COVID-19 has impacted businesses across the board, from restaurants and the service industry, to movie theaters and retail stores, to travel agencies.
Advisors have taken to instituting new business and financial protocols to cope and better prepare for the future, including annual subscriptions and cancellation fees to ensure and protect their income in the future.
“I always charge a 15% cancellation fee,” said Ralph Iantosca of Iantosca Travel in Irving, Texas, on a recent Travel Experts business panel. “This way the suppliers will not control my destiny with their commissions.”
Becky Lukovic of Bella Travel Planning in Alpharetta, Georgia charges a cancellation fee of $300 per person “to cover all costs as well as our time spent on planning and booking travel for our clients.” She said she also plans on implementing a change fee as well “because when a client changes anything we have to start the booking process all over again and our time is valuable."
“I call it 'Loss of Anticipated Revenue' and I make sure my clients know that this is a voluntary and temporary fee structure which will be replaced in the near future by Revised Terms & Conditions going forward,” Maureen Smith of Travel Smith in Bluffton, South Carolina, said on the panel.
Laura Madrid, of Resort to Laura Madrid in Atlanta, Georgia, recently introduced a cancellation fee as “95% of our work is done on the front end a trip, so a cancelled trip, where we do not earn our expected commission, can actually cost us money without a solid cancellation fee in place.”
It’s likely more advisors, whether independent contractors or part of an agency, will add cancellation or planning fees to their business model going forward after experiencing the mass cancellations in March and April due to the global pandemic.
On Travel Market Report’s MasterAdvisor series, Tiffany Hines, owner of Global Escapes, and Jamie Jones, COO of WhirlAway Travel, discussed how to begin charging fees.
To shift to this type of business model, it’s important to effectively present the idea to clients, Hines said.
“We want to be very transparent upfront, we don’t want to waste their time, and we certainly don’t want them to waste our advisors’ time if they’re right off-the-bat not interested in paying a fee. We’ve gotten to the point now where we only have to spend 15-20 minutes with somebody explaining what we do and how we can solve their problem,” she said.
“Because that’s what you’ve got to remember, they’re coming to you because they’ve got a problem, either lack of time, lack of knowledge, or they’re not quite sure of what they could be missing and they don’t want to pull the trigger on their own.”
“There is probably not going to be another opportunity to build a new model going forward,” said Iantosca, adding: “This new business model will not be based on commissions, but rather on our value as travel advisors.” Iantosca has an annual travel subscription model with a certain number of hours per year included based on $250 per hour with a minimum subscription of 20 hours annually or $5,000.
Lukovic has a variable fee program. “Clients can either pay a planning fee per trip, or they can pay the annual $1,000 retainer. My planning fees are dependent on the type of trip we are planning and begin at $100 per person for a basic cruise or tour and move up to the $300-$500 range for custom-designed trips.”
Smith noted that her business model has allowed for "fewer clients, but better revenues. I can devote more time to clients that generate better revenues. I care about my clients and my clients care about me and my business.”
If you’re still on the fence, Hines said to consider this: “Fees are not for bookings, they are for you. Commissions are for the things you do for the suppliers, so if you’re solely working for a commission, what that potentially tells a client is that you may or may not have their best interests at heart. If you charge a fee in addition to the commission you earn on the backend, it lets them know that you’re working for them.”