Originally Posted by
YVR Cockroach
Thanks tor the overview. I guess one can segment the mrket by at least sophisticated vs unsophisticated travellers, and those who have the time, inclination and/or knowledge to research and self-book and those who don't. The ones who will use a TA are the unsophisticated, those who don't have time, inclination and/or skills, and the unsophisticated who don't have the time, inclination and/or skills.
I'm not familiar with U.S. tax laws but won't that be a legitimate business expense/deduction? Looks like it isn't deductible for whatever reason.
So, as always US tax laws are a bit complicated (job security for tax attorneys and preparers!). It is revenue so it is taxed. The TA receives the commission as revenue even if they give it all away. TAs can take limited deductions for gifts and such but it depends a lot on your business model and practices...too many deductions can help get you an audit
Others may know better than me what level might trigger an audit, but I know if one were rebating most of their commissions, it would likely trigger one
As to sophisticated vs unsophisticated travelers, I would add some additional categories (maybe these are actually sub categories):
--Sophisticated travelers who know what they want and can pay for it, but who don't enjoy the planning process (surveys in the industry suggest that online travel planning can average 30 hours of planning per trip--a broad generalization, for sure). They are happy to work with an agent who knows them and what they like and will do all the "busy work" for them.
--Sophisticated travelers who can and do like to book their own but are interested in working with an agent willing to "rebate" some of the commission, saving the traveler some money (Hence, this thread!)
--Millennials who are the fastest growing segment of TA clients. They know how to use the internet, but they would rather spend their time doing something else
--People who like having a TA look out for deals for them. Case in point, when a certain European river cruise started giving out free cruises to doctors, nurses, firefighters, hospital staff, and police...Many people in those categories got a heads up from their TA . Those who booked saved 5 or 6 grand
The more the TA knows you, the more they can keep an eye out for a offer you might otherwise miss.
--People who like having someone who spends all their time watching the travel industry. Checking the Covid restrictions for example. Another case in point, a year before Crystal Cruises went under, some TAs began warning their Crystal clients that there might be financial trouble. We talked clients out of giving Crystal tens of thousands of dollars. Lost commissions, but being ethical and looking out for your clients is good long term business.
Of course, not every TA does these things and the OTA's definitely do not. But not every traveler wants or needs those type of services. To each their own