By Taz Bareham — 1 Apr 2016
Since their piece of the pie is what motivates them to sell for you, you want to make sure that you are setting commission rates the right way.
This is your chance to learn:
Working with agents is an indispensable way to increase the reach of your business and sell to a much larger audience, but of course agents are running a business every bit as much as you are. This means you need to pay them a commission for the work they do on your behalf, but you need to work out how much to pay them and how you’ll manage the payments.
You need to be aware of the industry standards for setting commission rates, as well as the different sorts of agent relationships you might encounter, plus how to calculate commissions and how Rezdy can help you out with all of that.
You might think that setting commission rates for your different partner agents is easy – you’ll just give them all the same rate, right? We warn you against doing that, because agents are quite well versed on industry standard commission rates and how different distribution networks function, and they will expect you to know about that too. Similarly, there are different types of agents out there who will likely expect different levels of commission.
As we said, there are different types of agents you might work with, each of which will have different expectations for your relationship with them. Most commonly, agent relationships are a direct distribution style, which would entail you working with, for example, a hotel concierge. In this case, industry standards dictate setting commission rates at no less than 10%.
We will go into more detail about setting up these relationships within Rezdy further down the page, but there are other, and slightly more complex, distribution relationships to be aware of as well.
A big example of a retail travel agent that we have here in Australia is Flight Centre. There are big ones all over the world – you’ll probably know who the big ones are in your home market. These are the travel agents who work out of a bricks-and-mortar shopfront, where a customer can walk in and ask someone to plan a trip for them. Industry standards recommend setting commission rates for agents such as these at around 10%-20% of the retail price of the package they put together.
Tour wholesalers, such as Go Tours here in Australia, never sell directly to customers. Rather, they link the individual tour operators (like you) with the retail travel agents (like Flight Centre). They supply tour options that include transportation, accommodation and of course tours. They also usually promote tours and programs that they think will appeal to certain markets.
For the services that tour wholesalers provide, industry standards recommend setting commission rates at around 25%-30%. They are more expensive, but then the service they provide links you to more distributors.
The ITO fits into the picture after the wholesaler. The wholesaler contacts the ITO after receiving a booking, and the ITO then books each element of the tour itinerary.
ITOs specialize in promoting and very often reselling tours and accommodation related to the specific area they operate in. They really offer in-depth, advanced knowledge of the particular destination the customer wants to visit.
For example, if a customer wants to book a Disneyland holiday to California, they ask a retail travel agent for a Disneyland holiday, the retail travel agent then contacts a wholesaler to look at Disneyland holiday packages, and the wholesaler then contacts the ITO who will book the specific hotels, transport options and activities involved.
Industry standards recommend setting commission rates for ITOs at around 25%-30% as well. It’s worth bearing in mind that these commission rates don’t compound. You don’t have to pay 10% to a retail agent, 25% to a wholesaler and then another 25% to an ITO. Depending on which one you work with, you would pay the commission to them directly.
A useful extra tip that we recommend is that you offer a small extra commission to agents, perhaps 2%-3% over the industry standard, to encourage sales. A little extra incentive for the agents to sell your products will make them devote more effort to it, which will of course benefit you as well.
If you only have one product and one agent that you work with, it’s going to be pretty easy to keep track of the commissions that you have set up and that you need to pay. However, if you have multiple products and multiple distribution partners and different commissions for each of them, life is going to get pretty complicated pretty quickly. To help yourself out, Rezdy can automate the process of setting commission rates and paying the commissions for each individual product and partner agent.
Firstly, you need to create an agent in your Rezdy account. If you already have a partnership with an agent, this is where you send them an invitation to join your Rezdy accoun. For those of you who do not yet have agent partnerships in Rezdy, you click on the Contacts tab, then Agents. From there, you click ‘Create New Agent’ and then you add the company name, or code, or however you want to identify them. That will then give you a code that you can send to them to invite them to use your account.
Once your agent is set up, you will ‘Create a Catalogue.’ The catalogue in Rezdy includes all the products that you want to share with an agent to resell on your behalf. To set up a catalogue, you click on Inventory and then Catalogue. This will bring you to a list of previously created catalogues. From there, you click on ‘New Catalogue’ and choose ‘Partners Catalogue.’ This is where you can name the catalogue and check the boxes for the products you want to include.
You will have already agreed on a commission rate with the agent when you spoke to them about partnering with each other. You can enter this commission rate into each product that you have on a Catalogue, and then you click ‘Create Catalogue.’
Once your agents and catalogues are set up, you choose with catalogues to share with which agents. Since you have set up the agreed commission rates within each product, all the information is there in the catalogue that you share.
You can grant your agents several extra permissions when reselling your products that could make it easier for them to resell. The first of these is the permission to create orders directly in Rezdy. This means that when an agent receives a booking request for your product, they can confirm and process the request without needing to ask you for approval first. We recommend that you do this because it means that customers can get confirmation straight away, especially if you and the agent are in different time zones and they may need to wait several hours for confirmation from you.
The second permission is to allow the agent to override the price per order of your product. If you have a good relationship with your agent and you trust them, you could allow them to override the price per order which might make it easier for them to sell to a particular customer. You can set these permissions individually for each agent that you partner with, so if you have a better relationship with one agent than you do with another, you can give them different permissions.
The third permission is to allow agents to update orders that they have placed. This is similar to letting them place orders for themselves in that, if they need to alter a particular booking for any reason, they can do so once again without needing to ask you for confirmation first.
You can also specify the payment options you want to provide to your agents. You can choose whether to pay the agent in full when they collect payment from the customer and then sort out how much they owe to you after the tour has been sold, or you can choose to pay them a deposit with full payment made to you on the day of the tour.
If you want to make your agent relationship official, you can give them some materials that will make them better able to resell your products for you. These could include a sales kit, fact sheets, photos, brochures, maps, videos, etc. You could also give them a rate sheet that includes information like concession rates, age groups for child rates, maximum and minimum group booking sizes and seasonal rates. You might also want to include your terms of trade, like who is responsible for what, your cancellation policy, availability and blockout dates and booking and payment deadlines. A lot of this can be automated through Rezdy, particularly your blockout dates and payment deadlines, so you just need to make sure your calendar is up to date and the agent can see it all.
Once all the information is available to the agent, give them the access link to your Rezdy account and make it as easy as possible for them to place bookings from customers and let them start selling your activities for you!
If you have any further questions, please feel free to send us an email at email@example.com and we’ll be happy to give you a call and help you through everything.
Ready to enable agents to resell your tours or activities? We have written an e-book that provides hands-on strategies to distribute your products.
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