This is part two of a two part series about the costs and earning potential of travel agencies. To learn about the former, see part one of this series, What Does It Cost to Start a Travel Agency?
So how exactly do travel agents get paid?
In this blog post, we review the primary sources of income for travel agents, as well as discuss the perks of working in the industry, including how to get access to heavily discounted and even free travel opportunities.
Generally speaking, travel agents earn a combination of the following three sources of income:
This is the starting point for travel professionals who want the security and structure of a 9 to 5 desk job.
While salaries vary drastically by experience, location, and other factors dictated by each individual agency, they usually start around $30-40,000 per year (with the higher end of this scale being in major cities such as New York or Los Angeles or Washington, D.C.) and are typically offered to candidates that have at least 2-3 years of travel sales experience.
If you have additional expertise, such as working knowledge of technologies like Sabre or Apollo, you may be able to garner a higher annual salary in the $45-50,000 range.
Sometimes, these salaries will be accompanied by some sort of commission incentive, but because you are already being paid a base salary, your agency will most likely retain the majority of your commissions.
Most salaried roles will also require that you show up to the office from 9 to 5 each day. That said, there are increasingly more remote (e.g. work-from-home) salaried roles available, but these types of roles are usually reserved for proven professionals with at least 5 years of travel agency experience.
While a base salary will provide you with some initial security, in the long term, it ends up limiting your earning potential, because your agency is going to keep the majority of the income you're generating.
For this reason, many travel professionals opt to go the independent contractor route, which not only provides you with the freedom of working when and where you want, but also allows you to retain the majority of your commissions.
These roles are typically remote (e.g. work-from-home) and the compensation is largely based on commission, which is our second source of income for travel agents.
In exchange for bringing them a sale, suppliers will pay travel agencies a percentage of the gross booking, not including taxes and certain fees. While payouts vary by supplier and your agency’s sales volume with that particular vendor, the industry standard starts at 10% of the commissionable rate and can go as high as 40% for certain products.
Generally, travel agencies earn 10% of the gross booking and then arrange some sort of commission split between you (the travel agent) and the agency.
For example, let’s say you book a family of 5 out to Aspen for Christmas.
If the package is priced at $8,500, that means your agency will have $850 in commission to split with you (assuming your agency is earning a 10% commission). With a 70-30 commission split, you will earn a $595 commission on this booking.
Now let's scale this example to an annual income.
If you can book 5 trips like this each month (in other words, one trip per week), that equates to $510,000 in gross annual bookings, which means that you will take home $35,700 in commissions over the course of the year.
Good advisors typically generate $100-250,000 in gross annual bookings within their first year, upwards of $500,000 in their second year, and over $1,000,000 in gross annual bookings from their third year on.
While most commission splits start in the 50-50 range, many hosts agencies will charge independent contractors a registration or affiliate fee that will increase your commission payout to anywhere from 60 to 80% (or even higher), depending on how much of an affiliate fee you are willing to pay.
You can also negotiate a higher commission split as your sales volume increases.
That said, it’s worth mentioning that you typically will not receive your commission from each individual trip until 30 days after the trip has occurred and certain products, particularly economy airfare, are usually not commissionable. In our example of the Christmas booking to Aspen above, you would likely not receive that commission until January, even if you booked the trip in August.
For that reason, many travel agents charge their clients upfront booking fees, which is our third source of income.
3. One-Time Fees
Travel agents provide their clients with a lot value, including saving time, money, and headaches on the road, so it's important that you be compensated adequately for your service.
Preparing accurate and professional travel itineraries takes lots expertise, time, and attention to detail, particularly for certain products like economy airfare, which often pay little or no commission (that said, first class and business class flights often pay generous commissions).
To compensate for this, many agencies charge a ticketing fee of $25 or so for every economy airline ticket issued.
Most good advisors will also charge a flat “Advisor Fee” of $100 to $250 (and beyond) per booking. This is no different than other professionals, such as lawyers or financial advisors, who charge retainers or transaction fees. Consumers are used to this model and will happily pay this small fee in exchange for access to a travel professional's expertise and preferred amenities (such as automatic room upgrades, complimentary resort credits, invitations to exclusive events, and on) that are not available to the general public.
Charging a fee not only weeds out the committed clients from the time-wasters, it also has a significant impact on your bottom line...
If you are booking 5 trips per month, that's equivalent to roughly 60 individual bookings over the course of a year. By charging a $250 advisor fee per booking, you're earning an additional $15,000 per year!
Combined with your $35,700 in commissions, that little advisor fee of $250 per booking adds up to an annual income of over $50,000.
Finally, there is one other source of income worth mentioning…
It is not exactly dollars in your pocket, but it does have an inherent value (especially if you are passionate about travel) and that is access to heavily discounted or even free travel.
4. Discounted Travel
Travel suppliers (e.g. hotels, tour operators, cruise lines, and so on) often offer what are called ‘Industry Rates’ to accredited travel professionals.
These are nothing more than better than public rates that can really add up.
For example, we recently saw a major cruise line offering industry rates starting as low as $35 per day. For that price, you can spend a week in the Bahamas for less than $300!
Not only that, suppliers will regularly invite travel professionals on all-expenses paid trips, known as FAMs (short for "Familiarization”), for the purpose of having travel professionals experience their products first-hand.
In exchange for the complimentary trip, you are expected to conduct site inspections and destination training.
Suppliers will not only cover the cost of the trip, they will typically put you up in the best room in the house, as well as pay for all food, drink, and excursions, because they want to guarantee that you have a great time so you recommend their property when you return home.
As a new agent, you can realistically expect at least one FAM opportunity within your first year, usually to the destination in which you plan on specializing. That said, we regularly see good agents take multiple, fully-comped FAMs each year, especially as they begin to sell more and more of a particular destination.
It is hard to assign an exact dollar amount to the FAM invitations you will receive, but there are many great opportunities out there for strong sellers that can literally add tens of thousands of dollars to your overall compensation.
How do you become a travel professional yourself and start getting access to these perks?
Disclaimer: The details shared herein are strictly opinion and are not intended as legal advice. Consult your lawyer regarding all legal matters when starting a travel agency or becoming an independent travel agent.