I recently spoke with some associates, who squeezed a travel agent’s commission by asking for a very substantial discount on their travel package. This led me to think about the commission-based work of a travel agent or a real estate broker, to better understand the game theory behind the exchange and work towards an optimal solution. Because interactions vary from person to person, the connection with an agent or broker could be a single time (one-shot game), as well as a continuing relationship (repeated game). This article will approach it from a consumer to travel agent standpoint, but the methodology could be extrapolated to many other client-business interactions.
Game Theory – One-Shot vs. Repeated
Here I refer to interactions or negotiations are games, played between you, the customer, and the travel agent. For one-off games, either party would want the best result for themselves, and reach some sort of equilibrium for that one game. However, in established relationships with travel agents, they would be willing to forgo some or all of the initial commission, with the hope or promise of additional business from the client or referrals. Thus, it would make sense in a repeated game to have some losses early to recoup down the line. This touches upon the topic of game theory, from an economics perspective.
However, what are some of the cons of doing so? A travel agent who does not believe the game will be repeated (i.e. repeat or referral business from this particular client is unlikely) will be unwilling to budge on pricing or package additions, as it would not provide the company much benefit. An agent who feels squeezed past a reasonable point may be disinclined to sell at all – preferring to focus resources and time on a more pleasant and profitable client.
Given this knowledge, I have developed a few basic strategies when dealing with selling agents.
- Build rapport. Don’t just promise them future business, but actively do so by coming back, referring others, or speaking highly about them in online reviews or when asked about feedback. Be pleasant and courteous.
- Find out their commission, if possible. For example, a timeshare agent’s commission in Las Vegas (link) was $75, so it was very easy to ask for $7 for an ice cream the lady was craving. However, some commissions for similar products could be as low as $20 – so asking for a third of that may lead to a hostile response.
- Understand what you’re asking for. A 1% savings on a $1000 package is $10. Is $10 worth squeezing out of an agent? Would the agent be able to provide other benefits instead, such as a room upgrade, free breakfast, etc., which may easily eclipse the potential squeezing of their commission?
- Ascertain the benefits of business loyalty. If you make frequent a particular agent or company, can you get additional benefits? This would be important in a repeated game series to understand. By centralizing the business to one agent versus others, you may pay slightly more. But, you may get a much larger amount of additional benefits in return.
Pitfalls to Avoid
- Being rude or unpleasant. They’re human just like you, understanding how far they can go is key. Know when and when not to ask or push a particular point.
- Demand, demand, demand. Going off the last point, know it’s a give and take relationship. Key travel agents can and will save you money, but not if you push them past a reasonable point.
Repeated game theory strategy is different than one-off games, since you need to build and maintain a profitable relationship on both sides. This process is similar to my Art of the Ask series, but focuses on commission-based selling agents rather than representatives in the hotel or airline industries. Game theory takes some understanding, but a collaborative and productive relationship with a trusted travel agent would be more beneficial than constantly shopping around.
Featured image from Pixabay of a cruise – something you might book with a travel agent.
What do you think of my musings? Let me know in the comments, or reach me directly at TheHotelion@gmail.com! Like my posts? See more here, on TravelUpdate! Follow me on Facebook (The Hotelion) or on Twitter and Instagram: @TheHotelion