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End Excessive Tourist Commissions Before It's Too Late, Says Phuket Businessman

Monday, September 23, 2013
PHUKET: Authorities on Phuket must bring an end to commissions of up to 50 percent being taken without the knowledge of tourists, a leading expat businessman says.

Excessive commissions are promoting a ''culture of rip-offs'' that will undermine and possibly destroy Phuket tourism eventually, the businessman believes.

His call for action comes with new laws to be imposed from October in China that will prevent people from becoming victims of commission-based package holidays to Phuket.

''Zero-baht tours'' rely on travellers being pressured into making purchases so commissions can be extracted to give the operator a profit.

But many independent travellers are also subjected to excessive commissions they aren't told about.

The expat businessman, who prefers to remain anonymous, says he knows of elephant trekking operations on Phuket that pay 50 percent commission to tuk-tuk or taxi drivers who bring customers.

''It's 1000 baht to ride the elephant and whoever brings the rider gets half of that,'' he said.

''If the Department of Special Investigation is trying to clean up the taxis and other groups that are taking advantage of tourists, then it has to be across the board,'' he told Phuketwan.

''Taking these commissions instills a mindset and it reinforces the feeling that this is the normal way of doing business, of ripping everybody off as a way of life.''

Tuk-tuk drivers in parts of Phuket's west coast are known to have tried to take over tour operations to act as driver-guides and gain access to larger commissions.

Tourists at Phuket International Airport are also sometimes ''kidnapped'' on arrival and taken to agency outlets where attempts are made to sell them accommodation and tours that the visitors don't need for high commissions.

Excessive fares charged by tuk-tuk and taxi drivers on Phuket are obvious. But behind the scenes, other hidden commissions threaten to become part of the Phuket ''culture.''

''There are a lot of good people on Phuket who are honest and diligent but there is also a subculture here of people that, any way and every way, rip off tourists,'' the expat businessman says.

Gems outlets and latex product outlets and some markets arranged - without the knowledge of tourists - to pay large commissions to bus, taxi and tuk-tuk drivers, he says.

''Thirty five percent is about standard,'' he said. ''At one latex product outlet you can see the bus drivers sit out the front, assessing what the tourists are carrying in their shopping bags and calculating how much commission they can claim.''

At some outlets, tourists are now issued with neckband bar code devices, so that the sales and the commission can be instantly recorded for each particular bus.

''The tourists don't understand what's happening,'' the expat businessman said. ''Anyone would be infuriated if they found out there was somebody getting 35 percent commission to bring them there.''

Many operations have windows out of sight of the tourists where drivers return later that day or the following day to collect their commission.

The best idea if you were running a business and wanted to have your guests treated fairly was to call the operation or outlet in advance to say that the tourists should get a discount, not be charged commission.

While commissions of 10 percent or 15 percent for bookings were accepted in some parts of the tourism industry, the 35 percent to 50 percent commissions being paid on Phuket were outrageous, the businessman said.

''I am not saying that any commission is not viable, but 35 percent, that's remarkable,'' he said. ''If commissions were reduced to 10 or 15 percent, the businesses would still be competitive.''

His main concern was the way that the application of outrageous commissions was affecting the attitude of people on Phuket who should be service-minded.

''When you get this rip-off culture,'' he said, ''it just grows worse with commissions.

''The tuk-tuk driver has made a lot of money, more money than he should have just to bring the tourists there, four or five times more than a Bangkok taxi driver.

''It just puts them in that 'rip-em off, rip-em off, rip-em off mindset, always thinking 'how else can I rip 'em off?''

With a reduced commission, the tourist is probably going to spend the money they save on Phuket anyway, the businessman says.

''That 450 baht is probably not going to go home with them,'' he said. ''It will most likely be spent some place else.''

He thinks the DSI will become more firmly established on Phuket and look at the effect of excessive commissions: ''Hopefully as they get more firmly on the ground here, they will.''

