TopDawg Travel

Archive for the ‘Travel Business’ Category

After I survived my first year as a home-based agent, with a really terrible host agency, I remember realizing I was, indeed, a Travel Professional, even though I was deeply defensive about being a “home-based” agent.  Being served by a host agency was akin to blasphemy back then!  Brick and Mortar/Retail agents (except for a couple) and vendors alike tended to shun me at vendor/supplier “show-n-tell” events.  I have been around long enough to remember being a minority and an outcast.  Now the home-based agent is an acceptable form of travel professional, and a majority.  Independent contractors have proven to be the cost savior for many B & M’s.  That really came about in only a few years. 

Are we now looking at an alternative business format that is still in the outcast mode, but will one day be viewed as a legitimate business format? 

I am saddened that MLM has invaded our industry.  YTB is the big bad MLM but there are others that are travel clubs or MLMs (and the customary rant – “card-mills”) that we in our industry don’t rant about.  In other industries, I have seen MLM becoming viewed as less and less a pyramid scheme.  Rather it is viewed more and more as an accepted business format (in other industries).

I am not in favor of MLMs (I remember the old “Amway” parties of the ’70s—-argh!).  Nor am I in favor of the travel clubs and other alternative business formats.  But business will go on, with or without my approval.  I think ranting over YTB and Kim Sorenson being included in panels or by vendors is really just a temper tantrum on the part of agents.  The really BIG question is whether the travel industry as a whole is going to govern itself or eventually be governed.  When consumers get damaged by the MLM/travelclub/card mills of the industry and lawsuits happen, the industry will become “regulated” by government. 

Politically and as a nation, I believe we are entering an era of (re)regulation after so many years of de-regulation in a great number of industries.  Travel and hospitality could find itself under far more stringent regulation if consumers become damaged.  Better the industry regulate itself and establish criteria for “professionalism” for its members.  And that is what these strings of comments on lots of travel industry forums is really about.  Everyone who has an opinion and the wherewithal to start a membership organization seems to be starting one with some form of “accreditation”. 

I may be a little old fashioned, but I am proud of being an IATAN card carrying travel agent.  I also have my CLIA card, am a member of the Travel Institute and more.  These days there are enough associations and alphabet soup designations to choke a horse.  Maybe some joining of forces might be in order.   Instead of pointing fingers at YTB and anyone who allows Sorenson to open his mouth, maybe we ought to be thinking about putting some standards in place, AND (very importantly) getting the word out about those standards to the consuming public.  I am amazed at the amount of vehemence within the industry, yet the ignorance about the conflict by the public.  Maybe educating the public, ie. the consumer, is really the solution to the conflict we are facing internally.  And YTB (and others like them) may very well survive.  But they will have to evolve just as much (if not more) than the rest of us.  Card Mills are starting to become a thing of the past (YTB no longer issuing IATAN-look-alike cards).  Organizations are tightening up their requirements of qualification for their cards.  Vendors are no longer “giving away” “FREE” fam trips (no such thing as a “free lunch”). 

Maybe the hullabaloo about YTB needs to die down.  Instead, start some serious conversation about what constitutes professionalism.  Retail agents, home based agents, organizations and associations, vendors and suppliers, we all need to be included in the conversation.  We may even have to include the MLMs in the conversation.  Let’s get beyond the babble of the rabble and have some serious conversation in 2009!

For what it is worth, this is my opinion of the CPB/DHS & electronics conundrum, along with some (hopefully) good ideas to be implemented: 

For several months now I have been reading about the crisis of international travel and re-entry into the good ole’ US of A with electronics in hand.  I have several clients who regularly travel internationally.  As their travel consultant I try to read up on, be informed and forewarn them of issues and events.  One of the most worrisome is that of having your computer, ipod, cell-phone, camera, blackberry or any other electronic method of carrying data being perused, rifled and even confiscated – sometimes to never be seen again.  Recently there was a an article that I “dugg” earlier this weekend and posted yesterday about this issue and some very good advice offered.  If you consider yourself a “regular” person, with no particular interests that could be thought of as deviant or political or any other classification that DHS &CPB would consider interesting, you probably think it will never happen to you; that it happens to people who “deserve” to be scrutinized; and/or people who may be ethnically, politically or religiously different than you are.  What this and other articles I have read emphasizes is that this is actually “non-discrimatory”.  It can happen to anyone who travels internationally, re-enters their home country, and is carrying a piece of electronics with them.  

