As the hospitality landscape undergoes significant transformation, the need to adapt revenue management strategies and analysis to waning hotel commissions has never been more critical for travel agents.
In its most recent report, Onyx (a payments company that focuses on improving the payments process for travel agents, hotels and others in the hospitality space), says that while hotel average daily rates (ADR) have been on the rise, commissions paid to travel management companies per commissionable room night (CPCR) remain static. This indicates a growing disparity between the revenue hotels generate and the commissions earned by TMCs.
Several key factors have influenced this change.
Online booking platforms like Booking.com and Expedia have made it easier for travellers to research and book accommodation. This directly impacts commission earnings.
Hotel groups are actively developing and improving mobile apps to enhance direct customer engagement and offer personalised recommendations.
Hotel groups are increasingly incentivising direct customer bookings through their websites or mobile apps, offering exclusive rates or loyalty programme benefits.
Social media platforms like Instagram and TikTok have become powerful marketing tools for hotels, allowing them to showcase their properties and engage with potential guests.
Marelise Stehlik, Marketing Executive for BON Hotels, told Travel News that commissions were a significant expense in the industry and would always be a topic of debate.
“The partnerships we forge with our agents remain invaluable. The 10% commission structure stays consistent, but as room rates increase, so does the absolute value of the commission paid. A higher room rate results in a higher commission amount.
“We recognise that inflation impacts every business differently, and we urge our agency partners to explore innovative ways to boost revenue. It’s clear that paying for service is standard practice, therefore it’s time to consider shifting the cost of using an 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: “Calculating commission revenue is extremely important. It is a large chunk of how travel agents earn money. They need to be looking at sales percentages, gross commissions and overrides. Traditional commission revenue is declining in the hospitality industry. At Giltedge we have adjusted our revenue stream by focusing on service fees, and how we charge them.
Recouping commissions
“At Giltedge we actively track commissions. Some hotels send us a breakdown of earned commissions every month, we invoice, and they pay us. Or we track which suppliers pay commission and then pull reports in Quicktrav to calculate and claim the commission monthly.
“In order to maximise commission possibilities, we also ensure that our consultants book with suppliers or hotels that offer the maximum commission.
“We negotiate and collaborate with hotels or other travel suppliers who can create mutually beneficial relationships and potentially secure better commission rates. Preferred supplier agreements are critical to better commission rates.
“We charge higher service fees where commission is too low. By understanding these trends and implementing effective strategies, we can forecast our revenues more accurately without upsetting the balance of our supplier relationships,” said Saunders.
Tracking delinquent commissions
In practice, hotel commissions can take anywhere from 60 days to many months to materialise. It’s a worldwide 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. This is with a view to the list being used as an accountability tool.
Some travel agents asked by Travel News said they spent many unproductive hours tracking commissions owed and some even paid another party to track unpaid commissions.
Technology can help. TACS (Travel Agency Commission Settlement) is a software platform designed to streamline the commission payment process for travel and hospitality businesses.
Onyx is another tech solution that can integrate with various travel management systems to streamline payment processing for hotel bookings and other travel services, which assists travel agents to reconcile payments and track commissions more efficiently.