While you’ve set your prices and your tours have been running great, once in a while it’s good to take a step back and reassess your commission rates for your partners.
Are your rates set in a way that maintains the best yield and maximises profit? There are two rates in question:
This is what customers pay, and it should be consistent across your distribution network. But as a small business – especially if you’re a new one – it’s easy to undercharge for your tours.
This might be because you’re not sure what customers are willing to pay for your tour, or they won’t value it, and so you won’t be able to attract enough new ones to cover your costs.
It’s tricky to figure out, especially because you’re essentially selling an experience. Make sure you’ve considered your operating costs, profit margin, and distribution network costs.
This is what your distributors will see to add their commission. It’s the minimum amount you can sell your tour for while still making a profit.
No matter how important your distributor is, don’t sacrifice your profit for their commission. For the right nett rate, add your operation costs to the profit margin you want to make per sale.
While customers will always get quoted the retail rate for your tours, distributors get a different rate depending on who they are:
Each rate is for the tourism year (1 April to 31 March), but it’s wise to plan rates 18 months in advance so that your distributors can sell way ahead of time.
There are a few commission rate mistakes that you should avoid:
Distributors expect you to understand the industry standards for agent commission.
A big part of a having a successful relationship with your distributors is how you will manage bookings on an ongoing basis.
Without an automated booking system, you’re going to be stuck with more administrative work that could easily be avoided.
If your online booking software doesn’t manage agent bookings, then feel free to try Rezdy. Rezdy allows agents to log in, send you bookings, and get paid – all based on the commission and products that you’ve set for them. Test it out today.
You can also download our free ebook to keep learning about distributing your tourism products: