Chartered Financial Analyst with 15+ years experience in the travel & tourism industry and service business finance.
Find your travel agency’s breakeven point. Enter any three variables—Monthly Fixed Costs, Avg. Commission per Trip, Variable Cost per Trip, or Breakeven Trips—to solve for the fourth.
Travel Agency Breakeven Calculator
Travel Agency Breakeven Formula
The breakeven formula for a travel agency finds the total number of trips (Q) you must book each month for your total commissions to cover all fixed and variable costs.
Q = F / (P – V)
Solve for Monthly Fixed Costs (F):
F = Q * (P – V)
Solve for Avg. Commission per Trip (P):
P = (F / Q) + V
Solve for Variable Cost per Trip (V):
V = P – (F / Q)
Variables Explained
- Monthly Fixed Costs (F): Your total, recurring monthly overhead. This includes office rent, salaried employees, GDS (Global Distribution System) fees, marketing, and software subscriptions.
- Avg. Commission per Trip (P): Your average *commission revenue* from a single booked trip (e.g., 10% of a $3,500 vacation package). This is your revenue, *not* the total price of the trip.
- Variable Cost per Trip (V): The average cost directly tied to one booking. This is typically the commission split you pay to your independent contractor (IC) agent, plus any per-booking transaction fees.
- Breakeven Trips Booked (Q): The total number of trips you need to book each month to reach $0 in profit.
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What is a Travel Agency’s Breakeven Point?
A **Travel Agency’s Breakeven Point** is the exact number of trips (Q) your agency must book in a month to cover all expenses. It is the minimum sales volume required to pay for your fixed overhead (like rent and GDS fees) and the variable costs (like agent commissions) for each booking.
**Fixed Costs (F)** are your consistent monthly overhead, regardless of how many trips you book. For an agency, this includes office rent (if you have one), salaried staff (not IC agents), GDS access fees, consortium fees, marketing, and software subscriptions (like your CRM).
**Avg. Commission (P)** is your *revenue*. It is crucial to remember this is *not* the total price of the vacation. If you book a $5,000 cruise that pays a 12% commission, your (P) is $600, not $5,000.
**Variable Costs (V)** are the costs incurred *only* when a trip is booked. The most common is the commission split paid to an independent contractor (IC) agent. If your agency’s policy is a 70/30 split on that $600 commission, your variable cost (V) is $180 (30% of $600).
The **Contribution Margin** (P – V) is the profit from a single booking that goes toward paying your fixed costs. In our example, `$600 (P) – $180 (V) = $420`. This $420 is what your agency *keeps* to pay the bills. This calculator finds how many $420 “profit chunks” you need to cover your total fixed costs.
How to Calculate Travel Agency Breakeven (Example)
Let’s calculate the breakeven point for a small travel agency.
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Identify Monthly Fixed Costs (F):
Your monthly office rent, GDS fees, and marketing subscriptions total $4,000.
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Identify Avg. Commission per Trip (P):
After blending all your bookings (cruises, tours, hotels), you find your average commission revenue per trip is $350.
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Identify Variable Cost per Trip (V):
You pay your agents a 20% commission on the commission revenue. Your average variable cost is $70 ($350 * 0.20).
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Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin per trip: $350 (P) – $70 (V) = $280.
Next, divide the fixed costs by this margin:
Q = $4,000 / $280 = 14.28 -
Conclusion:
Your agency must book 15 trips (rounding up) each month to cover all costs. The 16th trip you book in a month will be your first one that generates actual profit for the agency.
Frequently Asked Questions (FAQ)
Always use your **commission revenue** (or service fee) as your (P). The total price of the trip (e.g., $5,000 for a cruise) is the *supplier’s* revenue, not yours. Your revenue is the 10-15% commission you earn on that price.
If your agents are independent contractors (ICs) paid a *percentage* of the commission, it is a **Variable Cost (V)**. If you pay your agents a fixed *salary* no matter how much they sell, their salary is a **Fixed Cost (F)**.
Look at your last month’s finances. Take your **Total Commission Revenue** and divide it by the **Total Number of Trips Booked**. This gives you a reliable average (P) to use for your calculations.
Enter your (F) (e.g., $4,000), your (P) (e.g., $350), and your breakeven goal for (Q) (e.g., 20 trips). The calculator will solve for (V), telling you the *maximum variable cost* (e.g., $150) you can afford per trip. This helps you set your commission splits to ensure the agency remains profitable.