Commission Rates for Distributors: What Tour Operators Need to Know

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.

Getting your rates right

Are your rates set in a way that maintains the best yield and maximises profit? There are two rates in question:

Retail rate

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.

Nett rate

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.

Quoting your rates

While customers will always get quoted the retail rate for your tours, distributors get a different rate depending on who they are:

• Retail agents get the retail rate, which they then deduct their 10% commission from
• Wholesalers get quoted at 20% less than retail rate
• Inbound tour operators get quoted at 30% less than retail rate

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.

Avoiding rookie mistakes

There are a few commission rate mistakes that you should avoid:

• Giving the same commission rate to different types of agents
• Giving only a 5% difference of commission between different types of agents
• Giving last minute bookings from online travel sites better rates than agents
• Having different domestic and international distribution rates

Distributors expect you to understand the industry standards for agent commission.

Paying your distributors

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: