DMC commission contracts are, in most cases, about three pages of vocabulary that nobody enjoys reading. This article walks through the four structures you are likely to encounter, what each actually means for your margin, and which structure fits which kind of agency.
Why commission models matter
A commission model is not just a rate. It is a structure that decides how risk and reward are split between the agency and the DMC. The same headline percentage can mean radically different things depending on whether it sits on top of a net rate, a gross rate, or a hybrid. Misunderstanding the model is one of the most common ways for an otherwise profitable programme to slowly bleed margin.
The good news: there are only four models you really need to know. Everything else is a variation.
Model 1 Gross-Net (the simple one)
The DMC publishes a brochure rate (gross) and pays the agency a commission percentage on bookings. The agency takes the commission and remits the net amount to the DMC. This is the model most agencies know intuitively from hotel relationships.
Pros: Simple, predictable, easy to reconcile. Client sees the same rate the DMC publishes.
Cons: Agency commission is visible in the rate stack. If the agency wants to sell at less than gross, it has to discount from its own commission.
Fits: Smaller agencies, retail travel agents, programmes where transparent pricing matters.
Model 2 Net-Net (the wholesaler's model)
The DMC publishes a net rate to the agency. The agency adds its own mark-up to set its selling price. There is no fixed commission percentage the agency's margin is the difference between the DMC's net rate and whatever it sells at.
Pros: Agency controls its own selling price. Different mark-ups can be applied to different markets or distribution channels.
Cons: Reconciliation is more complex; the DMC does not see what the agency is actually charging. Disputes can arise about who owns the customer if rates leak.
Fits: Tour operators with their own packaging, wholesalers selling onward to retail.
Model 3 Net plus override (volume rewards)
A variant of net-net where the DMC pays a year-end override (a retrospective rebate) based on annual volume thresholds. The override is in addition to the agency's normal mark-up.
Pros: Aligns DMC and agency incentives both want volume to grow. The override is "free money" relative to the contracted rate.
Cons: The override is only paid retrospectively, so it doesn't help agency cash flow during the year. Volume thresholds need to be calibrated honestly too low and they are meaningless, too high and they demotivate.
Fits: Established partners with predictable growth trajectory.
Model 4 FIT vs GIT split (the segmented one)
The DMC applies different commission/mark-up rules to different segments of the agency's volume. FIT (Free Independent Traveller i.e., bookings sold to individual travellers) typically attracts a higher commission than GIT (Group Inclusive Tour series departures with fixed itinerary).
Why the difference? FIT bookings are operationally lighter for the DMC (fewer logistics, less coordination) and represent higher unit margins. GIT bookings consume more DMC resource per booking but in higher volume.
Pros: Reflects the actual cost of delivery. Allows the DMC to price competitively in the GIT space without giving away margin on premium FIT.
Cons: Requires honest reporting from the agency on the split. Some agencies are tempted to reclassify GIT as FIT to lift commission DMCs notice eventually.
Fits: Agencies with mixed FIT/GIT product, or operators who want a single relationship covering everything.
Three things that matter more than the headline percentage
Negotiations tend to fixate on the commission percentage. In practice, three other clauses often have larger financial impact:
- Cancellation policy. A generous commission means nothing if cancellations are 100% within 14 days. Read this clause first.
- Surcharge calendar. Public holidays, religious dates, peak season uplifts these can erode commission if not transparent up front.
- Credit terms. 30-day credit is worth roughly 0.5% on an annual programme in pure financing cost. 45 days is worth almost 1%.
A 14% commission with bad cancellation terms is worse than a 11% commission with reasonable ones. Always model the contract on a realistic season of bookings, not just on the headline rate.
What we do at Mokan B2B
We operate primarily on a net-plus-override model with FIT/GIT split, four tiers based on annual passenger volumes. Rates and tiers are confirmed in writing in your partner agreement, with annual review and override paid quarterly rather than annually (to help partner cash flow).
The full commission structure is shared during the partnership discussion. Tier confirmation usually happens during the discovery call once we understand your declared annual volume and product mix.