The coronavirus pandemic aimed a spotlight on a travel advisor compensation system that, for decades, went unchallenged until, rather suddenly, it was. Retailers today are calling for suppliers to pay travel agencies commissions earlier than ever before.
And equally suddenly, some suppliers have stepped forward to do so, with promises of impending change from others.
While the pandemic brought about this change, many agencies are hopeful they will last far beyond Covid-19.
Traditionally, commissions have been paid out at the time of, or soon after, a client travels. But travel came to a grinding halt earlier this year and with it travel agency revenue.
Work, however, didn't stop, and agents worked long days rebooking and canceling travel with no pay. Protected commissions, notably from cruise lines, helped break the fall, but even when rare new bookings were secured, commission payments could be years off.
To address the problem, some suppliers got creative, offering early-pay commission opportunities, a trend that seems likely to continue in 2021.
Notably, last summer, the Globus family of brands said it would pay commissions when a client pays.
More and more suppliers are coming on board, reported Alex Sharpe, president and CEO of Signature Travel Network and a vocal advocate for earlier pay.
Many are smaller destination management companies and in-country destination specialists, but he said he believes more suppliers will join their ranks, including a publicly traded U.S. cruise line which, Sharpe said, has assured him they will institute an early-pay program.
The bigger question is whether early-pay programs will outlast the pandemic.
Sharpe believes they will. "I think this is one of those seminal moments in our industry," he said.
Such policies do bring risks for suppliers. If a client cancels and a travel agency isn't cooperative in returning the early compensation, a supplier might have to spend considerable energy to recover the money.
To reassure suppliers, Signature guarantees the return of commission from any of its members who might balk. The arrangement gives Signature a competitive advantage over smaller organizations or independent agencies that might try to negotiate a similar deal but can't afford the guarantee.
Sharpe said any risk for the supplier is offset by reward. Many advisors, he said, will shift market share to suppliers willing to pay them earlier in the process.
And under current circumstances, suppliers who have over the years become dependent on advisors to provide the highest margins of any distribution channel have a vested interest in their survival.
Avoya Travel says the agency value is significant enough that it is asking suppliers to sign on to its Instant Commission 2.0 program. Co-president Jeff Anderson said the host wants suppliers to pay two commissions: a booking commission at the time of booking, followed by a departure commission once the client has traveled. The booking commission is nonrefundable.
At least one supplier is on board, Anderson said.
ASTA has been vocal in favor of changing the way agencies are paid, as well. Last month, the Society's senior vice president and general counsel, Peter Lobasso, issued a formal call for suppliers to move forward with advance commissions.
"We express our sincere appreciation to those suppliers whose commission policies reflect this more equitable structure," Lobasso wrote. "And for those who do not, while we certainly acknowledge the impact of the pandemic on our supplier partners, we hope that our call will be viewed as an opportunity to work together to achieve a mutually beneficial new solution."