How does a travel agency make money?

Written by keith evans Google
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How does a travel agency make money?
Travel agencies generate revenue in several ways. (Comstock/Comstock/Getty Images)

When a customer approaches a travel agency to schedule and book travel, she expects to get excellent travel prices with little or no planning and preparation. The travel agency accepts the customer's business and begins researching travel rates and booking appropriate offers. For each offer booked with partner airlines, cruise lines and rental car agencies, the agency providing the service offers a commission to the agent in exchange for the customer's business. At the height of travel competition, these commissions reach as high as 30 per cent of the rate paid by the customer, or £19 on a £65 fare. Poor economic conditions can largely restrict the commissions to a flat 10 per cent, however, and reduce the amount of profit received by the travel agency.

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Commissions

When a customer approaches a travel agency to schedule and book travel, she expects to get excellent travel prices with little or no planning and preparation. The travel agency accepts the customer's business and begins researching travel rates and booking appropriate offers. For each offer booked with partner airlines, cruise lines and rental car agencies, the agency providing the service offers a commission to the agent in exchange for the customer's business. At the height of travel competition, these commissions reach as high as 30 per cent of the rate paid by the customer, or £19 on a £65 fare. Poor economic conditions can largely restrict the commissions to a flat 10 per cent, however, and reduce the amount of profit received by the travel agency.

Rebates

Some larger travel agencies that agree to work exclusively with certain travel partners also receive income in the form of travel rebates. When a customer books travel though the agency--and the agency, in turn, books the fare with the travel provider--the agency charges the customer the lowest travel fare available at the time of booking. If the rate should drop later, however, the airline forwards a rebate to the travel agency--which may or may not be passed on to the end user. If the agency agrees to pass on the rebate savings, the customer receives a rebate check from the agency itself; if the agency doesn't pass along the savings, it pockets the rebate as additional profit.

Fees

Though most agencies continue to work entirely off travel commissions, economic conditions can force some agencies to charge customers for their services. Marked as "booking" or "convenience" fees, these fees are designed to compensate the travel agent for the time spent researching and booking travel.

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