31 Aug 2015 Should You Pay Percentage or Net Commission for Your Tours?

You are probably aware that in terms of commission, you can choose to pay your agents either a percentage or net commission rate.

But which one is better for your tour or activity business?

Let’s explore this topic further.

Percentage commission

With percentage commission, you agree to give your agents a percentage of the retail rate of your product. In this case, you set the retail rate, and your agents have to sell your tour or activity at that  set rate.

For example, you run a kayaking tour, and you sell it at $100 per tour. Your agents must also sell it at $100 per tour. You offer your agents 20% commission because you know that to make a profit you need at least $80 per tour. So you keep $80, and they pocket the $20 commission.

Net commission

With net commission, you tell your agents the flat dollar amount you want to get paid per tour, and leave the retail price to be determined by the agent. Hence, they set their own commission.

For example, you sell your kayak tours on your website for $100 per tour. You tell your agents to pay you $80 per tour at a net rate. This means that one agent can resell your tour at $81, and another can resell it at $110. Either way, you know what you’re getting and you’re making a profit.

Winner: Net commission

Percentage-based commission is how many tour and activity operators pay their agents. However, is it the best way?

It depends on what you’re trying to achieve. If you want to make sure all your customers see the same price for your tour or activity whether it’s with you or your agents, then it is the best way.

However, net commission is a better scenario, because:

• You are guaranteed to make a profit for each tour, and you give your agents flexibility in the marketplace. They can apply pricing strategies that allow them to be more competitive with each other, cutting into their own commission if they have to in order to sell your tours.

• You can leave marketing to the agents, who have a bigger marketing budget to play with in order to attract customers.

• Today’s travelers are deal hunters, and they are already comfortable with paying for hotels and flights in this way.

Setting net commission rates in Rezdy

You can set up net commission rates easily in Rezdy.

This is now part of the full agent setup tutorial.

What’s Next?

• Watch our webinar on setting commission with agents
• Follow the steps in the agent setup tutorial
• Log into your account

Topics agent bookings, commission, distribution