How Do Travel Agents Make Their Money?
When people discover my work involves travel advisors, one of the initial questions they often pose is, “How Do Travel Agents Make Their Money?” Do they primarily rely on service fees, or is their livelihood derived from commissions? Understanding How Do Travel Agents Make Their Money is key for anyone considering using a travel advisor or entering the profession themselves. It sheds light on the income models under which these experts operate.
Historically, the financial structure for travel agents was quite different.
A Short History
To truly grasp how travel agents earn their living today, a brief look at the past is essential. The industry’s financial landscape has seen significant transformation over the decades.
In earlier times, a substantial portion of a travel agency’s income stemmed from airline commissions. As airline tickets were costly, in high demand, and could only be issued by agents or the airlines themselves, they formed the core revenue stream for virtually every agency. Commissions from tours, hotels, and cruise lines were merely supplementary income.
These professionals were truly “agents” in the sense that they acted on behalf of travel vendors, with their revenue tied directly to commissions earned from selling travel products. However, a major shift occurred in the 1990s when airline commissions were drastically cut and capped. This event fundamentally altered the revenue base that travel agents had relied upon for years.
Airlines implemented these cuts primarily because they gained direct access to travelers through the nascent internet and the rise of online travel agencies (OTAs) like Expedia and Booking.com. This left traditional travel agents, who were once highly valued by airlines, needing to rapidly find new avenues for income generation. This challenging period marks the beginning of the modern story regarding how do travel agents make their money.
A Shift in Business Models
With commission structures changing and clients gaining the ability to book travel directly online, agencies faced the necessity to adapt their models for planning and booking travel. The travel agency community navigated a period of significant uncertainty and adaptation for about a decade. Many agencies that couldn’t quickly adjust their strategies were unfortunately compelled to close.
From Storefront to Home-Based
Despite challenges, the industry saw a fundamental shift in operations. While the physical storefront travel agencies that were once common across towns are less prevalent today, there’s a dynamic and rapidly growing segment of agencies operating remotely.
The period following the pandemic saw a considerable influx of new advisors. Referred to by various terms like solopreneurs, home-based agents, or location-independent professionals, this segment, though less visible without brick-and-mortar locations, now represents a significant force within the industry. The predominant agency model has transitioned from the traditional storefronts to the agile, remote operations common today.
Research reports from industry sources indicate this trend clearly. For example, one report found that a vast majority of hosted advisors (96%) and a large percentage of independent advisors (84%) worked from home in 2023. This shift towards remote work has significantly contributed to the accessibility and growth of the profession.
Logo for Travel Edge Network, a host agency supporting travel advisors
The travel agent workforce has seen a demographic shift as well. Industry statistics show a notable change from 2013, when a large percentage of the workforce was older, to 2022, where a significant portion is younger than 55. This indicates a rejuvenation of the profession, partly fueled by the flexibility and opportunities offered by the remote work model. The perceived threat of travel agents becoming extinct has largely faded, with the industry showing renewed growth and adaptability.
Moving to Diversify Income
Beyond the reduction in airline commissions, travel agents encountered another challenge: the introduction of non-commissionable fees (NCFs) by many major cruise lines. As the name suggests, these are miscellaneous fees included in the total price of a cruise but on which no commission is paid to the agent. This means an agent might earn commission only on a portion of the total cruise cost, further impacting their potential earnings from traditional commission sources.
Travel agency business models, whether focused on corporate or leisure travel, have increasingly aimed to become less reliant solely on commissions. This strategic pivot is a response not only to lower commission rates but also to the significant volatility the industry has faced due to events like economic recessions and global pandemics. During crises such as the coronavirus pandemic, travel advisors often worked tirelessly cancelling bookings, arranging emergency repatriations, and staying updated on complex regulations, frequently without receiving any commission income as travel halted.
These challenging periods highlighted the critical need for advisors to diversify their revenue streams to ensure greater income stability. A key solution implemented by many agents to counter diminishing commissions has been to introduce and charge various types of fees. This move has helped agencies reduce their complete dependence on vendor commissions, providing a more stable foundation for their business operations.
So, while commissions remain a component, understanding how do travel agents make their money today requires recognizing the growing role of fees.
The Breakdown of How Travel Agents Make Money
It’s crucial to recognize that the specific ways how do travel agents make their money can vary significantly depending on the type of agency and its specialization. To provide a clearer picture, let’s break down the income streams for several main categories of travel agencies.
How Do Corporate Travel Agents Make Money?
Corporate travel agencies make money mainly from service fees, net/private fares, and from airline commissions.
Airline tickets are fundamentally important for corporate travel agencies, also known as Travel Management Companies (TMCs). When airlines cut commissions, TMCs didn’t stop booking flights; they simply had to innovate to offset the loss in commission revenue. The primary strategy adopted was the implementation of a service fee for ticketing. For example, in 2023, research showed a median service fee of around $60 for international air tickets and $40 for domestic air tickets charged by these agencies.
