Commissions lag booking -- by a lot. Some want to change that

|
Commissions lag booking -- by a lot. Some want to change that
Photo Credit: Shutterstock/Aanbetta

Does this sound familiar? An agent works for weeks or months with a client to plan a trip, makes the booking months or even a year before the trip begins, and then waits. And waits. And waits.

And then receives a commission when (or soon after) the client travels. 

This scenario, reflective of how agencies receive payments from suppliers, has remained relatively unchanged for decades. It typically means compensation can come months or even years after the booking -- and all the work -- have been completed.

Most cruise lines, to support agencies through the pandemic and motivate them to offer future cruise credits rather than refunds, have been paying commissions on canceled sailings right away and will pay again when the client actually sails. 

The double-commission program is welcome, but it's temporary. As the coronavirus crisis drags on, commission payments have become a point of contention between agents and some suppliers. Pending commission payments are, in some instances, the difference between going out of business and staying afloat.

To increase cash flow, an increasing number of agencies are turning to service and consultation fees paid by clients. But there are also voices calling for suppliers to reexamine their commission payment policies and rework them to get dollars to agency owners faster.

Alex Sharpe
Alex Sharpe

Signature Travel Network CEO Alex Sharpe is one of those voices. Sharpe is on a mission to change the paradigm and figure out how agencies can get commissions more quickly after a booking is made. Signature already has one such agreement in place with Silversea Cruises; it's not a new agreement, but it's proof-of-concept that it can be done, Sharpe says, and he's hopeful more such arrangements may be on the horizon.

"It's going to be a long process, but I think for those who see the big picture, who really understand the value of a travel advisor and the increased value of a travel advisor [after] going through this -- I really believe that we'll get a couple to come through," Sharpe said.

ASTA has also been calling for faster commission payments since the pandemic began.

In late July, the Society praised a move from the Globus family of brands, which announced it would, for the time being, pay commissions more frequently and when a client pays instead of at the time of travel.

In its Travel Advisor Daily newsletter, ASTA said, "For much of the year we have been pushing for changes in industry economics toward quicker agency compensation, which will be critical as the industry recovers and bookings pick up well before actual travel. Good on you, Globus!"

Sharpe also lauded Globus' program and its support of the agency community. He predicts Globus would see some share shift as a result, with agents supporting Globus because the supplier is supporting them.

Many of the Signature CEO's gravest concerns center on traditional brick-and-mortar agencies. He worries that, with the overhead they carry, many might not survive a long period without revenue. At the same time, he said he believes suppliers should be motivated to help them survive, because they provide key business, such as groups for cruise lines.

Some of those agencies will be able to press pause and go on hiatus until travel comes back, but many are not so fortunate. Some are stuck with leases and could be forced to declare bankruptcy and close, Sharpe said. Then, when meaningful travel volume does return, the distribution channel will have holes.

"I worry about that," he said. "I would say they provide the lion's share, for sure, and are probably even more critical coming out of this versus an online call center. Brick-and-mortar agencies generally have a higher level of service."

Those agencies will also advocate for cruise lines and explain their safety procedures, Sharpe said, especially important because many consumers will feel reassured hearing about health protocols from a third party.

For several years, Signature has had an arrangement in place with Silversea for agencies to get commissions earlier. The cruise line had offered an early payment incentive with a discount on a cruise if full payment was made within a certain period, and that inspired Signature to ask the cruise line if, going forward, agencies could continue to get their commissions when full payment was made.

Initially, the answer was no because Silversea was concerned about getting the commission back if the client opted to cancel. But Sharpe offered Silversea a repayment guarantee, even if the money came from Signature and not the agency. The cruise line agreed. Most agencies that sold Silversea opted into the program, and there hasn't been a problem, Sharpe said. As a result, agencies are getting their commissions faster.

Mark Conroy, managing director of the Americas for Silversea, said offering advance commissions is "a matter of managing the credit risk." Agency owners have to consider the risk in giving the commission early to employees or independent contractors, and suppliers similarly have to consider their risk in remanding commissions on canceled cruises. The added buffer of Signature's guarantee made the program possible.

Suppliers want to keep agents happy, particularly luxury agents, Conroy said, adding that travel advisor recommendations are second only to recommendations from friends and family in selecting a cruise.

About 85% of Silversea passengers are repeat cruisers, Conroy added. "The advisors know who those people are, so they're the ones that can say, 'Hey, instead of taking this cruise in Alaska on a 2,500-passenger ship, have you thought about doing it on a 500-passenger ship?"

Sharpe has begun conversations with other suppliers. The handful of cruise line presidents he's spoken with did express interest in exploring some kind of early-pay program, but he'll likely need to wait until they know when sailings will resume.

"We're going to need the collective support of everyone to make it through," Sharpe said. "Not everyone's going to have the ability to just mothball an agency and come back in six months or 12 months and restart."

Sharpe said he's optimistic but knows not all suppliers are in a position to institute an early-pay program. But he plans to keep the subject in the forefront.

"I believe there is just tremendous, tremendous value in what we do, and even more so coming out of this Covid world, emerging back to travel," he said. "Whatever they can do will pay off in spades in terms of advocacy, in terms of directionally selling. All those things." 

Comments

From Our Partners

2020 Lifestyle Holidays Webinar
The Lifestyle You Deserve
Register Now
Enterprise
The Right Rental for All Occasions
Read More
2020 Enterprise Webinar
React. Reset. Reshape. | Enterprise and National Define the Path Forward
Watch Now

JDS Travel News JDS Viewpoints JDS Africa/MI