Commission

In the travel industry, the inventory is distributed all over the world through an extensive network of sellers. Commission is the fuel that drives this network. It provides an incentive for third parties to advertise and sell one supplier’s product over another supplier’s.

The structure of a commission differs quite a lot from sector to sector:

• Hotels: Pay typically 10% to 15% to traditional travel agencies, 15% to 25% to major OTAs.
• Airlines: Historically paid commission, but many have adopted a zero-commission model for basic economy tickets, forcing agents to charge service fees to travelers in place of commission.
• Cruises and tours: Pay high commissions (10% to 16%), often to promote incentives among agents to explain complex products to consumers.

From a technology and operations standpoint, commission management is one of the largest pain points in the industry. This process is called commission reconciliation and often involves complex data matching.

In the Agency Model (common in hotels), the guest pays directly to the hotel at the front desk. The hotel then owes a commission to the agent.

1. The agent (or OTA) issues an invoice to the hotel once the guest checks out.
2. The hotel needs to verify that the guest actually stayed (and didn’t cancel).
3. The hotel processes the payment back to the agent.

This manual bill-back process is prone to mistakes and delays. Modern travel tech platforms (like Onyx CenterSource or TACS) automate this by linking the hotel’s PMS directly to the agency’s accounting system, automating payments to ensure that agents receive their share on time.

Commissions are not necessarily static. To drive volume, suppliers employ tiered structures:

• Base commission: The regular percentage accepted in the contract (e.g., 10%).
• Override commission (volume incentive): A bonus percentage to be paid if the agency achieves certain sales targets. For instance, an airline could provide an agency with a 2% backend override if they sell the agency $1 million worth of flights in a given year. This type of compensation serves to align the goals of the agency with the revenue goals of the supplier.