How do travel agents make money
Travel agents make money in a variety of ways, depending on the product being sold.
Travel agents make money by selling holiday packages which are organised by tour operators. Or they may package the travel and hotel accommodation together themselves.
Travel agents also sell flight tickets on their own, hotels on their own, and other services such as train tickets, ferry bookings and insurance.
HOLIDAY PACKAGES
The major tour operators promote their packages through travel agents by allowing the agent to deduct a commission, typically 10%, when the agent forwards your payment to them.
Operators may also pay the agent additional incentives to sell their products. Anything from M&S vouchers through to offers of free “familiarisation trips”
TAILOR MADE PACKAGES
Another way that a travel agent can make money is by pricing a flight and hotel together as a package themselves. The hotel will pay a commission of typically 8-12% and the agent will include a mark-up of perhaps 10% into the bundled price.
FLIGHT ONLY BOOKINGS
How do travel agents make money from flight only bookings?
The airlines no longer pay the 9% that they once did. Some still pay 1% which is not enough to cover the time and cost required to process a booking.
How do travel agents make money from no-frills airlines?
No-Frills airlines such as Ryanair and easyJet display sole price levels on their websites.
If a travel agent books this for you they must charge you a “transaction fee” or “service fee” for their time.
Online travel agents include a mark-up in the fares quoted and this is why we always recommend that you book no-frills or low-cost airlines directly on the airline’s website.
How do travel agents make money from full service airlines?
As mentioned above, airlines no longer pay 9% commission. Some may pay a fixed 1%.
The airlines also pay some agents typically 1% and this is usually tied to sales and marketing activities, thus while travel agents benefit from this at year end, they cannot rely on these payments to cover the cost of selling you a ticket.
To understand how travel agents make money from flight tickets you need to know about “net fares and published fares” See our article here
A business travel agent will charge a transaction fee to arrange the booking. If the airline offers agents a lower net fare, it enables the agent to earn a margin on top of the fee.
All the leading online travel agents in the UK, such as Expedia and Opodo, include mark-ups in their prices too, but because their systems are automated, the amount charged is fixed and may be more competitive.
Thus we recommend that you always search and compare using our Flight Search as well as Expedia and Opodo Page
This entry was posted on Thursday, December 15th, 2011 at 3:08 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