So I offer this opinion and information as a means of helping our country remain safe from terrorism while protecting travelers from distress, loss of personal or privileged information and to protect against potential opportunity for identity theft, and/or, at the least, loss of valuable property.  Yes, sometimes they take a computer or other electronics.  You never get to see it again and have no financial remuneration for it.  You may also have lost the only copy of everything you have on that device.

#1:  Before you travel, back up everything on your device. Depending on the size of your memory device, you may need to purchase a portable hard drive and back up, back up, back up.  What the heck, you should be doing that anyway in case your device dies an unexpected death.  You would not want to lose that novel you have been working on for the past 10years, now would you?  Or last year’s tax return you did not print a copy of for your files?

#2:  You travel a lot and you travel internationally occasionally.  You might want to think about getting some online storage space for your truly valuable, potentially confidential, potentially damaging information.  It may seem scary to put it on a server, no matter how secure the owner says it is, and to access it through a secure connection over the internet.  But that is not as scary as having unscrupulous people rifling through the information or having it become public without your permission.

#3:  Do not carry any electronics with you and become a person who uses some of the oldest tools around – a pencil and paper. 

Mostly, just think about what personal (and otherwise) information is contained on the electronic devices you carry on your person.  Use discretion, no matter where you travel:  on the streets of your hometown, across our nation, or around the world.

A couple of years ago, some “host” agencies decided to try the multi-level marketing approach.  The down side to this was their marketing ploys.  They suggested that if you sign up as an agent with them you would get cheap or free travel as long as you paid them a sign up fee, a monthly fee and an annual renewal fee.  There might or might not be other fees as well.  You are encouraged to “sell” your family, friends, acquaintances and business associates on the idea of signing up also so they could travel on the cheap or for free.  For each individual you brought into the host, you would receive a “commission”.  

There are three levels of status in such a company:  the “director level”, the “rep level” and the “referring agent level”.  As I understand it, the “rep” makes some money by selling the “referring agent” a website which is provided by the company. 

For the “Referring Agent” to have access to this personal website, they must pay an upfront fee, a monthly fee and an annual renewal fee.  This website is then used to attract people who want to book a vacation or a trip of some sort.  There is a booking engine behind it and the referring agent makes a commission for any trip setup through their website.  They go out and give people their business card and website URL and make money.  Sounds easy enough.  On a website I found,  the majority of the “referring agents” were averaging sub $100 per month in commissions…..mmmmmmm…….well, they are covering their monthly costs to the company for the website.  And they were promised “cheap” or “free” travel as part of the “pitch” to buy in.  Whether they get “free or cheap” travel remains an unanswered question in my mind.

Maybe the better level is to be a “rep”.  Your whole job is to find people who have enough money to “buy” the website and pay the company monthly fees.  And the more dups,, ah, excuse me, agents you bring in, the more money you make.  I read on that website that said “some” reps make as much as $1000 per month.  Still an, mmmmmmmm……

Gee, money for free, travel for free…sounds good, huh?  Well, like someone once said, there is no free lunch.  These “Host” MLMs charge upwards of $1000 for the upfront privilege of becoming one of their agents.  Then your monthly fee can be anywhere from $30 to$100 per month.  The renewal fee is usually in the mid hundreds.  And all your friends, relatives, acquaintances and business associates are also paying that kind of money to the “Host”.  The commission split (should you actually find a vacationing client for travel arrangements) ranges from 40%-60% of the commission paid by the supplier.  Since most suppliers pay only 10% commission on the base rate (not including taxes and fees) of the travel supplied, a $2000 vacation will earn $200 in commissions.  So as the referring agent you can earn $80 to $120 dollars.  Of course, the referred client has to decide that the travel offered is the best deal for them and actually purhase the travel.  On the other hand they can be lured into spending the money on joining the “Host” and getting the so-called cheap or free travel.

I was not able to get the comp plan to open, nor find out what the “director” level does or exactly what they get paid for.  I did manage to see that there were 94 directors in a “power team” position who received $30k plus in the month shown.  Now, I would not mind being in that group!

And who knows if all “MLM” host/travel agencies work like this description.  I have not researched all of them.  I am not even sure if I know the names of all of the MLM type of host agencies that have started up.  I just don’t think I want to give a lot of money to this host just to have them give me a website and allow me to operate under their umbrella.  The thing is, there are some host agencies that do not look any different than these MLM ones. 

