The unprecedented shutdown in travel from the Covid-19 pandemic has created confusion and, in some cases, tension between advisors and suppliers over commission payments for canceled and postponed travel.
How and when advisors are paid for commissions has always varied from company to company, and the policies have become more convoluted as cruise lines and tour operators have had to cancel trips across the board.
“Suppliers are not paying commission for things that have been postponed, even if they’ve been rebooked at specific dates later on,” said Robert Joselyn, president and CEO of the Joselyn Consulting Group. “For example, if it were a cruise or a tour or something like that and somebody had one coming up in May and they rebook it for January of next year, they’re not going to see the commission until after the client travels next year. That revenue, for the purpose of surviving in 2020, is gone.”
Indeed, while scrambling to help clients get refunds or rebook trips, advisors have watched their expected income dry up or be postponed indefinitely. The uncertainty surrounding commission payments, along with a number of complaints from advisors who lost commissions on canceled trips, prompted ASTA last month to call for companies to pay commissions at the time of booking.
“This support to the ASTA agency community, in recognition of the value they bring to travel distribution, is greatly appreciated during this difficult time, and especially by those small-business members whose livelihoods have been gravely impacted,” ASTA president and CEO Zane Kerby told members at the time.
Most suppliers did relax their change and cancellation policies in response to the global travel shutdown.
Many also instituted commission protection plans, with some promising bonus commissions if travelers agree to take future travel credits or reschedule rather than cancel. Some also, at least at the outset of the crisis, paid commissions on refunded bookings.
But those policies have been changing as fast as companies’ expected travel resumption dates. Some of the companies that were paying commissions on all canceled travel have been moving away from that, saying such policies were not sustainable with an extended shutdown looming.
In recent weeks, many of the more generous commission payment policies have been amended to commission protection plans and bonuses that pay only on travel credits and rebookings.
Daniela Harrison, a travel consultant at Avenues of the World Travel in Flagstaff, Ariz., said that “the difficult part is that all cruise lines have their own policies, and they are changing almost daily.”
She said that in many cases, cruise lines “are actually cutting our commission in half or even less by issuing FCCs [future cruise credits] for clients to use on their next trip. We don’t have our commission protected on the original departure, and once the FCC is applied, we only get commission on the base fare difference.”
Angela Rice, co-founder of Boutique Travel Advisors in Paradise Valley, Ariz., said that when cruise lines and tour operators offer clients future travel products, it protects the commission but delays it, since commission payments are usually tied to the travel dates, which are being significantly and sometimes indefinitely delayed.
“For example, some future credits are being extended up to 24 months,” she said. “This offers flexibility for the consumer, but it’s a significant wait time for the travel advisor.”
Marc Hayes, president of Cruise Elite in Ormond Beach, Fla., said that the main challenge comes from clients canceling prior to final payments.
“At this juncture, commissions are not protected. We are losing our future income stream,” he said. “Consumer confidence in the cruise line industry is at a low mark. Many consumers wonder whether some of the cruise lines will even be around in the future. Cruise lines and suppliers should extend final payment due dates to instill further public confidence. We have been in business for over 15 years and have weathered the recession; however, we are in uncharted territory now.”
Indeed, Joselyn said he has had hundreds of conversations with travel advisors in recent weeks, and chief on everyone’s mind is getting cash into their business to pay employees, rent and bills.
That isn’t limited to travel agencies, though, Joselyn said. Suppliers, too, are concerned with cash flow.
“People are saying that they’re seeing commissions that are due them for past travel coming in slower than they were, and certainly the other thing they’re concerned about are [instances] where they’ve booked past travel and are due commissions” and a supplier goes out of business, he said.
Jamie Biesiada and Nancy Trejos contributed to this report.