The American Society of Travel Advisors (ASTA) is calling for changes to be made in the agency compensation system, namely the need to revise the timing of commission payments.
“To say that the unanticipated events of 2020 have caused disruption to travel advisors and the travel industry as a whole would, obviously, be an enormous understatement. Due to the practically universal dependence on commissions generated from the sale of travel, the near-total shutdown of travel worldwide as a result of the COVID-19 pandemic has, in particular, wrought an existential crisis on travel agencies of all sizes,” said Peter N. Lobasso, senior vice president and general counsel for ASTA, in an open letter.
Although the current system has worked “passably well” with a strong economy, few cancellations and a steady demand and bookings, the current climate has shown “the shortcomings of the status quo.”
Lobasso does note that “there are some glimmers of hope” around travel—specifically, the U.S. Centers for Disease Control and Prevention (CDC) recently lifting its “No Sail Order” and positive news regarding several successful clinical trials of a vaccine— although, he adds “the prospective optimism is tempered somewhat in recognition of the fact that full economic recovery of the travel agency industry will almost certainly lag the recovery of the travel industry as a whole by months, if not a year or more.”
In a survey by ASTA conducted earlier this year, 62 percent of respondents said they expected business income to lag the return of travel bookings by at least six months. This, Lobasso says, “is because in many cases travel suppliers—hoteliers, cruise lines, tour operators, airlines and the like—do not issue full commission payments to the booking agencies until their clients have actually completed their travel.” This means a sale made today often generates no immediate income for the agency. “Worse,” he adds, “should the previously booked client decide for whatever reason to not travel and elect to cancel the trip, in many cases the commission is lost entirely.”
Another issue Lobasso points out: “While new business and the revenue associated with it has come to a standstill, the work has not.” Many ASTA members, he notes, have been “busier than ever” this year, “working around the clock to accommodate clients whose plans were unexpectedly disrupted and, in many cases, needed assistance with itinerary changes or securing refunds from suppliers.”
The reason for the current model, Lobasso says, is that “suppliers may feel that it is necessary to protect themselves should a chargeback or other dispute with the traveler arise.” That risk, he says, “should [instead] be borne by the supplier and not the advisor who has already rendered the compensable service and has little if any control over his or her client’s conduct after the booking.”
While expressing “our sincere appreciation” to suppliers who already offer a timelier commission structure, Lobasso concluded by saying: “We call on all travel suppliers to review their existing agency commission structures and where necessary implement appropriate changes to more timely and fairly compensate advisors for the valuable services they render.”
He continues: “While payment upon booking would be ideal, ASTA believes commissions ought to be (1) paid no later than 14 days after the date of receipt of full payment from the traveler and (2) not subject to recall should travel be canceled for any reason not attributable to the acts or omissions of the advisor.”