The introduction of the new laws in China barring commission-based package tours are expected to bring a reaction in Thailand and Phuket from October.

Comments

Comments have been disabled for this article.

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It is common within all branches everywhere in the world to receive some kind of commission if you give them a new customer and please do not overlook the fact that in Phuket and elsewhere it is not only tuk tuk drivers and taxi drivers that receive commission, it is also the tour companies, guides and yes also the foreign guides...so a lot of people is benefitting and the customers , tourists pay for it. But is not so that people only buy if they want to ? If they thought it was too expensive then they would not buy? And since there is a lot of buying then that is ok. To somehow think or believe that prices would go down in case there was no commission paid is an illusion, what would happen is that there would be less business for all.

Posted by Sailor on September 23, 2013 11:26

Editor Comment:

Secret commissions of 35 percent and up to 50 percent are outrageous, Sailor. As the expat businessman says, 10-15 percent is reasonable. Once the tourists learn how much extra they are paying, they will be looking at their choices more carefully, for sure.

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A remark like this "It just puts them in that 'rip-em off, rip-em off, rip-em off mindset, always thinking 'how else can I rip 'em off?" shows that your source has no real understanding of the mindset here. People are thinking 'how can I make money', but not 'how can I rip them off'. This says a lot about his own mentality and attitude.

Posted by stevenl on September 23, 2013 12:07

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Unfortunately, tourists do not go with the best sea and land tours as high commissions up to more than 50% paid to guides, tuk-tuk and taxi drivers and touts are pushing those predators to send potential customers to the tour providers giving the highest commissions.
Anyway, DSI, TAT and Tourist Police should check all tuk-tuks and taxis if any brochure tours are available to tout tourist tours and tourism attractions and prosecute them to work as illegal guide and impound their vehicles.

Posted by Whistle-Blower on September 23, 2013 12:24

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I tend to agree wholeheartedly with Sailor. what tourist actually cares what commissions are paid to whom? They are surely more interested in what is the price? Can I afford it? Do I want to do it?
I would like to think that most tourists are here to enjoy themselves and have a good, safe and memorable holiday.
As an analogy, when I go into a shop, I see the price and if it is what I want I buy it. I don't start worrying who makes what out of the sale!
This constant nit picking and complaining about every aspect of Phuket is getting totally out of hand and is creating a bad impression!

Posted by Richard on September 23, 2013 12:38

Editor Comment:

So it's nit-picking to complain about tourists being ''kidnapped'' and paying 50 percent more than they need to? The DSI clearly has it right in targetting expats and taxi drivers.

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Most of these rip offs are run by people who are quite well off compared to Thais in other parts of Thailand. Corrupt Phuket officials are now very wealthy but it seems they can never have enough houses, cars or businesses. Just avoid Phuket and spend your money elsewhere.

Posted by Tommy on September 23, 2013 12:43

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So all the scaly little low lifes and rosebuds are being exposed. Good for you and me. Good for tourists too. May all tourist commission payers suffer an irreparable economic disaster. I have lived here for 12 years and I am sick of this type of stuff.

Posted by DuncanB on September 23, 2013 12:55

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If it was as Ed claims that tourists are paying 50% more than they have to then you can rest assured that there would a long time ago have been a business man setting up such a business selling the products to the tourists at those prices, that has not happened and will not happen. The commissions that can easily exceed 50% has to be seen as the necessary marketing and advertising cost so that the products can be sold. The businesses paying the commissions only pays them because it makes sense to them else they would not do so. It is kind of a free market Ed.

Posted by Sailor on September 23, 2013 13:14

Editor Comment:

It's not so much a free market as a thieves' market, where secret commission are paid and choices are made for the consumer without he or she knowing they are paying extra. You need to go back and read the article again.

