Know Your Value!

Photo courtesy of Thinkstock.

Our industry has become its own worst enemy. According to a survey by Pam Danziger in her book “Let Them Eat Cake,” the majority of consumers pay full price for luxury experiential goods — except travel. Indeed, 64 percent of individuals surveyed said they got a discount or a deal on such travel.

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It doesn’t matter if it’s a $299 Cancun package or a $100,000 world cruise, as an industry over the years we have promised customers they always will get the lowest price available, even if that happens after the sale has been completed. Here’s the cold, hard fact of this promise: The lower the price, the lower the commission. If you have set that kind of expectation, you have to watch every promotion, every one-week or flash sale to keep your promise. That’s a lot of work!

How much is your time worth? There are as many opinions on the subject of travel agent service or consulting fees as there are sale models. Most agents I have spoken with believe they are doing their customers a “disservice” by charging fees for services for which they are already compensated by the vendor.

Like most of you, I also fell into this trap as an agent and an owner. The biggest reason I did so was fear. I was afraid my customer would cancel and book with another agency or, worse, directly with the supplier. If the deposit is refundable, why should they stick with me? As I have learned over the years, this is unwarranted paranoia. Granted, it does sometimes happen, but not nearly as often as you might think.

Think about this: You are actually selling the same booking twice (or more) for a lot less money than you initially earned. We made our own bed on this one when we advertised “lowest price guarantee.”

You’re Not Walmart
It didn’t take me long to figure out that my company was not Walmart and there is something inherently wrong with this thinking. Our job is to make a profit so we can stay in the business of serving our customers. Profit is not a dirty word. Repeat customers are very difficult to service if we are out of business — that’s just the reality.

I am all about making a profit. There is a happy medium to this conundrum that is practiced by “Wealthy Travel Agents” and expected by the customer. We can thank the airlines for this nugget, since they have become masters of the game.

First, we must charge change and cancellation fees — period! If you are not doing so, start now! Remember, most of the work actually done on the booking is the service after the sale, hence our fear of the customer leaving us. But if there is a change or cancellation, why should everyone else but you benefit? You should be compensated for your extra effort.

Now, if you feel that this is simply part of the incredible service you provide, please stop whining about how you aren’t making money as a travel agent. Customers don’t care, since they assume you are making money. What they do care about is that you meet or exceed the service expectations you have set.

If you are upfront with your fee structure, you will get very little resistance if the need arises. If they ask you to waive the fee, and some will, then just politely decline. This reinforces your professionalism and does not allow customers to affect your profitability by taking advantage of your business policy. Don’t worry — it will not affect their decision to use you for future trips.

I know of a number of agencies that are only profitable because they charge fees. In many cases you can actually end up making more money than on the original commission and still provide customers with lower prices.

Make More With Fees
Let’s do the math. If a package is initially $3,000 at 10 percent commission ($300) and the supplier lowers the rate to $2,250, your commission drops to $225. You charge a $250 change fee and earn a total of $475 and the customer pays a net total of $2,500. Everyone wins!

Now that I have you on board, collecting fees is simple: Just set up a PayPal account. Disclose on your fee page that cancel and change fees will appear as separate charges billed under your agency name.

Wealthy travel agents treat their business as a business. They know exactly how much they are worth, the value what they bring to the table and how to maximize the revenue from every transaction.