Know the definitions of rack and net rates.
Expect to provide the following commissions, or a net rate reflecting the following discounts from your rack rate, when dealing with the international market:
|U.S. Receptive Operator||25-30%|
|Overseas Wholesaler or Specialty Tour Operator||20-25%|
|Overseas Retailer (travel agency)||10-15%|
The U.S. Receptive Tour Operator (RTO) works directly with other tour companies, not the consumer. Examples of this type of company are Rocky Mountain Holiday Tours, America 4 You, AlliedTPro, ATI, etc. They assist Tour Operators by planning itineraries and programs which are wholesaled to the overseas Tour Operators to sell to their customers through retail travel agencies. The receptive operator develops a document called a tariff, which lists all the accommodation net rates and is not for public distribution.
There are three links in this chain (the receptive, the overseas Tour Operator and the travel agent), so each one gets paid 10% for their efforts.
The Overseas Tour Operator (Wholesaler) or Specialty Tour Operator sells his product through retail agencies, so they have to pay the retail travel agent 10% for their selling efforts, and need 10% for themselves. The overseas Tour Operator generally produces a four-color brochure including all tours and product for sale which is distributed directly to the consumer and/or to travel agents. Many operators are transitioning to posting their offering only on their website and have discontinued the production of a brochure.
The Retail Travel Agent is selling the product of the overseas wholesaler or specialty Tour Operator directly to the consumer, and receives 10-15% for his efforts.
How do you know who you are selling your product to, and therefore which commission to offer? Sometimes you have to just ask who is buying your product.
Why offer a net rate? The wholesalers and specialty Tour Operators are promoting your product for you by featuring it in a four-color brochure, and promoting it directly to the consumer. You are not paying for that advertising, other than providing a net rate.
Do not increase your rack (brochure) rates by 20-30% and offer that as your commissionable rate!! If you do this, you can count on never working with that operator again. They can easily discover your rack rates by reading one of the rate cards in your brochure, going to your website or by just calling and asking your front desk or reservations department.
Net rate requirements may differ among the various tour companies, so keep an open mind and listen to what the Tour Operator’s needs are. They will tell you what their commission requirements are, and indicate if negotiations are possible.
You can also establish black out dates when the full commission or lowest net rate is not available, but be honest and up-front about it with the operator. Think about offering better net rates during shoulder seasons or slow periods when you really need the business.
The final rate you quote the operator should include taxes, gratuities, etc. (See Pricing your Product).
You must be prepared to honor the rates you have quoted, even those quoted over one year out. European operators are obligated to provide the rates printed in their brochures, as outlined by the European Consumer Protection Laws.