When choosing which suppliers to work with, there are two choices: North American tour operators and on-site destination management companies (DMCs).
When booking a client trip, is your go-to supplier a mainstream, North American-based tour operator? These are usually the heavy-hitters: The companies with offices in New York or Toronto, a nationwide sales team with regional sales representatives and a commensurate marketing budget.
When vetting which tour operators to work with, consider:
-Are they a preferred supplier with your host agency or consortium?
-What commission percentage do they pay?
-Do they employ their own guides or contract with local companies?
-Is there a 24-hour emergency contact?
-Do they white-label their tours (i.e. can you brand marketing and collateral?)
-The type of client you work with.
Travel agents prefer working with tour operators for various reasons:
Trust and Security
One of the main tour operator benefits is the security that comes in working with a company that's only a toll-free phone call away.
Client issues inevitably occur, and mediation and remediation are much easier when working with a North American supplier who has an established reputation, required liability insurance and who must abide by well-established US and Canadian laws.
A tour operator will usually do the problem-solving for you and simply inform you of both the problem and solution. While this is certainly a benefit to the agent, be mindful that you retain less control over your suppliers reflecting your own brand's standards.
Dollars and Sense
Money is the lifeblood of any business, so weighing the pros and cons of how a tour operator affects your business' finances is an important issue to consider.
Tour operators typically charge your clients' credit cards directly, with smaller or no transaction fees-or, more precisely, with fees built into the final price. Many travel agents prefer this extra convenience, choosing to avoid handling client's sensitive credit card information and dealing with credit card processors.
While this may be convenient, the client may question the value of working with you instead of directly with the supplier that appears on their credit card statement.
Tour operators typically offer a set commission (usually between 10-15%), based on your host agency, consortium, sales volume or a combination of the three. Each business is different, so this is a critical question to consider when running your own numbers. Is the tour operator's set commission acceptable to you and your business, financially?
Or would you be better off marking up net rates from a local on-site DMC? There is no right or wrong answer, but it is an important question for each travel entrepreneur to weigh.
Further, tour operator commission checks typically are not issued until the client has returned from travel, and even then, many agents complain about lost or delayed payment.
Follow the Money
All of the conveniences of working with a tour operator do come at a cost.
Consider that when you roll with a domestic company, much of the money goes to pay for expensive North American overhead costs, like payroll and sky-high rent in cities like Toronto and NYC.
These larger companies also have huge marketing budgets to pay for expensive advertising campaigns on Facebook or Google (often undercutting the travel agent community in the process), or intensive investment in office visits, tradeshows and marketing collateral.
Unfortunately, all of these expenses generally come in the form of lower agent commissions or to the on-site service providers, who are on the front lines taking care of your guests.
Of course, you're not relegated to choosing tour operators or DMCs; It may make more sense to work with one or the other depending on the trip's complexity, the destination or myriad other factors. But it is an important decision every travel entrepreneur must make.
I hope this has given you some food for thought, and please join me next week when we look into the pros and cons of working with local DMCs.
Until then, stay inspired.
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