Take for instance the one I initially signed up with.  It does not look a lot different than the one I have described above, other than it is local, a lot smaller, not as much “splash”, and have not taken their company “public” and have stock for sale.  I could take a wild guess here and think that the little guys are “wanna-be’s”.  They see the big ones making a lot of money for themselves and hope to cash in on the action.

I do not have answers to the questions running through my head.  I sense that the issue is a real hot potato and may cause hard feelings to emerge between friends and family members who enter this fray.  In the industry it is certainly causing friction.  Factions for all sides are lining up and the hissing match has only just begun.  Every day, every week brings new sides being taken, issues coming out. 

As I see it, when the “public” starts reading about it on page three of the business section of the Sunday edition of their hometown newspaper, we are going to see “comsumer protection” taking a stand and then the “government” is going to step in to protect the innocents.  From there it will all go downhill.  But this is just my opinion.

There is also the “Hosted” agent.  A host agency is one that sets up all the “booking” numbers, has a business telephone number, has the “seller of travel” license number and a negotiated commission rate with the suppliers of travel that is based on the volume they say they are or will do over the next 12 months.  A host agency may also set up educational oportunities for their agents  that are either in-house or through the suppliers of travel they work with.  They usually have a public website and an “intra-net” for their agents so the agents can have a consumer website, be able to see their bookings, see their commissions and get pertinent information about the travel business and their host agency.  The Host agency takes care of collecting the commissions from the suppliers of travel.  Some suppliers are harder to get the commission paid than others so this is a valuable service the Host supplies.  They determine the commission split between the host and the agent, pay the agent whenever they collect from the supplier and sometimes carry enough E&O insurance to cover their agents.  There are industry specific “back office” tools that a “Host” agency must invest in, but they are worth it when there are hundreds, if not thousands, of agents under their umbrella. You might relate it to the business model of the real estate industry.  Lots of real estate agents work for a broker who runs the brick and mortar office, makes sure thier paper work is properly executed and works out a commission split between themselves and the agent.  The same can be true with some financial services business models as well.

Back to “Host” agencies.  The way they make money (and all businesses must make money or they do not survive) is by charging fees.  There is usually a sign up fee, an annual renewal fee, a monthly fee that is based on the services provided and the level of commission split.  There are a variety of other charges, depending on each “Host’s” business model.  Picking a good “host” is possibly one of the most difficult (and crucial) choices an independent outside travel agent has to make, besides deciding whether to be a true “Independent” or a “Hosted” agent. 

As an aside, regarding my personal experience:  In the beginning, I went with a less than desirable, local to the area, so-called ”Host” agency.  (More on this at another time.) There are a lot of us here in the northwest who started with them.  I think this is mostly because we did not understand the very concepts I am blogging about here.  Lots of these people are now rather embittered and have left the business of being a travel agent.  It cost them their savings with nothing to show for it but those bitter feelings.  It is really a shame, because some of those folks might have made good, and maybe even great, travel consultants/agents. 

I feel fortunate to have found a good “Host” agency to become affiliated with in my second year of self-employment.  Thanks is owed for the support of the travel industry towards the new model of travel agencies (the at-home business model).  Those of us who get past the negative first experiences (and have the passion to be self-employed as a travel advisor and consultant) will be there to serve the consumer with knowledgeable advice and travel planning.

So,if I have any really worthwhile advice I can ever offer an aspiring travel agent, it is to pick your “Host’ agency very carefully!

Continuing on the theme of different types of Travel Agency Businesses:  There is the “Independent Agency”.  Kind of like a “Brick and Mortar” independent agency, they have the “booking” numbers that identify them to the government and the supplier of travel that they are legitimate sellers of travel.  They usually would not have a storefront.  They frequently work from their home office and meet their clients in the coffeeshop down the street, or the clients’ office or home locations.  They have their “E&O” insurance, their “Sellerof Travel” license for the state in which they reside and work.  They usually have a website, email and booking engines or other mechanisms.  They are not aligned with any other agency.  There may be only one person, or they may have others they work with as well.  What ever commissions are earned by “Independents” is theirs.  No split commissions for anyone.  They handle all their own “back office” details as well.  There is no one between them and the supplier of travel.  They usually do not have preferential commission structures either.  So while every penny they earn is theirs, there are not as many pennies for them per sale.  There are trade-offs, needless to say.