Written by Written By: Tom Ogg, Co-Founder and Co-Owner –
HomeBasedTravelAgent.com
One of the first issues that an agent must consider when starting their home based travel agency is whether to use a host agency or go independent. There are substantial benefits enjoyed by both paths and each individual must decide what is best for his or her business.
Generally, agents newer to the travel business choose to go with a host agency, while established agents tend to elect operating independently. However, this is constantly changing in today’s environment where technology and new distribution opportunities are evolving. There is not one right answer for agents who are considering this aspect of their agency, but there are several benefits to each route. To make matters even more confusing, some agents work with multiple host agencies, while others make a decision to work through a host agency for some transactions and to operate independently for others.
As you can see, finding your way through the maze may require some free thinking on your part. Each individual business has its own unique challenges and opportunities and the right answer for you may be completely different from anyone else. Following are 5 compelling reasons to consider each option and hopefully they will allow you to arrive at a suitable decision for your business.
5 Compelling Reasons to Use a Host Agency
Support and Community:
I suspect that the number one benefit of working through a host agency is that you have a built-in support network and a community of other agents also working through the host with whom you can connect and network. Operating a home based travel agency can give one a feeling of isolation and by having a cadre of agents in a similar situation can really help eliminate the isolation factor. Also, having seasoned agents to draw from for their experience and knowledge is a great way to greatly improve your viability to your clients.
One of the most valuable things that host agencies provided during the COVID pandemic was supporting their agents during the chaos. Host agencies provide a good amount of revenue to suppliers based on the total of all of its agents. This puts the host agency in a great position to negotiate for operational support such as refunds, information and results. An independent agent without a host agency may find it difficult to get a supplier to respond during times of crisis. The elements of community and support should be major considerations when considering the use of a host agency.
Operational Relief:
Most new agents don’t understand the burden of accounting, bookkeeping, filing, banking, managing finances and the myriad of operational duties that makes a one-person operation so challenging. Using a host agency that does most of the more complex operational tasks behind the scenes frees up the agent to sell more travel. Most host agencies will offer automation and a simplified operational interface with the agency. This benefit alone will make a huge potential impact on an agent’s productivity. The operational relief host agencies provided their agents during the pandemic was a very important benefit of working with a host agency.
Commissions:
Most host agencies gain overrides (extra commissions) based on their network’s productivity with any given supplier. As an example, a host agency may earn 16% commission from a cruise line by virtue of the network’s productivity. Even on a 70/30 commission split an agent may make more money working through a host than directly with a supplier at the normal 10% commission (16% x .70 = 11.2% commission). Since profit is the objective of every agency, this is a major consideration. Gaining favorable commission rates is a key consideration when working with a host agency.
A host agency’s pricing advantage is another major benefit. They may have hundreds of “group” departures that offer pricing far better than booking the same product from a supplier’s inventory. Many cruise lines and tour operators will reward productive agents with promotional budgets and extra incentives which allow the pricing through a host agency a huge advantage.
Consumer Technology and Leads:
Many host agencies offer consumer websites that are branded around the individual agent. The host keeps the content current, which leaves the agent more time to sell travel. Some host agencies offer consumer leads to their agents and this is an excellent solution for experienced agents that know how to close sales. Leads can become a very important aspect of a host / independent relationship.
Most host agencies have sophisticated digital marketing programs for their agents that may include email campaigns, social media feed, digital media in the forms of brochures, ebooks, books, video and other interactive media. Staying on top of digital marketing trends and opportunities makes working with a host agency extremely motivating.
Ease of Entry:
Especially for newer agents, a host agency can make it possible to start selling travel immediately. Since all aspects of the agency are fully developed, there is no need to spend time organizing an operation, contacting and negotiating promotional programs with suppliers, creating a website and other such tasks that a host may provide you from day one. If you are newer to the industry and want to get started selling travel efficiently a host agency may be your perfect solution.
Many host agencies offer mentoring, training and ongoing supplier educational programs. This can propel you into your successful operation at an accelerated rate and is certainly a major benefit of using a host. This is true especially if you are operating your own business for the first time.
5 Compelling Reasons to Go Independent of a Host Agency
Establish Your Brand:
If you are specializing in a narrow niche of travel establishing your brand and value proposition with the industry will help you create the relationships that are so necessary for your success. Suppliers of niche travel products are quite anxious to work with agents that specialize in their niche and will directly enable you to effectively sell their products. By working directly with these suppliers you can offer your clients a level of service that you may not have been able to accomplish working through a host agency. Suppliers see your brand, not a host agency’s.
Commission:
By operating directly with suppliers you will not be splitting commissions with a host agency. If you are specializing in a narrow niche, suppliers may offer extra commissions as an incentive to receive a disproportionate share of revenue within your niche. Because of your specialization productivity overrides may be much easier to achieve because of the narrow focus of your business. While you may lose the advantage of a network’s revenue when it comes to overall commissions, you may gain exceptional commissions based on your own productivity.
Consortia:
By operating independent of a host agency you may elect to join one of the industry consortia to gain both marketing support and higher commissions. Many host agencies depend of these groups for their higher commission levels that are split with their agents, but you may be able to join directly and retain the full commission. Understand that a consortium is under no obligation to sign you up as a member, but if you are producing meaningful revenues for their preferred suppliers, a consortium may choose to have you in their network.
Grow Your Business:
Once you have established your business, it becomes quite easy to then grow it in any number of directions. You can add independents of your own by acting as a host agency or add employees depending on what your needs become. By having existing supplier relationships, it becomes realistic to think that by expanding your revenue with them, you may also expand your commission level and promotional support package, as well. This will all lead to greater profitability and success.
Control Your Business:
By operating independently you have complete control over your business and may change directions upon a moment’s notice. This plays an important role when world events affect the very nature of the travel industry. You have complete financial control over your business and may choose with whom you do business giving you an element of security in difficult financial times.
As you can see, there are many things to consider when contemplating the question of whether to work with a host agency or go independent of a host. For numerous articles regarding how to work with host agencies or how to establish an independent agency visit www.HomeBasedTravelAgent.com and search the “Articles” section. Best of luck in whatever you decide.