Travel agents are under increasing pressure to adapt their revenue management strategies to the dwindling hotel commissions. In its latest report, Onyx, a payments company focusing on improving the payment process for travel agents and hotels, says that, while hotel average daily rate (ADR) has been on the increase, commissions paid per commissionable night (CPCR), to travel management companies, have remained static. This indicates that there is a growing difference between the revenue hotels produce and the commissions TMCs earn.
Several factors have influenced the change
Booking.com and Expedia, online booking platforms, have made it easier to research and reserve accommodation for travellers. This directly impacts commission income. Hotel groups are actively developing mobile apps that will enhance direct customer engagement, and offer personalised suggestions.
Hotels are increasingly offering special rates or loyalty program benefits to direct bookings made through their mobile apps or websites. Social media platforms such as Instagram and TikTok are powerful marketing tools that allow hotels to showcase their properties, engage with potential customers and market themselves.
Travel News spoke with Marelise Stehlik of BON Hotels. She told them that commissions would always be debated in the hotel industry. The partnership we create with our agents remains invaluable. The 10% commission structure remains constant, but the value of the commission increases as room rates rise. A higher room price results in a greater commission amount.
We acknowledge that inflation impacts each business differently and urge our agency partners explore innovative ways to raise revenue. It’s obvious that paying for services is standard practice. Therefore, it’s time to shift the cost of using a travel agent to the guest rather than the property.
Travel News spoke to Lara Saunders, General Manager of Sure Giltedge International, to find out how Giltedge is managing and adjusting commission revenues to these changes.
Saunders explained that:
“Calculating the commission revenue is very important.”
Travel agents make a lot of money from commissions. They should be focusing on sales percentages, gross profits and overrides. The hospitality industry is experiencing a decline in traditional commission revenue. Giltedge has adjusted its revenue stream to focus on service fees and how they are charged.
Recovering commissions
At Giltedge our commissions are tracked actively. Some hotels send a breakdown every month of the commissions earned, we invoice, and then they pay us. We can also track which suppliers pay commissions and then use Quicktrav reports to calculate and claim commissions monthly.
In order for our consultants to maximize commission possibilities, we ensure that they book with suppliers or hoteliers that offer the maximum possible commission. We negotiate with hotels and other travel suppliers to create mutually beneficial relationships that can potentially lead to better commission rates. Preferred supplier agreements will help you get better commission rates.
“We charge higher fees when commissions are too low.”
“By understanding these trends, and implementing effective strategy, we can forecast revenues more accurately without upsetting our supplier relationships,” Saunders said.
Tracking delinquent commissions
In practice, it can take from 60 days to several months for hotel commissions to be paid. This is a global problem. In fact the American Society of Travel Advisors (ASTA) has published a list of companies that pay agency commissions within 30 days of the published contracted final payment date set by the supplier. The list is intended to be used as a tool for accountability.
Travel News asked travel agents about their time spent tracking unpaid commissions. Some even paid a third party to do the job. Technology can be helpful. TACS is a software that streamlines the commission payment process.
Onyx, another tech solution, can integrate with different travel management systems. It streamlines payment processing for hotel reservations and other travel services. This helps travel agents reconcile payments and track their commissions.
