When the airlines eliminated the commissions paid to travel agents many of the "brick & mortars" began to simply go out of business. The remaining agencies began to shift their focus to the leisure travel market with cruises and land tours including hotels and car rentals and held on to their store front operations at least for awhile. Each year more and more independent store fronts are closing their doors due to unprofitability and increased overhead costs. Those remaining will probably be part of a chain or franchise operation.

Many of the brick & mortar agencies, upon closing their doors gave up their ARC credentials and the owners and employees began to work as outside agents for those remaining store fronts. A few of the store front agencies realizing an income potential, began to focus on these outside agents. These agents would generally work both in their home and in the store front agency depending on how the agency owner supported them. These agents were for the most part, experienced and required little support other than to pick up travel documents, brochures and other information from the agency.

The focus by the owners of most of these "brick & mortar" agencies were on their full time staff and the day to day business of operating a store front agency. As the years passed, more and more of the store front agencies continued to close their businesses, as mentioned earlier. Many began to work from their home or affiliated themselves with those remaining store front agencies. Many store front agencies were confronted with a growing population of outside agents who preferred to work out of their homes. The numbers were increasing as many less or no experienced agents realized there was potential income and convenience in working from home. The problem was that most of the store front agencies were not equipped to handle any number of outside agents. They offered little or no support or training to these emerging home-based travel agents.

A few of these store front agencies and even fewer of those agencies that held on to their credentials but closed their store front operation had a vision that if they could train and support the so-called home- based travel agent while holding on to the more experienced agent, a whole new revenue stream would open up. These agency owners began developing business models that would include attracting, supporting and training this growing market of home-based travel agents, especially the newer agents entering the industry. With the advent of the tremendous growth of the home- based travel agent, today's host travel agency was born out of what we once called fulfillment agencies or the old store front travel agencies.

Today's host agency is made up of many business models. There probably is a different business model for each host agency. The basic definition of a host agency is a retail travel agency with ARC, IATAN or CLIA accreditations who loans out their credentials to others for a piece of the commission or a transaction fee. As in any industry in its infancy problems arise including some business models with questionable character and/or goals.

Most host agencies today further define themselves with much of support and training and marketing technology and programs. Many hosts will only affiliate with experienced agents while a few more will engage both new and experienced agents. There are also a few agencies that find it beneficial to call themselves a host agency when their business model suggests something else.

However, the travel industry defining a host agency may never come to fruition. PATH, an organization for host agencies, are attempting to further define a host agency but time will tell as to their success. Host agencies are themselves evolving and we are beginning to see who the main players in this segment are. There will always be room for the smaller and midsize host agency however, their business model will dictate as to whether which of them will become successful.

The larger host agencies such as Nexion and Travel Planners International consider themselves the "big boys" in this segment and rightfully so. Their agents total into the thousands. The up and coming host agencies such as America's Vacation Center, Travel Partners, Coral Sands Travel and Travel Counselors are more midsize hosts with less than 500 affiliates each but growing rapidly. Perhaps they will be tomorrow's "big boys." There are hundreds of small host agencies that have from just one or two affiliated or home-based travel agents, to a couple of agencies that have from just one or two agents to a couple of hundred. I foresee the smaller Host agencies merging together with the larger hosts creating the "mega" Host Agency as cruise lines begin to increase their commission level requirements.

Host agencies for the most part, are a very apathetic group much like the travel agents they support. Other than the group of 24 host agencies that are presently members of PATH, the host agency organization, there are hundreds of host agencies that fall under the basic definition of a host agency that operate totally independently from each other and for the most part do not communicate with each other. The reason may be just the competitiveness of this segment or lack of self confidence. It is an historical fact that when bodies get together and share the same goals that body becomes more efficient and trusting of its fellow members. This has yet to happen with host agencies.

Host agencies also specialize in different areas. Some work with new, inexperienced agents, others work with experienced agents only. Some work in the corporate world while others are in the luxury niche markets. Still others are cruise only hosts. There is a host agency for everyone's needs or interests. The multi-level-marketing travel agencies with their own unique business model, is also considered by many as a host agency. MLM's as they are more commonly called are having a huge effect on today's host agency and travel agent. Multi-level-marketing companys, or MLM's have been around for decades. The bulk of today's MLM's entered the travel agency scene within the last 10 years. The largest and best known MLM is YTB International. The public company is controlled by the Tomer's father/son team and Kim Sorenson, all of whom were founders of the well known controversial insurance MLM company, A. L. Williams.

YTB International and other MLM business models operate differently from each other but they all have the same common thread. The bulk of their revenue comes from the recruitment of, who they call, Referral Travel Agents (RTA's), the sale of websites and training and other products. A very small percentage of their revenue actually comes from earned travel commissions.

