"There are big differences between the types of home-based agents and the types of host agency," says Brad Anderson, co-president of America's Vacation Center. "Thousands of hosts are traditional brick-and-mortar with two or three independent contractors. That model has been around forever. The new breed of host agency has independent contractors all over the continent, including Canada, giving various types of support.
"What do different models of host do for their members? Some are focused on the air side, providing GDS connectivity and great tools for corporate agents. A host [that focuses] on the leisure side provides great support, tools and high commissions for people who want to book vacations," Anderson notes.
More than one expert has compared the agent/host relationship to the synergies of a good marriage, with each partner supporting the other in essential ways. It seems independent contractors could really use a Match.com or eHarmony.com to drill down to figure out what they want and who will provide it for them, but until that day arrives, the experts in the field have their own advice to offer.
Anderson says agents seeking a good host should be looking for a variety of components. First—technology. "We provide a powerful suite of tools: CRM, booking engine, back-office accounting, e-mail, online commission tracking—and in our model all of that is integrated, so you only have to do something once," Anderson notes. "It's all Web-based, so you can work from anywhere."
Next is marketing. Michael Gross, president and CEO of Global Travel International, says, "A good host provides turnkey marketing support," from camera-ready art to electronic promotions. Many hosts send their agents e-mail messages they can customize and forward to their clients, as well as press releases agents can customize and send to local newspapers, and downloadable brochures. The Devil Is in the Details
Another business task hosts can take off an agent's plate is tracking commissions and other back-office functions. "Talk about grunt work," says Anderson.
In many cases, a host agency can also provide an independent contractor just entering the business with credibility. AVC's affiliation with American Express provides that, as well as a global network of agents, which can provide assistance to travelers far from home.
Among the most important services is training. "Ongoing training is incredibly important," says Anderson. Often, training is provided online, in the form of seminars and supplier conference calls. In addition, some hosts archive this information for agents who aren't available at the time of a scheduled session. The Crystal Ball View
But let's face it...most agents who are on their own choose to join a host organization for the money. "If an agent is serious in this business and wants reasonable income, they have to make decisions about how to operate," says Scott Koepf, vice president of marketing for Jurni, the marketing arm of Sabre of which host agency Nexion is a member.
According to Koepf, unless an agent makes more than $1.5 to 2 million on their own on an annual basis, they need a host; but even some agents who do make that much on their own choose to affiliate with a host because they want to make even more money.
"For an agency to reach commission levels that are beyond the standard 10 percent," says Koepf, "almost every major supplier today has a tiered program based on productivity. It's difficult for an independent agent to drive that kind of volume. The day an agent signs up with a host agency, they move from 10 percent to 15 percent or more. That's a huge swing."
Many home-based entrepreneurs say the toughest challenge can be a sense of isolation. A host agency can overcome that problem by connecting its members in a variety of ways, through instant messaging on an intranet, "webinars" and other means. The same links allow home-based agents to arrange coverage for their clients even when they are out of the office, whether it's through the host's customer care center or a "buddy system" with other members of the agency.
But perhaps more critical still to the agent's business is the long-term relationship a host provides to suppliers, and how that relationship is handled. In some cases, the host agency acts as a constant go-between for agents and suppliers; in others, the host facilitates a more direct interaction.
"I think the real story is connecting independent contractors with the right travel agency networks, host agencies and/or consortia," says Tom Horman, CTC, senior vice president of communications and member relations, Joystar, Inc. "Joystar's business model (and that of many of our competitors) is all about matching the right sellers with the right suppliers to drive a value proposition that favors the end traveler." The result is a "trifecta win," says Horman.
In the travel industry, says Horman, "margins are thin and the name of the game is all about volume. Most suppliers would not look at the independent contractor marketplace unless the individual seller of travel can do at least $2 million annually in business. An agent will only earn standard commissions (10 percent) if they are not connected to a larger organization." For a traditional agency, the larger organization can be a consortium or a marketing organization. "For independents, it means a host agency, a travel agency network (e.g., Joystar), an affiliate or franchise system (American Express, Carlson), etc.," says Horman.
"The relationship with suppliers is critical," says Gross. "We have a strong relationship with suppliers, especially preferred. This allows the host agency to get maximum commission and deals for agents...Very few of our home-based agents can hit the levels of productivity we do, so we don't get into situations where suppliers go directly to individual agents." However, "if you have a good relationship with the supplier, it should be translated over to the home-based agent," he says. "We encourage agents with high productivity to work directly with suppliers."
Money & Relationships
Scott Ahlsmith, CTC, president and CEO of Magellan Travel Group and chairman of The Travel Institute, speaks of three considerations in choosing a host, each of which helps the agent determine the model that's best. "First is the amount of compensation," he says, whether it's through a percentage or a fixed fee. It depends on the volume of business in dollars, the volume in terms of invoices or bookings, and the average amount of commission per booking.
Secondly, and "just as important," he says, "is the relationship with the supplier. The host agency has a relationship that falls under the category of repairing things that go wrong. The real power of the host is buying power, or how to get the last available seat or best fare, the best cabin on a cruise—they can make that call to the right people to get what the independent contractor wants done. It's all about 'waivers and favors.' Most independent contractors want somebody who can help them make things right when they go wrong."
The final criterion "has to do with the host agency's attitude towards the independent contractor and their business," says Ahlsmith. "Host agencies can be very secretive about independent contractors: They want all communications to suppliers and consortia to go through them, they don't share productivity numbers for individual agents with suppliers. They operate in a closed environment.
"This can be for competitive reasons, since it offers a measure of security (because data doesn't get out). Others outsource a lot of the work, but act as a point-of-sale, where an agent closes the sale, and they make it as visible and open as possible, facilitating the conversation with suppliers and agents. The host acts as a one-stop conduit for the suppliers."
Under this model, the supplier "can go to a host agency and ask to talk to all independent contractors who have a strong client base that would buy a Mediterranean cruise, for example," he continues. "The host agency would set up a conference call or dialog with those people, and the supplier is then free to communicate directly with those independent contractors, productivity numbers would be shared, and the agents would be able to get invitations for inaugurals, local training, etc. Suppliers send documents and brochures directly to the independent contractor's home office, and they are starting to assign local sales people to those independent contractors.
"In the past, if a host agency was in Chicago and an independent contractor sold something in Boston, the local Boston rep got cut out of the picture, and Chicago got the credit," Ahlsmith says.
"Because the names and productivity are shared, they assign a rep to that person and invite them to breakfast seminars and training sessions, fam trips and inaugurals. The sales reps share the credit."
When you select a host, make sure the one you choose has the right stuff to keep you happy and your business healthy. Future issues will discuss red flags to watch for in choosing a host, and agents' own host agency stories.