When people find out I work with travel advisors, one of the first questions they ask me is how do travel agents make money? Do they charge fees or do they earn a living from commission?travel agencies agents make money or do they earn
Usually, the people asking are either those who are interested in becoming a travel agent or they’re thinking about trying one out and want to better understand the income model a travel advisors operates under.
I’ll go more in-depth in just a second, here’s a list of steps that show how travel agents make money
- Depending on the booking type and the agency, the travel agent may also charge the traveler a consultation fee. (Our travel agent research shows about 50-60% of advisors charge some sort of a fee.)
- A traveler works with a travel advisor to plan and finalize their travel itinerary.
- The travel advisor books the trip, often within the agency’s preferred supplier list.
- Advisors are recognized by suppliers because they give an accreditation number specific to their agency. The number signals to the vendor/supplier who the agency is and if the supplier pays the commissions, the travel agency’s commission level.
- The commission is paid to the travel agencies travel agents make money or do they earn agent. For most trips, the vendor pays a commission to the travel agent after the client has traveled. For most cruises, the travel agent is paid their commission after final payment (typically about 60-90 days before the sailing)
A Short History
To give you an answer on how travel agents make money, it’s important to know a little history. I promise to keep it short—it’s actually pretty fascinating how the industry has changed over the years.travel agencies
In the good ‘ol days, a large portion of travel agency income came from airline commissions. Since tickets were expensive, in demand, and could only be ticketed by agents or the airlines, they were the bread and butter of every agency.
travel agencies
What about commissions from tours, hotels, and cruise lines? Those were just icing on the cake.travel agencies agents make money or do they earn
They were travel agents in every sense of the word because they were agents of travel vendors. Their revenue came from the commissions earned from selling travel products. However, when airline commissions were cut and capped in the 1990s — sad face! — the main revenue base fortravel agencies disappeared. It hurt. A lot.
Airlines cut their commission because they could now reach travelers via the web and online travel agencies (OTAs) like Expedia and Booking.com. Travel agents, who were once wined and dined by airlines, were left out in the cold. Ouch.
With this rapidly changing travel landscape, travel agents needed to find a new way to make money . . . and fast. And that’s where our modern-day story of ‘How Do Travel Agents Make Money?’ begins
From Storefront to Home-Based
But kiddos, I got news for you! While the storefront travel agencies that once peppered towns across the US aren’t as numerous, there is a BUSTLING group of agencies that are less visible, working remotely.
There’s been a HUGE influx of new advisors, especially after the pandemic. Call them solopreneurs/home-based/location-independent — whatever hip term you want to use. They may be harder to see without a storefront, but this new segment of the industry is now a force to be reckoned with!
By and large, the most popular agency model has switched from the storefront agencies of the past to the remote agencies of today.
Moving to Diversify Income
Along with the loss of airline commissions, travel agents face the challenge of many major cruise lines’ non-commissionable fees (NCFs).
Yup, it’s self-explanatory: They’re miscellaneous fees that are not commissionable. While a cruise sale may be $2,000, it’s possible only $1,400 of it will be commissionable. (That deserves a boo from you as the audience.)
Travel agency business models (both corporate and leisure) are moving to become less dependent on commissions alone. Why the change? Not only did commissions from airlines and other vendors lower than in the past, but the industry has experienced huge industry and economic ups and downs including 9/11, recessions, and pandemics. (Am I missing any? PHEW, travel agents sure are resilient!)
Commission income went on rollercoaster rides during these times. During the coronavirus pandemic, for example, advisors were working overtime canceling trips, bending over backward to get their clients home safe, spending oodles of time to keep up to date with constantly-changing travel regulations, and rebooking trips despite the fact that commissions came to a halt.how travel agencies make money
That’s right, they were working overtime for essentially no pay.
How Do Corporate Travel Agents Make Money?
Corporate travel agencies make money mainly from service fees, net/private fares, and from airline commissions.
Airline tickets are the lifeblood of corporate agencies (also known as TMCs or travel management companies). Were TMCs going to stop selling airline tickets just because airlines stopped commission? No way. They had to get creative to offset lower commissions. What did these corporate agencies do? They implemented a service fee when they booked a ticket.how travel agencies make money
In 2023, HAR research reports show the median service fee charge for international air was ~$60 and ~$40 for domestic air.
In addition to air, corporate travel agencies earn commissions from booking cars and hotels for business travelers (typically 8-10% commissions). Corporate travel agencies make money mainly from service fees, overrides from the GDS and airlines, net/private fares, and from airline commissions.
The average service fee for air ticketing in 2022 was $39 for domestic air and $63 for international air for agents who booked corporate travel.
Travel agencies, depending on the airline contracts they have access to, are able to earn commissions on both domestic air (typically 0-5%) and international air (roughly 10-22%).
✈️ Read more on airline fare types. ✈️Want to break into corporate travel? Read how to become a corporate agent.
How Do Leisure Travel Agents Make Money
After the commission cuts, many travel agencies shifted their focus to leisure products that still paid travel agent commissions. These products were essentially vacation packages and cruises. Nowadays, these are your leisure travel agencies (the ones you probably think of when you think of a travel agent.