The Boatman's Choice

By Kate Rice

Published on: October 21, 2009

My brothers, who have shot the rapids of the Green River, the Colorado River and other wild rivers many times, have a favorite photo. It’s a picture of a raft going over. Most of the passengers are hanging on to their seats for dear life. But the boatman knows this ride is done. He’s leaping out of the raft.

My brothers always laugh at the difference between the boatman, who knows it’s time to bail, and the passengers, who are hoping against hope that the raft will right itself and go back to the way it was. The difference is the boatman has given himself a better choice of where he’s going to land. His passengers, on the other hand, are just getting dumped.

That photo of an instant on a river is a snapshot of the travel business today. The raft eventually will land and float again, and the passengers will climb back in. That, too, will happen with our economy and our industry. But like that raft trip, the industry and your business are not going to be what we thought they were going to be when we started this particular run.

This is actually just part of the capitalist model. It’s probably best described by the concept of “creative destruction,” a term coined by a guy named Joseph Schumpeter in the middle of the last century. He was an economist who was living in a time even more tumultuous than our own – during which he experienced World War I, the Great Depression and World War II. He was more than an observer of the tumultuous times; he experienced them firsthand, even going bankrupt himself at one point.

Schumpeter was one of the first out there to talk about people like travel agents, most of whom are, believe it or not, entrepreneurs. He called you “wild spirits” and labeled you Unternehmergeist, which is German for entrepreneur-spirit.

So what do my boatman and Joseph Schumpeter have to do with each other? They illustrate that we are in the midst of a restructuring, and now it’s time, yet again, to take that leap and reinvent ourselves.

For the past half century retail travel has operated with a commission-centric model. But it’s now time to shift to a new model – one that is fee-centric. Most agents have been charging service fees for years. But the fee-centric model goes well beyond this to consulting fees.

There are many problems with the commission-centric model. First, it’s the supplier, not the customer, who pays you, making you effectively the supplier’s agent. Second, commissions don’t necessarily compensate you for the work that you do. A cruise costing thousands of dollars can take much more time to plan and book than a simple fly/drive package for time-share owners going to Hawaii, but that fly/drive can pay you much better than the cruise and take minutes instead of hours.

Third, the commission-centric model makes you vulnerable to what Nolan Burris, head of Visionistics and author of ASTA’s “Travel Agency Consultancy Fee Course,” calls those late night decisions in corporate boardrooms. Once your customers become the source of your income, your bottom line is not hostage to supplier decisions.

The fee-centric model also can mean you make more money. Tim Richmond, DS, ACC, owner of Craig’s Travel in Garden Grove, Calif., has adopted the retainer fee model. Nearly 200 of his clients pay him $500 a year to handle their travel. He doesn’t have to worry about chasing down those errant hotel and car rental commissions. If he can get a better deal booking something for a client on Priceline, he books it there, no problem. He finds himself working less and making more.

Nancy Cutter, CTC, DS, owner of Court Travel in Charlotte, N.C., now gets roughly 30 percent of her revenues from fees. And Jennifer Terzi, a Canadian agent with Travel Professionals International, is a Disney specialist who now charges $149 plus GST for her Pixie Dust Concierge service. She also finds that her customers are treating her better now that they’re paying her directly.

The commission-centric model forces agents to try to make money by doing high volume business. But what consumers want, Burris points out, is your time. Unfortunately, all too often, agents are so busy trying to do as many bookings as possible that they don’t have the time to deliver the very thing consumers want from them -- professional service.

Agents on the commission model can find themselves on a treadmill that is going faster and faster. Burris says that revenue from the average leisure transaction is 42 percent less than it was in 2001.

Many agents fear they’ll lose business to the Internet if they start charging for their time. But those who have made the leap to a fee-based model find that they’re losing the customers who they should have “fired” anyway and keeping the ones who want quality and service, not the cheapest deal.

So tap into that wild, entrepreneurial spirit of yours. Channel your inner boatman (or boatwoman). Watch this column for more on how to profitably navigate the rapids of this white-knuckle industry.

Kate Rice is executive editor covering retail travel for TravelPulse.com.