Become a Home Based Travel Agent

Evaluating the Benefits of a Host Agency Affiliation

An Interview with Don Gould, Chairman & CEO of GTM

By Joanie Ogg CTC, MCC

Can you share with our readers your view on yesterday's and today’s home-based agency model?

The hot topic continues to be the growth of the home-based agencies segment of the distribution system. In reality the “home based” agent has been around for years. Agencies have used outside independent agents for as long as commission income could be shared.

What has changed is the stigma formerly attached to operating without airline appointments has gone the way of paper tickets. Vendors who wouldn’t think of doing business with anyone not appointed by ARC have found new ways to determine with whom they will do business.

A recent Agent@Home magazine survey found that 40% of home-based agencies are affiliated with a host. The majority of independents, especially those with industry experience, appear to question the benefit of working with a host. Our research shows the two most common reasons given for not establishing a partnership with a host are “Why should I share my commission?” and “Why should I give up my identity?”

How can an agent benefit “commission wise” by working with a host agency?

The truth is most independent agents don’t book enough volume with a single vendor to qualify for anything more than the standard commission, or the first level of override commission. At a minimum affiliating with a host agency should provide you with an effective rate of commission (the amount you receive after applying your split) that is at least equal to the vendor’s second level of commission for most of your business.

Determining the effective rate of commission you will earn from a host relationship is critical.  Host agencies aggregate the sales of their agents to achieve higher vendor commission plateaus. The success they enjoy has a significant impact on what you will earn. Affiliating with a host offering a 70/30 split of 15% commission makes more sense than signing on with a company offering a 90/10 split of 11% commission.

Analyze your business and identify the top five vendors with whom you deal – you’ll probably find they represent 80% of your sales. Ask each host you talk to what commission levels they have achieved with your favorite vendors. Apply the split to that figure and you have identified your effective rate of commission – the money you’ll put in your pocket.

One of the concerns that agents share with us is the possibility that they will lose their identity working through a host agency. Do you believe that is a legitimate concern?

Partnering with a host shouldn’t have any impact on your identity as it relates to your clients. You will still be who you are and your company will be what it is. You should be able to pass on extra benefits because you are working through a host – but your clients will only know you are the one providing the value added deals.

Concerned that you will forgo the “perks” if you sign on with a host? A good host will open doors and provide more options than you could secure on your own. Again – volume speaks and vendors listen. Seminars at sea, FAM trips, training and educational programs and other special benefits should be made available by your host.

Are industry association memberships important to you? A good host will hold membership in professional organizations and you’ll be able to maintain associate status. You’ll save money on fees and still receive the benefits of membership.

If you deal with reality you understand that the identity issue shouldn’t be an issue at all. Your customers come first and a host agency relationship shouldn’t require you to change your identity.

With some recent host agency “lack of commission payment” issues, there is no question some agents are concerned about financial security when dealing with a host agency. What would you recommend agents do to better secure their financial future?

When evaluating a host relationship be certain to gather information about business processes. Discuss the frequency of commission payments, the systems in place to build and maintain financial records, how compensation disputes are handled – in short ask as any question necessary to gain comfort back office controls are in place to insure you will be paid for your efforts. ” My host is late in paying me” is a too common complaint that often signals procedural problems and possible money problems. If you have any doubts about whether or not you’ll be treated fairly back away and take your business somewhere else.

Is it really necessary for an agent to have marketing support from the host partner, or can they simply do their own marketing targeted at their specific clientele?

Marketing support that has relevance – something you can personalize and use – is another reason to partner with a host. In as much as the bulk of an agent’s business comes from repeat business and referrals it is imperative that marketing initiatives reinforce the agent’s position of being the “go to” source for all leisure travel.

The concept of segmented marketing that has become popular with many vendors, and is a major feature of several host agencies, is an example of a program that lacks relevance. While the concept makes sense from the supplier’s standpoint it is of little value to the agent – and could have a negative impact. Why?  – because the character and size of the typical agent’s customer list doesn’t support segmentation. Agent’s need to stay in touch with all their customers and keep sending a “we cover the world” message.

What importance does technology play in the relationship?
The technology provided to support your business over shadows the availability of a GDS. Your evaluation should focus on what technology the host provides, and deciding if the benefits claimed support your business plan. Examples of things to determine include: Does the technology include efficiencies and controls that give you comfort the host is a business partner. AS NACTA advises “The decision on which host to pick should not be based on the type of CRS access they offer, but on the level of support they offer as it pertains to your business plan.”

Some host agencies claim to charge no fees and others charge for many things. How does an agent determine what fees are reasonable and what are not?

Another factor to consider are fees charged by a host. Fees can have a significant impact your bottom line. Think about it - a $30 monthly fee reduces the effective rate of commission by 1% on your first $3,000 of earnings each month.

When evaluating a host agency be certain you consider the fees charged, if any, and what you receive for those fees.  If you are charged a monthly fee of $30, and provided with a “free website” which is available in the marketplace for $25 a month, doesn’t the “free benefit” really become a “fee benefit”?

Do you think support provided by a host agency should be personal?

The most challenging aspect of working as an independent agent is being able to stay focused and not allowing yourself to suffer the depression of being alone. Your host agency relationship should provide “people support” and a means to stay in touch with colleagues. A good host agency relationship gives you the benefits of being able to call on others who face similar challenges and are striving to achieve similar objectives.

Can you share some words of wisdom about the growth of the home-based market?

While vendor interest in the home based market will continue, the companies will become more selective as they develop a better understanding of the market. Suppliers will spend time and money to support those whom they consider serious about growing their business while separating themselves from those who think, “Being a travel agent is fun.”

We are finding that agents value a straightforward approach and are looking for a host affiliation that provides the means to earn more money and run a more efficient business. Forget the hype – at the end of the day the knowledgeable agent will chose a course of action that is best for them.