In the past, travel agents made money from commissions from airlines and hotels. And while this is still a key revenue source for travel agents, the increasing prevalence of online booking has made them look for new sources to diversify their income. So, how do travel agents make money today?
Below, we explain the different ways in which independent professionals and online agencies generate revenue in the ever-changing travel industry. By understanding the rewards that come with taking on the role of a travel agent, you will gain insight into this often-overlooked career path and how it could fit into your own life goals.
How Do Travel Agents Work?
Travel agents work to provide their clients with a stress-free and personalized travel experience by taking care of all the details and providing expert advice and support. Travel agents can work independently or for travel agencies.
The key role of a travel agent is to assess their client’s needs and make the necessary recommendations and arrangements based on them. Services provided by travel agents include:
- Consultation – Determining the client’s travel needs, budget, and preferences. This includes asking questions about the purpose of the trip, the desired destination, preferred travel dates, accommodation preferences, and any specific requests or requirements.
- Research – Identifying the best travel options available for the client (flights, hotels, rental cars, tours, and activities).
- Booking – Making travel arrangements on behalf of the client.
- Confirmation – Verification of all details related to the booking, including providing the client with the necessary information, such as flight times, hotel reservations, and tour details.
- Follow-up – A travel agent may provide advice on travel visas, travel insurance, packing tips, and other travel-related issues.
How Do Travel Agents Get Paid?
The most common way a travel agent gets paid is from commissions from airlines, cruise lines, or tour companies for packages sold. The commission rate varies depending on the type of travel and the agreements with travel providers.
Additionally, travel agents get paid a fee by their clients for their services. The amount of the service fee is entirely up to the agent and is related to the type of services provided. Typically, it’s charged for arranging some or all segments of the travel.
If the travel agent is employed by an agency, then just like any other employee, they’ll receive a salary or hourly wages.
Net price overages are also an option for many agencies. So, for instance, if an agent books a certain number of hotel rooms, the vendor gives them a discount which is then marked up, and the difference is kept by the agency.
Some travel agents may also earn additional revenue by offering travel insurance or upgrades to accommodations or transportation.
Travel Agent Business Model
The simplest way to describe the business model of travel agents is to go by the main source of income. Based on this, there are two types of business models:
- Commission-Based
The commission-based business model allows travel agents to earn a percentage of the total cost of a travel package, such as flights, accommodations, and activities. Depending on whether the package is domestic or international, travel agent commissions may be as low as 5% or as high as 20% or more.
- Service-Fee-Based
In a service-fee-based business model, travel agents charge their clients a service fee for their expertise or assistance in planning a trip. If the travel agent is in the role of an advisor, they may recommend a popular destination or deal on a specific trip.
Alternatively, they may provide help for any given element of the trip, from booking a hotel room or flight to booking a spa treatment. The fee charged can be a flat rate or a percentage of the total trip cost.
It’s important to note that with the rise of online booking platforms, the travel industry has become more competitive, and many travel agents use a combination of commission and service fees, plus access to exclusive deals and pricing. This way, they’re able to offer their clients a unique and personalized experience while staying competitive in the market.
How Travel Agents Make Money
Here are the most common ways travel agents make money.
1. Travel Insurance Sales
Travel insurance is essential to ensure your trip is protected in case of any unexpected changes or emergencies. Travel agents can sell insurance policies for their clients, which provide coverage for things like flight cancellations, lost luggage, and medical expenses. Depending on the policy sold, agents can earn up to 40% in commission.
2. Cruise Sales
Travel agents may receive a high commission or bonus on cruises based on the number of rooms booked by their clients. Typically, the commission rate for cruises is around 12%. This is because a large number of passengers are required to fill a ship.
Note that a significant portion of clients’ bills is taxes. For instance, a booking for cruise berths priced at $4,000 might include taxes amounting to $1,500. When booking cruises, agents earn commissions only on the portion of the cost that is not taxed.
3. Car Rental
Depending on the car rental agency, agents may earn between 8% to 10% commission on bookings. Other travel agents charge a flat fee of $20–$40 for making the reservation with the car rental company.
The car rental industry is highly competitive, so the key here is for travel agents to establish relationships with different companies and shop around for the best rates for their clients.
4. Tours
From visiting vineyards in Tuscany to exploring the rainforest in Costa Rica, tours are an excellent way for clients to get the most out of their travels. Agents can earn commissions ranging between 10% and 20% when they book a tour package and may also receive incentives such as free rooms or discounts on future trips.
5. Premium Listings
Car companies, airlines, and cruise lines pay handsomely for premium listings on travel agents’ sites. This gives the company more visibility and may help them generate more revenue. Typically, agents negotiate a commission for booking trips with these companies or charge a flat fee for providing access to the website.
6. Vacation Packages and Deals
If a travel agent is employed, they can use the buying power of their agency to get discounts and special offers which they can then pass on to their clients in the form of reduced hotel rates, exclusive deals, and other incentives. Usually, the commission rates for booking vacation packages range between 10% and 15%.
7. Niche Travel
Focusing on a niche area can be highly profitable for travel agents because it allows them to refine their expertise and cater to clients seeking a specific type of trip, like wedding and honeymoon or sports travel.
Some agents have two distinct branches of their business. The first covers travel to various destinations worldwide, while the second specializes in a particular theme like yachting, wine, or culinary adventures. For instance, an agent could sell packages for resorts and cruises while also organizing unique wine or food-related trips.
8. Mode of Travel
Vacationers have options beyond just using traditional modes of transportation like planes, trains, and cars. For instance, they can choose to explore an area by cycling from one spot to another. It’s the agent’s responsibility to arrange the logistics of the trip, from transportation to the actual adventure.
9. Corporate Travel
Many travel agents make their money by organizing custom trips for corporations. From organizing team building, corporate retreats, or special rewards trips, corporate travel is an excellent source of revenue and provides the opportunity for the agent to make long-term relationships with companies.
Travel agents may be paid an hourly fee for their services and/or a commission on airline tickets, cruises, and hotels and resorts. They could also receive incentives to book certain properties or activities, such as golf courses or spa treatments.
How Much Do Travel Agents Make Per Booking?
A travel agent’s commission may be as low as 5% or as high as 30% and depends on various factors such as the type of booking, the element of travel, and the vendor they book with. In addition to commissions, travel agents’ income can come from other sources, such as service fees.
For example, if a travel agent earns a commission of 10% on a $2,000 booking, they would make $200. However, if the booking is a complex itinerary, such as a multi-country trip, and the travel agent charges a service fee of $200, their total income from that booking would be $400.
Do Travel Agents Get Paid Hourly?
Yes, travel agents can be paid by the hour, and it’s a more common type of compensation for travel agents who work for larger agencies. The average hourly pay of travel agents in the US currently stands at $17.71 and goes as high as $28 per hour in states like New York, California, and Nevada.
However, travel agents are typically compensated in different ways, and their pay structure may depend on the company they work for and the type of travel they book. And while some are paid on an hourly basis, most receive a salary or are paid on a commission basis.