Setting the right commission rate for your agents is a tricky task for tours and activities. It’s about maintaining a delicate balance of motivating your agents to sell your tours, while also remaining profitable.
We break down the essentials of what you need to know to get your rates right in distributing your tour products.
There are two types of rates that you will be dealing with.
Never sacrifice your profit for the sake of commission – even if it’s a really good agent.
In direct distribution – where you deal directly with the person who deals directly with the consumer (for example, when you deal with a concierge, a hostel, or an OTA), it’s pretty straightforward. You should give at least 10% commission in this case.
In the case of more complex distribution – where you make the deal with an inbound tour operator – it’s a bit more complex.
You pay 30% commission to the ITO. The ITO keeps 10% and gives 20% to the tour wholesaler. The tour wholesaler keeps 10% and gives the remaining 10% to the retail travel agent.
Use Small Business WA’s commission rate formula for each of your products. You may want to add ‘over-ride’ commission to encourage sales as well (usually 2-3% on top of existing commission rates).
Consider how you will manage agent bookings on an ongoing basis.
Does your online booking software manage agent bookings? This means that it:
Having robust software with this functionality is imperative to the long-term success of your agent relationships. It will eliminate unnecessary admin work on both ends, while allowing you to maintain maximum profitability from avoiding overbooking your tours.
You can also download the complete guide to choosing booking software by clicking here.
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