Paul Davies Paul Davies

Still a need to charge more

Though travel businesses are moving more towards a fee-based model, in most cases they should still be charging more, says an accountant who specialises in the sector.

Paul Davies, partner with OneTeam Chartered Accountants, says that many agencies are currently earning significant profits – as much in five or six months as they would have in a year pre-Covid. However that is on the back of the principals and their reduced teams working extremely hard and putting in longer hours than are sustainable.

‘The challenge they face is employing staff, and even finding those staff.

‘If an agency employs someone new to the industry, then significant training is required and that means putting an experienced seller at least partially into a training role.’

Davies says that if agencies take on inexperienced staff the profit will drop.

So, a better financial model may be to charge higher fees on reduced volumes – keep the overheads down, reduce risk and make more money.

‘The most efficient way really is to focus on the key clients, the ones that really appreciate the effort being put in and are prepared to pay professional rates for that service.’

He says that while a lot of attention has been paid to the reduction of front-end commissions, businesses are also facing reduced over-rides and pressure at the back end of the business.

‘We are hearing that clients in most cases will pay fees for the work businesses are doing, so it is really a matter of the sector being confident to charge rates that compensate them for their knowledge, skills, and extremely high service levels.

‘There is no point working 12 hours a day, six days a week if you are not making a good return on that effort.’

Related items