Working with motels and smaller tourism operators I often have discussions with them about paying commissions. Back in time forgotten, a now unknown sayer spread a story about the evil in paying commissions. And now the universally accepted tourism industry distribution network is left to slowly spread the story of the good in paying commissions.
Tourism has a Distribution Network
I hate to start with tourism 101 but like every industry that exists, the tourism industry has an accepted distribution network. This includes but is not limited to: consumer to supplier, consumer to retailer to supplier, consumer to retailer to wholesaler to supplier. This distribution network has a marketing expense for every component, regardless of how the consumer ultimately purchases from the supplier.
Commissions are a Marketing Expense
From the resistance I have heard to commissions, it appears that the barriers go up based on how a business records the commission in their financial accounts. Resisters will say that paying commission is a simple reduction in revenue. However all revenue received has a cost through the marketing undertaken to achieve that revenue. Different sectors of the tourism industry will have different benchmarks for what is an acceptable 'overall' marketing expense as a percentage of 'overall' revenue. Some marketing efforts will cost more than others and the resulting revenue will also vary, but ultimately an accommodation provider, for instance, could be accepting of a marketing expense at 10% of 'overall' revenue.
Accept that there is a distribution network for tourism as with every industry and that distribution has a marketing expense and we are well on the way to having a cohesive distribution system for the tourism industry.
The Good in Commissions
An accommodation provider will have their product advertised and promoted through media, many and varied. This advertising and promotion has a cost. An advertisment in a regional publication is a good strategy and these advertisements generally have a very high cost, sometimes as much as $4,000. Now while this is probably a good use of the marketing budget, the accommodation provider is often unaware of how much revenue has been derived from this advertisement. Asking where you heard about us is good but it's not fool proof.
Commissions, unlike any other form of distribution and resulting marketing expense, have the beauty of no revenue - no marketing expense.
If the marketing budget was to blow out as a percentage of revenue, the accommodation provider can be guarenteed that this is not due to paying commissions. No matter how many rooms are sold, at whatever price, the commission will always maintain an acceptable percentage of revenue as a marketing expense.
Consumers Embrace the Distribution Network
Consumers will surf the net and contact an accommodation supplier directly and make a booking. There are still consumers that don't use the internet and want to talk to an agent who will make the booking for them. Consumers will read about accommodation in brochures and book direct and others will want further information from an agent. This is the tourism industry distribution network in full swing.
When the agent contacts an accommodation supplier on behalf of the consumer, this is the agent acting as an ambassador, giving a voice of acknowledgement, that the accommodation is suitable for the consumer's needs. Every business in every industry wants and needs these ambassadorial spokespeople spreading the good word about them.
Embrace the tourism industry distribution network as the industry's consumers do.
Further discussions we could have:
Different distribution networks can have different rates and different rates within a network?
Work with your distribution networks and they will work for you?
David Hancock is the visitor development manager for Hutt City, Wellington, New Zealand and would be delighted to receive comments on this or any other topic.
http://www.huttvalleynz.com/
http://www.facebook.com/HuttCity.Wellington
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