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One example. Big tour operators provide city tours (namely shopping tours) free of charge, because they get comissions from shops for bringing customers. For Russian market it is 30% in average. I explain why so high. Because of very high rivalry between tour operators they have to dump prices for hotels, transfers, flights, etc. to get customers. To compensate these losses it is common practice around the world to get commisions during shopping tours or from suppliers providing sightseeing tours. If comissions would be reduced to 10%, the price of tour package (hotel, transfer, flight) would be rised and be equal to trip to Italy from some Siberian town. Thailand would lost a few millions tourists (mostly so much desired in previous years low quality segment, not only from Russia).

Posted by Stranger on September 23, 2013 13:15

Editor Comment:

Yes, and that's exactly what the Chinese laws will achieve. The result should be what Phuket wants: fewer tourists but people who have more to spend.

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As well as extortionate commissions (aka rip-offs) it would help regenerate Phuket if greedy landlords would stop asking for obscenely high key money & rents. There is so much property (old & new) lying empty & decaying that some areas are becoming unsightly. Surely it would be better to accept small rents & get these properties operational, giving the impression that the island is vibrant.

Posted by Logic on September 23, 2013 13:22

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Deception, overcharging and tax evasion. Are there any criminals in Phuket zoo, I mean prison, convicted of these crimes against society?

Posted by gee on September 23, 2013 13:45

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@Editor
Actually it's very dubious. If package price is rised, less people come. Good for environment, but a lot of hotels would be left emptied again and would have to dump prices to get guests from another markets (same as already happened when quantity of Europeans started to decline dramatically and Phuket hoteliers had to turn to Chinese and Russian markets). The basic problem is corruption, when officials are fed mostly by numerous illegal or half-legal street businesses oriented on crowds, and not by big legal businesses paying full taxes. So talking about quality, they go on to concentarte on numbers, scaring that quality tourism will leave most of profits in the pockets of 5* hotels and big tour operators as it was 20 years ago.

Posted by Stranger on September 23, 2013 14:49

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One thing I haven't seen mentioned, and it's very simple, is with a lot less, or no, "zero baht" tourists (I hate that inaccurate term) there will be a lot of empty rooms. Empty rooms make zero baht. Is it possible some businesses may fold? Personally, I don't believe there is such a thing as a "zero baht" tourist, but that is my opinion, I could be wrong and if I am, I'm sure someone can explain it. What I do know is that there are businesses that DO make money from these tourists, some of this is passed onto their employees, usually Thais, to the Government in taxes and to the support industries. I believe those who complain are those that are missing out on their "piece of the cake."

Posted by DSI.Watch on September 23, 2013 15:05

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Here's how the commission system works for my hotels. Say the room costs 1000 baht per night.

If the customer books a room online using a global brand-name website (Agoda, Expedia etc), the room price is still 1,000 baht and I have to pay a commission of up to 25% from this amount.

If the customer books direct with my hotel, then I pay no commission and pocket 1,000 baht.

If a taxi or tuk-tuk brings a potential customer to my hotel who hasn't got a booking with me, AND if that customer sees the room and is happy to pay 1000 baht per night, then I pay the taxi a 30% commission.

For all three cases, the customer pays the same rate ==> 1,000 baht, and it is their choice whether or not they wish to book/stay for the rate of 1000 baht.

For my businesses, I obviously prefer direct bookings, but realistically have to rely on agency bookings and taxi services, for which I pay a commission.

If commissions were eliminated, my room-rate would not be reduced - it would still be 1000 baht.

I'm sure that the price of other business's goods and services would also not be reduced if commissions were removed or cut to a low value.

At the end of the day, the customer can decide whether or not the service or product is worth the money.

What is totally unacceptable is where the agent or taxi tries to 'resell' my product at a rate higher than what I retail it at, such as trying to resell my hotel room for 2000 baht. I previously experienced this policy about 7 years ago from some travel agents at the airport, and I personally went to those agents and demanded (and received) a refund for my guests.

Simon

Posted by Simon Luttrell on September 23, 2013 15:14

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Agree 100% with Simon!