In addition to these service fees on air travel, corporate agencies earn commissions from booking related services for business travelers, such as rental cars and hotel accommodations, typically earning 8-10% commission on these bookings. Corporate travel agencies generate income primarily through service fees charged to clients, overrides secured from Global Distribution Systems (GDS) and airlines based on volume, earnings from net/private fares, and residual airline commissions, which can range from 0-5% for domestic air and roughly 10-22% for international air, depending on specific airline contracts. If you’re interested in this field, you might want to learn [how to become a corporate travel agent].
The average service fee for air ticketing in 2022 was reported as $39 for domestic air and $63 for international air for agents specializing in corporate travel.
How Do Leisure Travel Agents Make Money?
Following the commission cuts, many travel agencies strategically redirected their focus towards leisure travel products that continued to offer agent commissions. These included vacation packages and cruises, which form the core business for what are now typically considered leisure travel agencies.
Charging a fee helps agents boost a travel agency’s bottom line and compensates them for their expertise.
Generally, leisure travel agents make money from commissions paid by vendors on the sale of vacation packages, cruises, flights booked within packages, and other supplementary services. However, the practice of charging consultation fees and various service fees is becoming increasingly prevalent. This trend reflects agencies’ efforts to diversify their income sources and lessen dependence on supplier commissions alone.
Recent data shows a significant increase in the number of leisure agents charging fees. In 2023, for instance, almost half of hosted advisors (49%) and over two-thirds of independent advisors (67%) reported charging fees, a substantial jump from just 33% in 2017. This highlights a clear shift in the travel agency business model.
Charging fees serves multiple purposes: it enhances the agency’s profitability and ensures that agents are compensated for their time, expertise, and the value they provide in planning complex trips. Some agencies employ a “look-to-book” or “plan to go” fee, an upfront charge for the initial research and planning phase. This fee may be applied towards the total cost if the client books through the agency, or retained if they choose to book elsewhere. Other models include straightforward, non-refundable consultation fees. While [average commission for travel agents] varies, fees provide a more predictable income stream.
For flights booked separately, especially complex itineraries, a service fee is almost standard (median international air ~ $60, domestic air ~ $40 in 2023). But fees are also applied for custom trips (FITs), air-inclusive packages, tours, accommodations-only bookings, and cruises, demonstrating how leisure agents diversify beyond commissions. Many also wonder [why use a disney travel agent] or specific destination experts; their value often justifies a fee structure.
Chart showing top service fees charged by travel agents in 2022 for various services
Some agents have successfully structured their business to earn a large percentage of their income from fees, illustrating the potential of this revenue model.
How Do Travel Agents Make Money with Custom Itineraries?
Not all travelers are seeking mass-market options like large cruises, all-inclusive resorts, or standard group tours. For those desiring unique, personalized journeys built specifically for their interests and preferences, travel agents specialize in creating F-I-T trips (Foreign Independent Tours), commonly known as custom itineraries. Developing these tailored trips is considerably more time-intensive and often involves booking services from numerous different suppliers, some of whom may not pay travel agent commissions.
Agents specializing in custom itineraries typically charge higher consultation, trip planning, and/or service fees to adequately compensate for the significant time and expertise required to design and coordinate these complex trips.
FIT travel agents make money not only through these higher fees but also by potentially marking up net pricing they receive from vendors and earning commissions from the various suppliers they book for the itinerary. The fee structure for custom itineraries is highly individualized, reflecting the bespoke nature of the service provided. For those exploring this niche, understanding fee strategies is crucial.
Exploring how to enter the profession, including understanding different business models like specializing in custom trips, can involve learning [how to get travel agent license] or joining a host agency.
How Do the Big Travel Agencies Make Money?
When discussing the “big players” in the travel agency world, we’re referring to agencies generating tens of millions in sales revenue annually. While there isn’t a strict boundary, these are the top-tier agencies, often considered the top 1% of the industry.
Unlike most smaller agencies that earn commission based on their sales volume tiers, these large travel agencies earn income primarily through commissions plus overrides based on their overall revenue and market share performance.
An override can be understood as a bonus payment from a vendor. When a major travel agency reaches pre-defined sales objectives or successfully shifts market share in favor of a particular supplier, that vendor provides additional compensation beyond the standard commission rate. These valuable overrides can come from various types of vendors, including airlines, GDSs, cruise lines, tour operators, and car rental companies, significantly boosting the agency’s overall profitability.
In Closing
Understanding how do travel agents make their money reveals a dynamic industry that has evolved significantly from its commission-dependent past. Today’s travel agents, especially those operating independently or from home, utilize a hybrid model combining vendor commissions with strategic service and planning fees to build more resilient and stable businesses. This shift ensures they are compensated not just for booking, but for their valuable expertise, time, and the personalized service they provide in navigating the complexities of modern travel.
Knowing how the business side works might even spark an interest in pursuing travel as a career. If you’re considering this path, there are many resources available to help you get started, from understanding licensing requirements to learning about host agency models. Whether you’re planning your next vacation or thinking about a new profession, appreciating the diverse ways travel agents earn their living offers valuable insight into their role and the value they bring to travelers.
