The gap is growing between larger and smaller traditional agencies when it comes to charging service fees. The 2017 data indicates that agencies with annual gross sales of $10 million or more attributed 40% of their revenue to service fees and 60% to commissions, while agencies grossing under $1 million reported 20% of revenue from service fees and 80% from commissions. In 2012, the smaller agencies reported getting 27% of their revenue from fees, while larger agencies reported 38% of their revenue was from service charges. Contributing editor Jeri Clausing talked to Kimberly Wilson Wetty, co-owner and co-president of Valerie Wilson Travel, about why some agents don't charge service fees, and why they all should.
Q: It seems more agencies are charging service fees, especially those that serve very high-end clients. Why is that?
A: The shift from travel agent (order taker) to travel adviser (consulting services) has been happening over many years. From expert advice on where to stay and visit to providing value-add in the form of travel benefits (upgrades, breakfast, resort credits, etc.), not to mention the true value of time it takes to plan the perfect vacation, that all comes at a cost, and clients are happy to pay. If you are a professional and proud of the services and value you bring to the table, charge a fee.
Q: Why do you think so many smaller agencies still don't charge fees?
A: Sadly, I think there are two main reasons and a possible third one. First, fear of losing the business. I am sure many advisers/agencies think, "What if the client won't pay my fee or challenges me on the cost? I can't afford to take that risk and lose the booking, so I won't charge a fee." Secondly, I think there is a lack of confidence about how to present their services. If you don't see your value, it is hard to convince someone else of your value. And perhaps lastly, no fee puts them in a perceived competitive advantage against advisers who do charge. It is a hook to close the sale. We see as an industry that cruise bookings rarely have a planning fee tied to them the same way as a customized land-based trip. But, that might change, too, in the future.
Kimberly Wilson Wetty
Q: Can you give me an overview of your company's fee structure?
A: We charge a nonrefundable planning fee on all leisure bookings, and the fee varies based on the complexity, length of the trip and number of people. At some point, we might see a shift from planning fees per trip to flat retainers or a research fee and then a booking/engagement fee. Just like every client is unique, the fee always has to be unique and appropriate. But no professional travel adviser should be afraid to get paid for what they do.
Q: What types of fees are most common: A deposit of sorts that applies to the trip if booked, or a flat fee?
A: We believe that a research/planning fee has to be charged up front. What if they don't book with you or cancel? If you haven't charged a fee, you have worked for free. When a client commits to a planning fee, they are committing to you as a trusted adviser and to the trip. If they have to cancel, we rarely refund the money, as we have already incurred costs planning it and we need to be paid for our services. But sometimes, especially with larger multigen or couples trips, we will say the planning fee will be applied to the cost of the trip to help get them committed to use our services. We encourage our advisers to keep track of the hours they spend per trip to better understand the return on investment on each booking.
CORRECTION: The chart "Percent of revenue from service fees, traditional agencies" contained an incorrect key in a previous version of this report. The corrected version is shown.