What is an Agent?
An individual or business entity who has the authority to act on behalf of another individual or entity. In travel, the term is used to describe a travel agent who is authorized to sell tours and activities on behalf of a tour operator. The travel agent is generally compensated based on which type of agent they are:
Net Rate Agent – An agent who sells tours and activities at a retail rack rate to consumers where the agent takes payment from the consumer and pays a net rate to the tour operator for the sale. The difference between the net rate and the rack rate is the agent’s margin. The net rate agent typically absorbs marketing, customer service, and payment processing costs. The agent also typically absorbs charge-back risks as they are the merchant of record for the transaction.
Commission Agent – An agent who sells tours and activities at a retail rack rate to consumers but passes payment and customer information directly to the tour operator. The tour operator pays the agent a commission for the sale. The commission agent absorbs marketing costs but payment processing and customer service costs are generally handled by the tour operator. The commission agent is not subject to charge-back risks as they do not act as the merchant of record for any transactions.