State of the Travel Industry As 2008 Draws To A Close – Opinion

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!

The Travel Business: MLM Host Agencies

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.

The Travel Business: My Business, My Opinion

Last month Royal Caribbean, Celebrity and Azamara Cruise Lines made a broad and sweeping decision that has caused rumblings (both positive and negative) in the travel industry and among travel agents. Over the past year or two there have been “host agencies” that look like they are a multi-level marketing business.

Many people still consider Multi-Level Marketing to be a pyramid scheme. However Multi-Level Marketers have become mainstream and legitimate businesses. Many people have thrived in that environment and do not seem to be a harm to the public or the individual consumer.

I did not realize, until I was talking about the events of the past few months with my networking group, that most people did not have a clue what the travel agency business model looks like.  And they really did not care unless they were using a travel agent to help plan their vacation.  Then they wanted to know what it would “cost” them to have an agent/agency help them.  So the question would then come up about how we are paid. 

I am going to describe the different Modus Operandi of the travel agency today, as I understand it.  There will be several blog entries following this one as I try to define for myself what each business model is and how I fit into the industry and the business of being a travel consultant.