Data shows that the more revenue an agency -- home-based or traditional -- books, the greater the chance that a larger percentage of revenue will come from service fees.
Jamie Biesiada talked with Roger Block, president of Travel Leaders Network, about the ins and outs of service fees.
Q: Why do you think agents making more money tend to bring in more revenue from service fees?
A: One of the things I've noticed is that the more successful agents tend to be more confident [and] have a higher degree of expertise meaning not necessarily expertise, but have been in the business a lot longer.
They tend to sell a lot higher level of product, more expensive product, which also then gets more into the FIT planning. Even though it may be a standard package, maybe a standard cruise, they're giving the client advice and counsel on pre- and post- and shore excursion-type things.
Q: What are the main arguments for charging service fees?
A: The argument for it is that you as a travel professional have a lot of knowledge, which you're imparting to the client in a very efficient manner. You're taking the headaches away from the client as far as making sure all the arrangements are taken care of, all the details are taken care of whether that means they need a visa, do they need specialty shots, etc., etc. There is no other profession that I know of that gives that type of consulting advice for free, and so therefore, as a true professional, you should be charging for your intellectual knowledge.
Q: What about the case against charging service fees?
A: The case against it is that in the marketplace, unfortunately, there are vendors out there who are willing to be a transaction-only type facilitator that are very competitive in terms of their pricing, and if there's a client who is a price-shopper, so to speak, do you want to remain competitive and keep your client? So the question is, how do you charge full price plus a service fee if there are clients that are good clients out there that you want to retain, and that you know darn well if you try to charge the full selling price that the vendor is charging plus a service fee that client will leave you and go elsewhere?
In that latter case, it's really trying to determine the overall value of the client, and is it worthwhile waiving and not charging service fees knowing full well you're going to make enough money on the overall transaction to offset that.
And I guess the third case is if you're new in the business, for example, and there's a number of, let's say, organizations out there that are recruiting new folks into their [independent contractor] networks who may not be comfortable or 100% knowledgeable, and they are doing it as a transaction and adding very little value. I think those folks should be very careful if they're going to be trying to charge a service fee on top of the transaction if they really don't feel like they're providing added value.
Q: Do you advocate for your agents to charge service fees?
A: We do advocate it, especially for the planning fee-type of arrangement where it is collected up front. It is applied to the cost of the transaction, assuming that the cost of the transaction is meaningful. And we have a number of our agencies that are doing it. We also have a number of agencies that we've advocated that they charge anywhere from $25 to $50 per booking just to cover their cost.