MLM's to this date do fall into the generic description of today's host agencies; the lending of credentials to affiliates desiring to sell travel for a piece of the commission or a fee. However, host agencies as well as the host agency organization, PATH, are attempting to redefine the definition of a host agency. Today's host agencies generally offer continuous support and free training materials, which is still lacking from the so-called MLM host agencies. More recently, MLM's like YTB International are seeking ways to bring more training credibility to their business by bringing aboard well known industry trainers and celebrities to serve on their Board of Directors..

Travel suppliers today are still confused over the MLM phenomena and the host agency in general. Travel suppliers are in the business of selling their products period. Most are concerned over taking a stand either way as they feel it may hurt future sales. Many of these suppliers are, in fact, realizing that only a small percentage of home-based agents actually produce sales.

Suppliers have discovered via their own incentives offered that the MLM affiliates or referral agents that actually produce sales represent a small percentage of the MLM affiliates. While the so-called "legitimate" host agency or non-MLM produces a much larger percentage of the real sellers. Nevertheless, travel suppliers today have mixed feelings on the MLM travel agencies. You just need to look at the cruise lines where Carnival has been a great supporter of the MLM while Royal Caribbean has taken action against those that promote the travel agent photo ID cards, a by- product of most MLM's and other violations known only to them.

The MLMs emphasize the selling of cruise sales as their product preference. They believe cruise sales have the largest potential because so few consumers have really experienced a cruise. MLM's in an effort, to rid themselves of the so-called "card mill" tag have replaced their own photo ID card in many cases, with today's CLIA photo ID card. CLIA's requirements to obtain their photo ID card are minimal, making it easier for an untrained consumer or referral agent to obtain one. CLIA also promotes their photo ID card with the MLMs and generates the sale of hundreds of photo ID cards every month.

Today's travel agency MLM threatens the existence of the individual travel professional in several ways.

1. Travel suppliers who generally accept the MLM referral agent or affiliate, loses sight of who or where the real travel professionals are. The sheer number of MLM sign-ons numbering in the thousands are actually diluting the value once offered by these "real" travel professionals.

2. Travel suppliers have not been able to control these referral agents or affiliates from taking advantage of their own incentives such as FAMs. However, some travel suppliers are beginning to note the difference and re-write their FAM requirements. These suppliers still represent a small minority.

3. The individual travel professional is disappointed and discouraged over the fact their recognition and status is being reduced without much help from the supplier.

4. Travel organizations, with little exception, have failed to express their viewpoints and discussion with the MLM's and the effect on the travel professional. There hasn't been a white paper written on MLM's since 2000 when ASTA wrote a white paper on "card mills.

5. It is common knowledge as well as common sense that when you have a seller of travel that is untrained concerning the product he or she sells, you will have complaints. The more complaints that arise, the more of a possibility that local and state laws will be enacted that may represent "overkill" as an attempt to solve a problem. That's the way many governments work.

6. The very nature of the MLM, whose primary goal is creating membership fees and website sales by offering marketing incentives also creates an atmosphere of mistrust and may lead to scams perpetrated by those affiliates obsessed with creating more income for themselves.

7. The individual travel professional, travel agent organizations, the media and travel suppliers of course, are unable to as individual groups to join together and terminate business with the MLM's for fear of subjecting themselves to anti-trust violations.

The solution to this problem may be as follows.

1. It comes down to a question of whether organizations, the individual professional, media and the travel supplier are willing to engage in awareness programs and promote higher standards and increased requirements for all travel agents. This can be done without identifying any MLM or other host agency model as the standards would apply to everyone.

2. These same groups mentioned above must look at the MLM model as a double edged sword. One side has the thousands of untrained affiliates who are more interested in perks, FAMS and the family discount (commission) and the other side with the potential loss of and/or dilution of the travel agent professional who really represents the sales of products or fees. Photo ID cards or numbers issued by IATAN, CLIA, TRUE AND TRAVEL SELLERS remain key to reducing one side of this double edged sword, particularly CLIA who represents the cruise lines in a marketing capacity.

It is a travel industry community and hopefully not a state or federal government problem. Do we wish to continue on in a fragmented state or do we work toward a real professional travel industry?
 

About the Author

 Peter Stilphen is CEO and founder of the Host Agencies, Coral Sands Travel, America's Host Agency and the World Cruising Society. He was the Founder of PATH, a Host Agency organization and is the Founder and Managing Director of STARS, a non-profit upscale organization for the Individual Travel Professional. Mr. Stilphen is also known for his provocative articles concerning the state of the Travel Agent distribution system.