Last summer, Calvin Cottam of Los Angeles was scheduled to leave on a seven-day Caribbean cruise out of San Juan, Puerto Rico, with his niece. But shortly before departure, he became ill and had to cancel. He fully expected to suffer a cancellation penalty imposed by the cruise line. What he didn't expect was to be asked by the travel agent who handled the booking to pay, out of his refund, the agent's commission on the entire booking.
Here's how it worked: The closer to a sailing date that a traveler cancels his or her cruise, the stiffer the cancellation penalty. In this case, Cottam was hit with a 90% cancellation penalty (that is, 10% was to be refunded). The base price of the cruise (for two people) was $2,180, plus $118 for port charges and $22 in taxes, for a total of $2,320. Since payment was made by credit card, the 10% refund of $358 (10% of the cruise base price, plus a full refund of the port charges and taxes) was credited to Cottam's credit card account.
Subsequently, Cottam was billed by his travel agent for $218, a 10% commission on the $2,180 cost of the cruise.
Is the consumer obligated to pay the travel agent's commission on a canceled cruise if the cruise line doesn't?
No, according to Ada Brown, president of Seaside Travel in Long Beach and head of the Southern California chapter of the American Society of Travel Agents (ASTA).
"Our commissions should always come from suppliers and never from consumers," Brown said. "But there can be some confusion when it comes to refunds, which is one of the gray areas of the travel business."
Patty Campbell, head of Carlson Travel/All About Travel in Northridge and former chairperson of the Assn. of Retail Travel Agents (ARTA), agreed. "It's understandable that the agent should want to be paid for booking this cruise even if the passenger didn't sail. But payment should come from the cruise line.
"The passenger isn't obliged to pay for what the cruise line didn't," she continued. "However, there can be a feeling of obligation on the part of the client to refund the agent's commission, on those occasions when the client gets reimbursed for the cancellation penalty through some form of trip cancellation insurance."
Travel agents make their money through commissions paid by airlines, cruise lines, hotels, car rental firms and other travel industry suppliers--at no cost to the consumer. When consumers pay for their travel services by cash or check, agents generally take out their commission and remit the rest of the money to the supplier (or an entity representing the supplier). If payment is by credit card, agents wait to be paid their commission after the traveler has utilized the particular service.
Depending on the policy of the travel supplier involved, a travel agency may still receive its commission even if the client cancels--that is, the client receives whatever refund is due, and the travel agency still gets its commission. In Cottam's case, however, the cruise line's policy did not guarantee the agent's commission on canceled sailings.
"I was willing to pay the $218 (to the travel agency) as a measure of goodwill, but not because I had to," said Cottam, who did have trip-cancellation protection covering a canceled cruise.
"Policies by cruise lines and other suppliers vary on protecting the agent's commission when cancellations are involved," said Brown. "I wouldn't expect the client to pay me from his refund, but this depends on the relationship between the agent and his client. If an agent wants such a fee in case of a cancellation where his or her commission isn't protected, this should be set up in advance with the client."
Brown said her agency's policy calls for refunding part of its commission in the case of canceled cruises and keeping the other part.
"If one of our clients cancels a cruise, as a goodwill gesture we refund our commission on the portion of money refunded by the supplier," she said. "Let's say a cruise cost $2,000, and we withheld $200 as our commission and sent the cruise line $1,800. A 50% cancellation penalty is assessed when our client cancels, so we get a check for the client for $900, or half of the $1,800. We would add $100, or 50% of our $200 commission. Thus, the client would actually get $1,000, or 50% of his original cost."
Brown added that California's Travel Promoters Act allows travel agencies to take out up to 10% of a consumer's overall payment fee as their commission. This law also requires that tickets, or vouchers, be delivered to clients within two business days after full payment. In addition, full payment has to be immediately sent to the supplier or deposited in a trust account by the travel seller. (The seller could also post a bond.)