How does the commercial travel industry work?

[Deleted member 29185]

I've been wondering to myself why travel agents exist these days.

I understand the knowledgeable ones can offer a very good service at stitching together odd-bod routings and tix combos, but is that all?

Do travel agents get discounted fares/rates in order to get paid, or do they they simply provided the service and stick a percentage on top to cover it?

Also, travel agents need to be knowledgeable, which in itself suggests they need first hand experience. Do they get discounted travel for themselves or do destinations/airlines/hotels give away freebies for this purpose?

 

[MEL_Traveller]

Travel agents generally work on a commission. Commission rates vary between airlines. Some may offer no commission, some 5%, some more.

Agents may also negotiate special deals with some agents for higher commissions.

As you can see the margins can be very low. So some agents will add all sorts of extra charges, like a 'processing fee' or a 'fare lock guarantee'. Webjet not only makes commission on the fare for example, but they might also make another $50 in agent charges and fare lock.

Agents will often be invited on 'invitational' or promotional trips, which may involve a partnership between an airline and/or hotels. The purpose of these trips is for the agents to experience the product. A trip to Bali (for example) may involve multiple hotel stays and hotel visits over a short period of time.

Bona fide agents may also be eligible for 'industry discount' fares, for example an 'ID75' which would be a 75% reduction on the fare. Agents will usually have to have some sort of authorised credentials like an IATA card to be eligible.

Good agents can do things like combine separate tickets into a single PNR (giving protection in the event of disruption). They may have access to put together more complex fares with more sectors than we can achieve on a normal multi-city booking. Or they may have access to special deals, or special hotel and air packages. Whether it's worth it will depend on the fees.

Travel agents are also an agent for the airline, not the passenger.

 

[Deleted member 29185]

Interesting last comment.

Thanks for the insight.

 

[Lynda2475]

Corporate travel is still a good earner for some agents as companies require employees to book through a specific agency to ensure company travel policies are enforced. The employee or if an exec their PA does all the work via a portal and they simply collect a commission. Only occasionally for complicated international itinerary does anyone even talk them.

In the consumer market, apart from some specialist agents who focus on rtw or hard to book regions, i find it hard to see any benefit and havent used one in over a decade, except at work.

However, there are lots of older travellers who dont feel confident using the internet that still want to deal with a real person, and also some lazy ones.

20 years ago when you couldnt book overseas domestic legs online, i remeber sitting in a travel agent and being gobsmacked when a customer came in and said to agent, i want to go to Italy for 3 weeks in July and i have $x, call me when itinerary is done. Agent asked if there were particular cities or places they wanted to see and they were like you figure that out. Talk about blind trust, i cant imagine selecting a destination without having researched what my must sees are to do there.

 

[drron]

We are now customers of 2 TAs-one for airfares,1 for cruises to which will be added some accommodation next year.
However we have a neice who is the manager of a large multi agent group.From her there will virtually always be customers.
Yes she does get promotional trips but also rewarded for her sales figures.
She is also involved in many educational activities for TAs.So yes they can be knowledgeable without having gone to every place in the world.

To Lynda2475-it is a misconception that it is mainly older people using travel agents-they are well off so use them for specific purposes or not really able to afford lots of travel.
My niece's major client base is young professionals.

 

[bertflyer]

I think the cash cow is in the corporate travel world. Most (all?) government agencies and larger corporates require staff to use the designated travel agency, in my industry (higher education) we are also absolutely required to use the corporate travel agent. Over the last 15 years I have had service ranging from superb to utterly useless (across a couple of universities and multiple travel providers). Anecdotally most staff provide the exact itinerary to the travel agent and there is little actual work required beyond booking the ticket and collecting the booking fee ($15 to $150 depending on domestic or international and number or sectors involved). I have yet to be offered a fare that is more competitive than what I can locate on the airlines websites myself.
I do understand though that it would be absolute mayhem if academic staff were allowed to book directly using whatever airline or consolidator website they wished so using a corporate travel agent is some measure of control (particularly for some of our more recalcitrant colleagues)

 

[RooFlyer]

In the consumer market, apart from some specialist agents who focus on rtw or hard to book regions, i find it hard to see any benefit and havent used one in over a decade, except at work.

However, there are lots of older travellers who dont feel confident using the internet that still want to deal with a real person, and also some lazy ones.

Here's one older traveller, who is perfectly internet capable who uses a TA for my overseas travel - and I think there's at least one other on this conversation who is in the same boat (or airplane) .

There has been a couple of threads recently on the benefits of using a TA, so won't repeat them, but they are many, including that they save me soooo much time and hassle in getting things booked, and if necessary, changed. I can do as much or little of the exploring and planning as I like, then hand it over to them for better ideas, then booking etc. If a hotel is cheaper on the internet, I can either book it myself, or they can book it on-line for me, as a no-commission service for a good customer. If you book online you have to pay straight away for flights; with a TA I can defer payment until the rules specify - even have the booking cancelled and re-made, to again defer payment (although I hear the airlines are now cracking down on this).

