle, carefully researched other fee programs before starting his own Feb. 1. He found that by looking at what others are charging now (after an increase or two), he may not have to raise his fees so soon. "I fought it tooth and nail and went kicking and screaming," said Calley, who admits he is now a true believer in fees. "We networked with other agencies in the area and tried to be competitive with them."

Calley ended up with a $10 flat fee per ticket with a maximum of $20 per booking. And he charges a $15 change fee. "I know there are other agencies charging $5 and that's fine, maybe they'll break even. But I know that agencies in this area are charging between $10 and $20. The main thing I learned is to not fear change. It has taught me what service is all about."

Ohlandt at Vintage Travel had a similar revelation about fees that seems to have put a spring in her travel agent step. "Now we're making money doing the ticket, and if they cancel it, we make money as well. It makes you feel better about the profession you're in. You have a worth. That's really the bottom line."

Improving Fee Programs

To fee or not to fee is not the question. How to get the most out of those fees is. Here are ways some agents are improving their service fee programs.

  • Flat fee: Move to a simplified schedule of charging one fee for everything. One agent reported doubling fee revenue by moving to a flat $15 fee.
  • Separate accounting: Open a separate checking account for fees and buy a software program to calculate how much income comes from fees.
  • Let outside agents in: Offer outside agents the same cut on fees that they get on commissions.
  • Do your homework: If you haven't implemented fees, find out what competing agencies are charging before launching a fee program. By knowing what to charge, you minimize the probability that you will need to raise fees soon after introducing them.
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