Mark Pestronk
Q: Our agency earns zero commissions on almost all airline tickets and industry-standard commissions of around 10% on cruises, tours, resorts and hotels. I keep hearing about other travel agencies that earn much higher commissions than we do. While some of these agencies are industry giants, others are small to midsize. They obviously know something that we don't know. Can you explain how they arrange to obtain higher commissions?
A: Going from the least to the most complex, these arrangements, which I call "booking configurations," are as follows:
• You can join a host agency, consortium, co-op or franchise. The organization will then list you as a member, so that you will automatically enjoy its higher commission levels from those suppliers that offer commission programs for the members. Although you may have to share the commissions and pay fees, you will generally be better off than you are now.
• You can use some travel companies' booking portals that provide better commissions merely for using the portal rather than calling or using a GDS.
• You can send booking requests by email or phone call to a higher-commission travel agency and then have it do the booking and ticketing for you. You would then share the commissions.
• If you use a GDS, you can get the higher-commission travel agency to designate your agency as its authorized location under its GDS contract. With such a configuration, reservations that you make will be automatically sent to the other agency for ticketing or other documentation. The transactions will then appear to suppliers as though they have been made by the higher-commission travel agency.
• You can get a very large agency to designate your agency as an "associate branch" under the former's ARC agreement. Then, the airlines will generally treat you as an authorized location of the large agency. Only a few large agencies are willing to use this configuration, as it carries the risk that your agency could generate debit memos and other liabilities for which the large agency would be legally responsible.
• A group of agencies can band together and have ARC designate one of them as the home office and the others as branches. To the world of suppliers, you will appear as one agency, which should generate commission offers based on your size. In my experience, this configuration is even rarer than the associate branch set up, as it requires independent entrepreneurs to cooperate to a greater extent than they are used to.
What do these six booking configurations have in common? Most are tricks designed to make suppliers think that your agency is part of something bigger. Most suppliers are not stupid, so I have to assume that they condone or even encourage these kinds of arrangements because they simplify marketing and administration.
Before the turn of the century, suppliers had to deploy hundreds of sales reps to work with tens of thousands of independent travel agencies. Now, with so many agencies affiliated with others, far fewer resources are needed to reach them all.