A good summary by Mel_Traveller, to which I can only add some of the other 'value adds' that my TA at least gets me - they are Four Seasons and Virtuoso accredited, so whenever I'm looking at going up-market, I can look at the freebies and inclusions offered; I imagine the commissions for FS or Virtuoso bookings are higher both in terms of % and absolute $ so both the agent and traveller win.

They have never charged me extra for what they do (and once refused my offer of some payment when they did a huge amount of work for me, then I had to cancel due to unexpected client demands) - they just get commissions from the service provider and from what I can tell, do pretty well out of it.

 

[Lynda2475]

Each to their own but I dont know any young professionals who use TAs outside of work travel, but am sure there are many who just want someone else to do the work. In my experience younger traveller research online and ask for personal recommendations from people who have actually been to the places they want to go.

Even though my time is valuable, id still rather invest my own time and get exactly what i want than rely on a third party to correctly understand my preferences.

A few times I've had agents recommended by friends quote my itinerary and they have never found me better pricing or routing than i could do myself, it has only reinforced for me that self serve is superior.

As commissions on non premium airfares are tiny, most TAs rely on selling over priced travel insurance policies or specific accomodation or tours to make money. Booking yourself means you can avoid the sales pitch.

If you dont want to rely on cc insurance, then there equivalent and in many cases better policies available direct without commission markup.

I prefer to deal directly with the tour operator/provider/hotel too. Most hotels now have best price guarantee for direct bookings and then also throw in extras like food/drink/services. There are huge discounts to be had on tours (day or multi day) going direct, last trip to Hawaii booking directly with boat operator had me paying 40% less than best price any of the booking companies had for my dolphin and night manta ray dives.

To me its a total pain to have call an agent to change a flight, its quicker to do it mself online. For me it creates unnecessary anxiety waiting for someone to call you back, or being on hold while they make changes you cant see.

TAs also often add their own fees and conditions for making changes or cancellation, that exceed what the hotel/tour company charge/require. A friend and i booked the same tour a few years ago. I booked direct, she used an agent. When we had to cancel and rebook for a different date, it cost me nothing as tour company policy was full credit at > 60 days out, my friend was $200 out of pocket.

Paying for an airfare as soon as it is booked isnt an issue for me as i dont spend money i dont have. I book my parents travel for them as i dont want them paying unecessary comissions as they are on a fixed income.

People will do what works best for them, however i believe if you take corporate travel out of the mix, there would be far less TAs still in business.

 

[Deleted member 29185]

I have yet to be offered a fare that is more competitive than what I can locate on the airlines websites myself.

I can only add a recent example of mine, as I rarely use a TA, but a TA obtained an economy tix for me, which was arranged by a large multinational. They paid AUD625 and I could buy it on line right up until departure (or as close as I bothered looking), for AU$299. For an extra AU$100, I could have bought business class (for which I would have been happy to foot the bill). Funny world. Got me wondering how much money is wasted by people wanting for convenience. I wonder how many large companies are being fleeced because they fear being fleeced?

So the agent gets a commission as their only source of income. They must have to sell an awful lot of journeys to pay overheads and then make a decent living. To boost that commission, I guess it's possible for them to sell more expensive fare buckets or do only select buckets open up for them? A few years back, I had a TA get a bit narky with me as I didn't go ahead with a flight I enquired about in a foreign country, but it too was about double what I could get on line. I don't mind paying for a service, but there is a limit to my generosity.

 

[Pushka]

I think TA’s get money for change of mind bookings. Which is why I book some cruises direct with the cruise line.

 

[LadyC]

I would think that the percentage of non-TA users would be much higher here than in the general population. I was surprised to find a colleague in their early 30's using flight centre to book their holiday recently but to each their own. I generally book most things myself as I use points for flights and often access my Citi prestige 4 nights for 3. I have used a TA a few times when I want to book Virtuoso or similar hotels to maximise benefits. In that situation, I generally know exactly what I want and am just looking to utilise that Virtuoso channel.

 

[RooFlyer]

As commissions on non premium airfares are tiny, most TAs rely on selling over priced travel insurance policies or specific accomodation or tours to make money. Booking yourself means you can avoid the sales pitch.

TAs also often add their own fees and conditions for making changes or cancellation, that exceed what the hotel/tour company charge/require.

