How Do Home-Based Travel Agents Make Money?

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travel-agents-make-moneyI’m often asked, “How do travel agents make money?” It seems like a simple enough question and I bet you think you know the answer. But read on. Some of the ways home-based travel agents – the smart ones at least – earn money may not be quite so obvious.

The Obvious Ways Travel Agents Make Money

The most obvious way a home-based travel agent, or any travel agent for that matter, makes money is through commissions on sales the agent has generated.

For many home-based travel agents that means a SHARE of the commission earned, since the home-based agent has a working relationship with a “host agency.” The host agency affiliation gives the home-based independent contractor a certain credibility and makes it possible (or at least easier) for the home-based agent to earn a commission to begin with. In exchange for this and for other services rendered, the host agency takes a split of the commission.

There is nothing wrong with this arrangement and, as I explain in the Home-Based Travel Agent Success Course, it is actually possible to make MORE money by splitting a commission than would otherwise be possible.

The trick – or maybe I should say the essential business strategy – is to make sure you are getting the best possible, most favorable commission split and that the host agency isn’t hiding behind clever legalisms in the contract to pay you less than is rightfully yours. There are many ways to insure you are maximizing your commission income in a host agency relationship. Smart home-basers make sure they know them all.

So another, slightly less obvious way, you earn money is by picking the RIGHT host agency to begin with. That means having extensive, detailed knowledge of the marketplace. And that takes persistence, time, effort, and money. I have identified and analyzed over 300 host agencies with policies and commission splits that vary widely.

Of course, you don’t always have to share your commissions. I teach my students the quickest, cheapest way to get their own IATA number (or other unique industry identifier) so they can deal with suppliers on an equal footing with the “big boys.” Of course, there are plusses and minuses to this approach. Smart home-based agents know the ins and outs and can pick and choose which strategy to use in which situation, always with an eye on maximizing their income.

The Less Obvious Ways Travel Agents Make Money

If commissions are obvious, then fees take a little getting used to. Fees became a “hot” topic for the traditional travel agent community when the airlines started cutting, capping, and eventually eliminating base commissions. Whether fees make sense for most home-based agents, is another matter. Those who take my advice do very little business with the airlines anyway. When they do sell airline tickets, they do so in such a way that they make good money without having to rely on the airlines.

Still, there are times when home-based agents charge fees and their clients are happy to pay them. And they have nothing to do with airlines. To take just one example, many clients recognize the value of someone who can make hotel reservations in a foreign language. Think about it: would you be willing to pay a reasonable fee for someone to make a reservation in a charming ryokan (Japanese traditional inn) that would remain forever undiscovered by those who weren’t fluent in Japanese?

japanese roykan

A Japanese ryokan

Many creative home-based agents earn money by selling their specialized knowledge and expertise –- knowledge and expertise that people typically can’t get from the run-of-the-mill storefront agency.

Yet another less obvious way that the smart ones among us make money is through the age old method of buying low and selling high. Not every travel product is sold on a commission basis. In many instances, from airline tickets to tours, a travel agent can purchase the product at one price (which the customer doesn’t know) and sell it at any price she or he wishes. In effect, you set your own commission when you adopt this strategy, which is referred to by a variety of terms including “merchant pricing,” “the distributorship model,” and so forth.

A good example of this is consolidator tickets. If you know where to look, you can buy a $1,000 ticket for $800 and sell it for $900. You’ve made more than 10%, the customer has saved 10%, the consolidator has made some money, and everyone is happy –- except maybe the airline, which may be wondering why they were so eager to cut travel agents off at the knees.

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Ways You Might Not Have Guessed

Can travel agents make money without selling anything? Well, yes and no.

Let me explain.

I believe that one of the most important money making activities in which successful home-based travel agents engage has nothing to do with selling itself. It has to do with the design of their travel business and the strategies they choose to implement.

One way smart travel agents make money is by specializing. In a way, it doesn’t matter what they specialize in, just so long as they specialize in something.

My thinking goes like this: If I have a specialty, then I am going to have better product knowledge, better contacts with suppliers in my specialty, better commissions (based on selling more), a better confidence level in my ability to market and sell within my specialty, and whole lot of other “betters” that I can’t even think of right now.

tourist-indiaNow of course what you specialize in does make a difference. Let’s say two immigrants from India decide to become home-based travel agents. One decides to specialize in selling cheap, cheap airfare to New Delhi to other Indian immigrants on the theory that a lot of them want to go home to visit every year. The other also decides to specialize in travel to India, but with a difference. This agent will specialize in selling cultural and recreational tourism to NON-Indians who want to discover the delights of this charming country and to prosperous second-generation Indians who want to get in touch with their roots.

Which one do you think has a better chance of success? Which one will make more money? I know which one I’d bet on.

There are many different ways to specialize, but even without becoming a dedicated specialist you can still be smarter in choosing what to sell. It doesn’t take a PhD in math to figure out that selling cheap travel (like point-to-point coach airline tickets) with small (or no) commissions is less likely to produce significant income than selling high-ticket travel (like cruises and specialty tours) with generous commissions.

You can even make money by being choosy about whom you sell to! Do you want to concentrate your time and effort on people who are constantly asking you to lower the price, or give them a rebate, or offer them free restaurant and sightseeing advice just for the “privilege” of selling them the cheapest airline seat? Or would you prefer dealing with people who appreciate your expertise and who are more than happy to put their vacation in your hands, knowing that you’ll provide them with an unforgettable experience?

This discussion has just scratched the surface, but hopefully you get the idea: a home-based travel agent makes money in many different ways, by making a lot of separate business decisions, and making the right ones again and again.

If you’d like to learn more, all these strategies and more are covered in the Home-Based Travel Agent Success Course.

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How Do Home-Based Travel Agents Make Money? was last modified: October 22nd, 2015 by Kelly Monaghan