Richard Turen
Your questions are always appreciated. Here is one that caught my eye.
Q: While I enjoy your column, I am somewhat disappointed that you rarely comment on the topic on most of our minds: How should advisors be handling fees in this new AI environment? We have been operating a simple fee program, which breaks down to $50 per air ticket, $100 per cruise and tour booking and $250 per FIT. Our agency is midsize, full-service, with nine ICs, and my husband and me, who each have our own clients. We book in the range of $3 million annually. At every conference we attend, and even at our own host agency, we are constantly reminded that fees need to be charged, leading us to think that ours may be too low. Please share your thoughts.
A: You are correct; this is a topic I have not embraced, primarily because I know that my views on the subject are not at all in keeping with industry norms or advice from those who profess expertise in the subject.
There is indeed an overwhelming view, supported by the vast majority of speakers at industry events, that the travel advisor must demonstrate a sense of self-worth to the consumer by showing that their time is indeed worth something. Most agency gurus advise increasing fees to cover rising expenses.
Last year, Travel Weekly reported in its annual Travel Industry Survey that 64% of traditional agencies are now charging fees, with 36% of home-based, independent agencies doing the same. These figures may be surprising to some, as the data shows that a minority of home-based advisors are currently charging fees. But based on the research I've looked at, the numbers keep rising.
Your fees seem fairly average, except for the charge for work on an FIT. I think that for two guests $500 is more the norm. Of course, that's the thing about fees: There are just so many variables to consider.
Fees do not establish self-worth. In fact, I believe that they establish just the opposite. They translate to the reality that the products you sell are not of a value sufficient to generate a sustainable living on commission.
The goal should be an average transaction of well above $5,000. Many advisors are far ahead of that level of sales because they are definitely not "full service." That is, I think, one of the keys to earning an enviable living in our industry.
You employ ICs, and it is legally challenging to tell them that they can only sell products that meet certain quality and commission standards. You are sharing commission, and your ICs may be keeping up to 100% of commissions. In that scenario, it is clear why fees are necessary.
But what would happen if only you and your husband sold travel on your own? Alternatively, you might consider having an IC join you as an invested partner. You would then not be splitting commission with anyone; you would keep your commissions plus your overrides.
Fees mean that your clients are paying you more to book the same thing that AI will make it easier for them to book online and directly. Do you really think that, going forward, it is wise to give suppliers a price advantage by charging your clients to use your services? And what will happen when suppliers start lowering prices for consumers who book directly with them? That's the other shoe; can we be positive it won't eventually drop?