How to formulate a fair service fee

TRAVEL AGENTS should
not compromise on
charging a service fee.
Instead, they should have
a good understanding of
the financial side of their
business, what the costs
are and what is required
to sustain the business in
order to establish a fee that
is fair, says Vanya Lessing,
ceo of Sure Travel. Vanya was
speaking at last year’s Sure
Travel Management Forum
which was held at the Protea
Hotel Fire & Ice! Menlyn from
November 20-22.
“Customers understand that
there are costs and that you
are in business to make a
fair profit,” Vanya said. “Fees
should not be hidden as this
undermines your right to
charge a fair fee and is likely
to damage your relationship
with your customer.”
To this end, Future Proof
Travel Solutions founder
and president, Nolan Burris,
suggests agents adopt a basic
formula when determining a
particular service fee. “When
considering professional fees,
the most important figures
to understand are your costs
per transaction multiplied by
the product type,” he said.
“Only when you know what
it actually costs you to sell
a cruise or tour can you
determine the amount you
should charge.”
The various fees the agency
is responsible for should be
considered, such as fixed
costs like rent, insurance,
wages, taxes, furniture,
computers, he said.
“Agents should set
themselves a revenue return
and work their model around
that return,” he said. “Once
the revenue stream has been
established, they must work
backwards to establish the
various transaction fees that
will give them the revenue that
they are wishing to achieve.”
He also provided attendees
at the forum with examples of
how to use a computer-based
spreadsheet to estimate an
average fee that agents could
charge. He suggested agents
analyse all factors pertaining
to business, such as agency
expenses, non-air sales, nonair
revenue and air revenue to
establish an average cost per
transaction.