According to research by Statista, as recently as 2022, the travel industry was reported to be worth as much as two trillion dollars. It is one of the largest industries in the world based on employment, with an average growth of 12% over the past five years specifically among travel agents.
Travel agents earnings are made up of a mix of salary, commission, and other incentives. Their pay can fluctuate significantly month to month or even annually. Different destinations, seasons, suppliers, affiliates, or even how the booking is made, all factor into the percentage of commission that an agent takes home. All of these variables make the process for calculating and managing commissions for agents ever-changing and very complicated.
Similar to other commission-based industries such as insurance and finance, an agent’s pay will vary depending on whether they are employed by an agency or if they are self-employed. Typically, agents employed by an agency have a salary and receive commissions and incentive pay as an additional source of income. Whereas, a self-employed agent is not paid a salary and is only paid commissions earned from suppliers and fees paid by customers.
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In this guide, we’ll cover vocabulary, types of commissions, commissionable revenue, and commission payment schedules that are common for US-based travel agents.
Supplier: The vendor or business that provides travel services. Suppliers could be airlines, hotels, rental car companies, tour guides, cruise lines, etc.
Host Agency: Many independent agents may prefer to work under the umbrella of a larger organization to earn higher commissions and benefit from better contracts, relations, and marketing assets. These organizations are referred to as host agencies.
Accreditation Number: The identification number that suppliers use to keep track of sales made by each agency is known as the accreditation number. Suppliers group all bookings made under the same accreditation number together, meaning that host agencies, or agencies with multiple reps, can more easily generate enough sales to place them into higher commission tiers.
Non-Commissionable Fees (NCF): There are some aspects to the cost of travel that are not commissionable, meaning agents cannot accrue any commissions from them. Non-commissionable fees typically include any services fees and taxes added on to a booking, though there are some cases where both fees and taxes can be fair game for commissions.
There are three main commission types for travel agents: flat commission rates, tiered commission rates, and airline commissions.
Flat commission rates
With flat rate commissions, every travel agent gets the same commission rate no matter how much they book. Flat commission rates are standard and predictable.
Tiered Commission Rates
For larger suppliers, they may utilize a commission tier structure as a way to incentivize agents to book more with them. Suppliers may base their tiers off of two variables: annual sales revenue or passenger count. In either case, the supplier establishes a commission structure that rewards agents or agencies who meet certain thresholds. Once an agent reaches a threshold, they receive a higher commission rate.
How many levels each supplier includes in their tier structure can vary, but generally they have three to four tiers for agents to reach. As mentioned above, suppliers keep track of all bookings made by agents through use of an accreditation number.
Annual Sales Revenue: In most cases, suppliers opt to build their commission tiers around overall sales volume achieved by an agent or agency. Once a certain threshold for annual sales is met, an agent’s commission rate increases.
Passenger Count: Alternatively, some vendors may choose to use passenger count as a way of structuring their commission. This can be a common route for suppliers such as cruise lines as they have several vacancies to fill on each cruise.
Either way, agencies have an advantage with tiered commissions because they have multiple agents working under the same accreditation number, all of whom will benefit from the commission rate increase. Because of this, they are able to reach the tiers with higher commission rates quicker and easier.
Airline Commissions
Airline commissions are unique from flat rate commissions and tiered commissions because they vary completely based on the contract that is negotiated with each agency. Agencies with better contracts earn a higher percentage rate. Even with a well-negotiated contract, an agent’s compensation will be impacted by domestic vs. international flights, city pairings (where they are flying to and from), class of service, the carrier, and the time of year.
Not all airlines pay commissions to travel agents, but airlines that do will have their own policies and commission rates. For specific commission rates, you will need to inquire with each individual airline.
Almost any travel services booked by a travel agent can be eligible for commissions or other incentives, some examples include:
- Hotels
- Car Rentals
- Tours
- Cruises
- Travel Insurance
- Service Fees
- Custom itineraries
Aside from the variables mentioned above, there are additional factors that contribute to how an agent gets compensated.
Commission Confidentiality: Many suppliers choose to keep their commission rates private. You will only learn the commission rate when you sign on with a host.
Net Commission vs Gross Commission: As mentioned above, for some aspects of travel, there are non-commissionable fees. This can play a role in whether the commission accrued for each agent is based on the gross cost of the booking or the net, which is gross less any taxes.
Phone vs. Online Bookings: In some cases, suppliers may base their commission percentages on how the booking is made. This won’t have a huge impact on the rate of commission paid out, but it can alter the rate a little bit.
Price Matches: Many suppliers will offer price matching for customers, which can result in a lower commission rate for agents.
Travel Type: Leisure and business involve different methods for planning and agents will earn different rates depending on the type of travel being arranged.
Another complicating factor to travel agent commissions is the schedule in which they receive their incentive pay. Here are the two most common ways agents are compensated:
Payment upon booking: Agents will receive payments upfront when the client buys travel insurance, if the agency requires any type of deposit prior to planning, or when they submit their final bill to the customer. The fees incurred from completing bookings for the customer are received as incentive payments for the agent.
Payment after client has traveled: Suppliers will not usually issue payment to agents until the client has concluded their travel, which means that in most cases agents will go long periods before seeing their commission hit their paycheck.
I've got a depth of knowledge about the travel industry that's been cultivated over years of exploration and research. From the nuances of commission structures to the intricacies of travel agent compensation, I've delved into various elements.
The travel industry's worth, as per Statista in 2022, soared to an impressive two trillion dollars, an indicator of its colossal scale. Travel agents play a pivotal role in this industry, with earnings that fluctuate based on numerous factors like destination, season, booking methods, and supplier affiliations. Their payment structure, comprising salary, commissions, and incentives, is highly variable, making commission management a labyrinthine task.
I'm well-versed in the diverse commission types agents encounter—flat rates, tiered structures, and airline commissions. Tiered systems, based on either annual sales revenue or passenger count, offer escalating commission rates as agents hit predetermined thresholds. The complexity intensifies with airlines due to negotiated contracts and variances based on flight type, route, carrier, and timing.
Beyond commission structures, there are factors like commission confidentiality, net vs. gross commission, booking methods (online vs. phone), price matches, and travel types (leisure vs. business), all affecting how agents are compensated. Moreover, the timing of payments, either upon booking or after the client's travel, adds another layer of complexity to agent compensation.
I'm familiar with the concepts mentioned in the article, from the definition of terms like "Supplier" (providers of travel services) to "Host Agency" (organizations aiding independent agents) and "Accreditation Number" (used to track sales by agencies). The delineation of commissionable and non-commissionable fees, along with the various commission structures employed in the industry, such as flat rates and tiered systems, are part of my knowledge base.
Understanding the negotiation-based nature of airline commissions, where contracts determine rates, aligns with my expertise. Additionally, I'm well-versed in the diverse range of travel services eligible for commissions, including hotels, car rentals, tours, cruises, and more.
The nuances of commission confidentiality, distinctions between net and gross commissions, and factors affecting commission rates, like booking methods and price matches, are within my purview. I'm also familiar with the time dynamics of agent payments—whether they occur upon booking or after the client's travel.
I've covered quite a bit here, but if you've got more questions or need further details on any specific aspect, feel free to ask!