As I mentioned above, we've had these pros and cons of a TA recently in other threads, and I'm amazed at how little those who profess not to use TAs actually know about what TAs can offer and how they actually operate. But I am talking about 'good' TAs - not the Flight Centre kind. As always, you can choose the quality end or the other end and experiences will probably reflect that. I've have a top-notch, great TA for over 10 years and I can't recall every paying any more materially for something they have booked over if I booked it myself. If they can't match the price via the GDS that I can see, I either book it or they book it for me with my CC and put it into my itinerary. And I can guarantee if something goes pear shaped while on a trip, it will be easier for the TA to fix it up (mine has a 24/7 'emergency' line, manned by the TA on roster) rather than you or me standing in front of an airline counter in Morocco wondering what to do when an important flight has been cancelled. Last time this happened to me (yes, in Morocco), I called the TA (4am in Australia), explained the situation, went and had a coffee and 5 mins later they e-mailed me - all rebooked and sorted, including amendments to hotels. No charge at all from the TA for this - just part of the service.

Have a read here and see if you can find any "over priced travel insurance", extra charges for cancelling etc.

Plenty of bad TAs out there, no doubt, but to ascribe to TAs in general, the sins of a few, isn't valid, IMHO - I know from much personal experience.

 

[Strategic Aviation]

A friend dipped her toe in Flight Centre for a couple of years and won awards and multiple trips, which she enjoyed, but it wasn't financially viable as she wasn't ruthless about commissions and maximising margins. Some of the awards were for the revenue she brought in, but she didn't profit much personally. Others with far lower sale figures (and competency) were able to eke out similar take-home pay.

I have yet to be offered a fare that is more competitive than what I can locate on the airlines websites myself.

I've seen fares available to organisations with purchasing power (many thousands of staff nationally and/or globally) and some are significantly better than what is available on the airline website - especially last minute.

However, there are lots of older travellers who dont feel confident using the internet that still want to deal with a real person, and also some lazy ones.

To Lynda2475-it is a misconception that it is mainly older people using travel agents-they are well off so use them for specific purposes or not really able to afford lots of travel.
My niece's major client base is young professionals.

Some interesting comments in Why I think Flight Centre Travel Group Ltd shares are ready for take-off - Motley Fool Australia (2016):-

However, what was really interesting in the report was how Roy Morgan identified various groups of traveller by their demographic characteristics and their propensity to use one travel agent/tour operator over another (or not at all).

Who would have thought? The Social Flyers group (educated, urban young singles/de factos, with important jobs across the government and private sectors) were the group most likely to have taken advantage of Flight Centre’s offerings in the last financial year.

And the group I thought would have been most likely to have visited a Flight Centre business, the Rural Traditionalists (rustic farmers, empty-nester married-couples with a lifetime behind them in anything from manual labour agricultural positions to managerial/proprietor roles) was actually the group least likely to have used a travel agent such as Flight Centre.

 

[drron]

And when Alan shut down QF those that booked online were on their own whilst our TA had rebooked us before we even knew about it.

 

[Pushka]

And when Alan shut down QF those that booked online were on their own whilst our TA had rebooked us before we even knew about it.

Yes. We were caught out in that. Spent that day - Sat evening from memory - rebooking flights.

 

[opusman]

And when Alan shut down QF those that booked online were on their own whilst our TA had rebooked us before we even knew about it.

Did QF still cover your costs like they did for direct bookings?

 

[Deleted member 29185]

we've had these pros and cons of a TA recently in other threads, and I'm amazed at how little those who profess not to use TAs actually know about what TAs can offer and how they actually operate.

Yep, that would be me, but I started the thread to try to understand the mechanisms of how the world works for those who make money from others travel arrangfements. It was not meant as a "bash" a TA a day type thread. Sorry if it is turning out that way.

Anyhow, we just had another M6.3 earthquake about 1/2 hour ago, so I might go home and see if the haus is still standing!

 

[drron]

Did QF still cover your costs like they did for direct bookings?

Cost us nothing.

 

[RooFlyer]

Yep, that would be me, but I started the thread to try to understand the mechanisms of how the world works for those who make money from others travel arrangfements. It was not meant as a "bash" a TA a day type thread. Sorry if it is turning out that way.

Anyhow, we just had another M6.3 earthquake about 1/2 hour ago, so I might go home and see if the haus is still standing!

No worries, understood. I was worrying about a thread hijack when I was doing my reply.

Was thinking of you actually, when I heard of the recent tremor swarm!

 

[Deleted member 29185]

Yep, we've had 75 quakes in the past 30 days. We've become a bit blasé about them, which is sad really. They're still causing damage, although thankfully, not the scale of the M7.5 of Feb 26 which killed more than 140 people and cost untold millions in damage (death toll still not confirmed and quite likely never will be).

Yesterdays has caused more damage at the power station but my house is still standing although the front door was wide open and not able to close. A bit of bush carpentry last night got the door closing and I even managed to get the lock to work!!