Free Hosting Forever?
by Andi Mysza

article continued from

Following the airline commission cuts last decade and the 9/11 terrorist attacks, most agents were forced to restructure their businesses to reflect a more sustainable pricing model. It’s simple: It’s fee and/or commission based. Period. Based on your business profile, it’s how you envision maximizing your profits in the long run. Your pricing model accounts for your time and labor, as well the expenses associated with running your business (and, hopefully, an acceptable profit to fund future business growth).

Now, what do you offer your clients in exchange for the price/fee you’re charging? I’m surmising you’d offer any or all of the following: reservations, advice based on your professional knowledge, recommendations, product comparisons, buying power with suppliers, group contract negotiations, corporate travel and reporting, and the list goes on. To take it a step further, would you be in business very long if you rebated 80 percent to 90 percent of your commissions without generating any other fee income? Obviously not.

The hosting business is no different. On a daily basis, we face agents who are “host shopping” with only two questions:

1. What’s my commission split?
2. How much does the program cost?

Why is this? Why is it that agents become their evil twin (e.g., the clients described above)? Because, over the last one to two years, the hosting industry has trained them to act this way. Our segment of the business has become extremely competitive and muddled with would-be “hosts” offering something for nothing – or, worse, nothing for nothing.

To illustrate: In the “olden days,” a 50 percent commission split was commonplace for independent contractors, and it was generally offered at no cost with very few services except the use of phone lines and an ARC number from a local brick-and-mortar agency. Over the past five years or so, the price of poker has gone up. True hosts have developed complete hosting programs designed with the home based agent in mind – including marketing, technology, support, accounting and more. Fees were instituted by hosts in exchange for these increased services.

As the market began to proliferate and mutate (e.g., MLMs, card mills, and referral programs calling themselves “host agencies”), it became increasingly competitive and many hosts have resorted to “price” to compete. In many instances, this has taken the form of increased commission splits combined with low/no fees which is not sustainable long term.

It’s unfortunate for the home based agent industry, but there will be fall out by definition. It takes people and technology to run our host businesses. Both cost money. And, it will be the agents themselves who will be hurt by this in the long run.

What’s the lesson to be learned from this historical perspective? Making a host agency decision is very important to your business. It’s a long term decision, as it’s not desirable to bounce around between hosts. Take the time to do a proper evaluation before you join a host. Understand what services/products are included if you join (it is not always clear in the marketing hype) versus what you have to pay for as you get nickel and dimed after you join the “free” program, the host’s historical/current profitability, debt on the host’s balance sheet, length of time as a host, reputation among your key suppliers, Better Business Bureau rating, level of personal support, and complaints (they can be found by Googling). Find a stable, ethical host with whom to partner and develop a long-term working relationship.

Your free host program can’t be free forever, so why even go there?

Andi Mysza is the president of MTravel.com, a division of Montrose Travel in Montrose, Calif., and a member of the board of directors for PATH, the Professional Association of Travel Hosts. PATH is a new association that aims to set the standards for the travel host industry. You may reach her at andi@montrosetravel.com.

(Credit: Andi Mysza)