Deal With Rebate Requests
by John Hawks

article continued

Along the way, though, more agents have continued struggling with another challenge: resisting requests from their clients to share or rebate commissions!

It’s one of the worst kept secrets in the travel industry: A growing number of agents give a portion of their commissions to their clients to reduce trip prices and to encourage those consumers to book their trips with these agents. These “rebates” can range from a slight share of the commission on a given trip to the full base commission (with the agent retaining the overrides). And, they can take many forms – from actual cash rebates to larger-than-usual gifts or onboard and resort credits.

Since the travel agency community relies on tiny margins already – five to 15 percent commissions, on average, for the typical trip – many agents say these rebates undermine legitimate travel sellers by making it much tougher to earn a living and stay in business. And, more travel suppliers now realize that rebating hurts their image in the marketplace by focusing buyers strictly on the lowest possible prices, not the competitive advantages of their products.

In its most basic form, rebating commissions is not technically illegal, in that agents who share their commissions with clients are not breaking federal or state laws in many instances. However, this practice does violate the sales agreements and policies enforced by many leading suppliers, particularly cruise lines and major tour operators. Suppliers have the legal right to establish and enforce rules that discourage rebating – typically, by prohibiting agents from advertising or promoting lower rates than other agents by using rebates (e.g., selling a $1,500 tour for $1,425 by giving consumers half of the agent’s 10 percent commission).

In today’s tough economy, you may be tempted to offer rebates (or to give in to demands by savvy consumers who realize you might be pressed to split commissions with them). Think about the impact of giving up commission dollars on your bottom line – and, remember that (once you start rebating) the practice is hard to stop!

Also, you should check the fine print in the sales policies and agreements enforced by your preferred suppliers. If you violate these rules by splitting commissions with clients, you could incur penalties from these suppliers or even lose the right to sell their products.

What if you’ve decided not to rebate commissions, but you’re competing with other local agents who are sharing commissions with clients? This situation is a tough one, because it may be difficult to prove that the practice is going on (and, many suppliers may not want to get involved in what’s viewed as a competitive battle between two agents). Your best approach may be monitoring these agents’ ads, Web sites, flyers, and other marketing materials to see if they are offering unusual discounts on the base prices that could only be possible if they’re rebating commissions. In these cases, you can forward these materials to the suppliers operating these trips, and you’ll find a growing number of suppliers eager to follow up and stop these practices.

(Credits: Makaristos; Flaviac; Hibatallah Badreddine; Cezary P)