This is a quick blog post on some differences between how travel agents, corporate and/or leisure agents make money.
Commissions are the biggest market for travel agents globally. Commissions domestically now average about 7% of the room rate only versus internationally commissions are closer to 10% of the room rate. All-inclusive hotels tend to pay higher overall dollar amount on commissions since they include the package price per night minus a few percent for staff gratuities and taxes. They still pay 10% but it tends to be higher cost than a typical room rate. Example, a 5 star hotel such as Grand Velas in Riviera Maya pays close to $140 per night for a double occupancy stay that costs $1500 a night whereas a five star hotel such as Ritz-Carlton, Aruba only pays $49 per night on a room rate of $499++ which is really a $637 cost to the consumer. The difference is travel agents do not make any commissions on any food and beverage spend at the EP properties whereas all-inclusive hotels include food and beverage costs in their package pricing.
New hotels can run promotions up to as high as 18% to drive demand to room bookings.
Commissions are not paid on resort fee or taxes so the recent market changes have not been in favor of travel agents. First, Marriott moved commissions from 10-7% in the US in which other chains followed suit, then the resort or city fee became such a significant portion of overall cost. In some hotels in Bahamas or Puerto Rico, the resort fee and taxes can be up to almost $150 per night per room.
Commissions are not paid to companies or individuals unless they have an IATA number. In the past the ARC’s Verified Travel Consultant did work for commission payments but we are seeing less and less hotels accept this in the market. The application for IATA numbers confirms appropriate insurance is carried, trainings are completed, and the travel agent understands market terms. Individuals aren’t able to carry an IATA, only corporations.
Rates wise the cost should not be different if you are receiving commissions or not. The hotels aren’t allowed to mark up the pricing 10% to cover their commissions. If an agent does not receive the commissions then the hotel keeps that money.
As a company we don’t do any business without being the commissionable agent on a hotel block contract for our groups.
Here is the part that every corporate agency differs.
Agencies like Helms Briscoe just do the contracting, collect the commissions and then are not involved in any more planning. If you want any support in planning I recommend staying away from this approach as then Helms receives the commissions and the event planning company will need to charge more since they are not the commissionable agent.
Some larger agencies take a percent of the entire event (on top of commissions), we find these costs can end up being between 15-35%. Some of these costs are transparent usually around 15–20% and others are not (usually additional 10-15%). This is the most common billing method for incentive trips.
Other agencies like Executive Group Travel charge a person fee for each attendee on the trip. This fee includes the full planning of the event from sourcing, to contracting, to budgeting, to registration, to rooming lists, to transfers, and all the details in between. This fee is transparent up front and you can easily budget the cost of the agency. In this case the agency is betting on the clients growth structure in hopes that the small opportunities became larger ones down the road. And most importantly the companies stay with the agency during the growth period. This is similar to how a baseball agent works, you make a bet on your clients in hopes it pays off 3-5 years down the road.