I own both online and brick & mortar tour counters.

Yes, some companies offer 50% commissions and higher for tours.

Most tour desks will take a 3,000 baht list price tour with a 50% commission 9net of 1,500 baht) and mark up the net price about 20% making the total paid by the tourist only 1,800 baht --- this is 1,200 baht cheaper than buying stright from the operator!

We are quite clear (and so are almost all tour desks) that the higher the tour price the better the quality of teh tour. The old saying "you get what you pay for".

This is EXACTLY the point of zero-baht tours. If you want the absolute cheapest tour package possible, don't be surprised if there is a stop at a gem shop.

If you don't want to be packed into a speedboat with 60-80 other people - don't buy a 1,200 baht Phi Phi Tour.

Is it best for consumers to buy direct or through an agent?

Typically, you will get the best prices through an agent, as they are going to sacrifice some of their commission to get the sale.

Best advice: look carefully for an agent you can trust and they will not steer you wrong, as they want your business again next year and want your friends recommended to you.

If you buy from a tuk-tuk driver, they may not have your best interests in mind. This is not a problem with commissions, this is a problem with the customer not doing a little research themselves. The tuk-tuk driver is only trying to maximize his profit.

Tourists who would NEVER buy a house, car, stereo, computer, or even a frozen meal from the market without either researching or at least reading the label to make sure they are getting what they pay for will blindly trust a taxi driver whom they have never met - knowing full well they wouldn't trust a taxi driver in their own home country!

In regards to the local expatriate business man who doesn't want to pay big commisions:
1. Provide a better service that can benefit from a higher net price - and SHOW this to your agents and consumers.
2. Embrace commissions - it is a free market society that we live in. People have freedom of choice who to work with, who to sell and who to buy from. The commission has been a part of commerce since the dawn of time. There are many companies here that have high net prices and still offer 30-40% commissions and we are easily able to sell those tours. We sell those tours to those who are looking for quality NOT the cheapest price.
3. Quit crying. There are plenty of Thai owned businesses that offer 60+% commissions with very low nets that DO NOT take people to gem shops and the like, yet the companies and the owners are RICH. It is called VOLUME. Think McDonald's, it is a crap burger, but due to low pricing, and vigorous marketing they sell BILLIONS making them MILLIONS.

Find your target market and go for it. If you provide a good service and commissions, you will have people selling your tours.

If you want to do it on your own without paying commissions or paying for advertising, then do what most expatriate business owners do here and start writing fake positive reviews for yourself on Trip Advisor.

But I guess that wouldn't make you much better or honest that the tuk-tuk driver would it?

Posted by TourDesk on September 23, 2013 15:57

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@ Tour Desk. You are spot on. Most tour operators offers around 30 % commission. Some more, some less.
@ Whistle Blower. How much commission do you pay me if I book a diver on your liveaboard (BTW! That would never happen, as I prefer to go with the best sea tour operators) - 30 % if I'm not all wrong. Stop crying!

Posted by Zenobiz on September 23, 2013 22:14

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An informative article. If I step into a tuk tuk ask him to bring me somewhere, pay an exorbitant rate, I expect him to get no commission. I understand a travel and tour company getting a 15% commission but not a tuk tuk driver who has already gouged me. Also the business man interviewed is correct, the tourist spends his vacation budget so there is just less to spend elsewhere.They get less value for their money and thus a less pleasurable experience.

Posted by Tuna on September 24, 2013 00:41

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As these commissions didn't rise for ten years now, I demand to increase them in order to catch up with international standards.

Posted by pshy on September 24, 2013 11:05

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How about the Tiger Kingdom? Scam or rip off? The driver (legal and illegal) gets 300/400/700 bahts per paying customers(package 1/2/3), plus 150 bahts per customer buying lunch there. All this on top of the driver's high fare to bring the customers there.

Posted by danny on September 24, 2013 23:32


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