It amazes me when Independent Contractors (IC) expect 100% commissions from a Host Agency. I’m even more flabbergasted when an IC is surprised to discover that their Host has defaulted on those same commission obligations. Eventually the IC learns that 100% of zero equals $0.00.
I spoke with a concerned agent last week. He was dismayed that his Host Agency had defaulted on their commission sharing arrangement. His prior Host Agency was supposed to pay him 100% of the supplier’s commission. He thought the “100% Host Agency” could make up for the loss by doing more business! Now it appeared that the “100% Host Agency” had run out of money and couldn’t afford to remit the agent any of his earned commissions.
The IC was shopping for a new Host Agency – but he only wanted to pay $100 or less per month for that privilege. It didn’t matter about the number of his transactions, the quality of the suppliers, or the volume of his business. After all, that’s all he had to pay his last Host Agency – only $99 per month. You know…the same one that now owes him commissions for thousands of dollars on his hard-earned sales.
I asked the agent if he rebated 100% of his earned commission back to his customers? Was he willing to work for $100 per month too? “No” was his answer, he worked to hard too do that, and he couldn’t stay in business if he rebated 100% of his commission!
Agents who shop for a Host Agency on the basis of an unrealistic commission spilt are destined to suffer the consequences of those shortsighted win/lose business relationships.
It is in the best interests of an IC to partner with a strong Host Agency. The IC should expect the Host Agency to operate at a profit. If the Host doesn’t operate profitably, the IC should immediately look for a new Host where profit is an important part of the business plan and relationship.
A quality Host Agency should bring far more to the table for ICs than just high commissions however. ICs evaluating Host Agencies should look at several variables before the relationship is finalized, and they should be willing to share commissions and/or fees for the services of a quality Host.
It doesn’t matter as to what state a Host may be located. What is most important is that the Host is a good fit for the IC’s business. If the IC sells cruise and tour business only, the IC shouldn’t partner with a Host that mandates GDS connections or convoluted invoicing systems and procedures.
Conversely, if the IC needs air ticketing service and support for commercial accounts, the IC shouldn’t partner with a Host that only specializes in cruise sales.
The IC should ask for references, and get phone and email contacts of other ICs from a Host prospect. The IC should talk to the references and make sure that they are getting paid the commissions due. Ask the Host or reference to review monthly statements in order to understand the commission reporting and payment process.
Find out if the potential Host’s preferred suppliers are those cruise and tour companies that the IC sells the most. The IC should partner with a Host big enough to have clout, but one that is not so large that they are lost in the masses.
Does the Host answer their own phones, or is the IC lost in voice-mail jail – forever subjected to the automatic call director? Are e-mails answered promptly and clearly? Are e-mails answered at all?
ICs should look for a Host that has a communication system that allows community with your peers. In a traditional office, some of the best advice comes from co-workers. Smart ICs rely on cyber co-workers who are not competitors. The private Host community system also makes sure you aren’t giving advice to “lurking” consumers or competitors — as found on some public web sites.
Smart agents know that there are three major ways to increase bottom-line profit:
- Sell more.
- Make more on what you sell
- Reduce your costs and expenses
A quality Host Agency partnership can accomplish all three.
The IC should expect to earn more on their sales via a quality Host Agency relationship. Plan for your partner Host Agency to make a profit.
Or, you too will discover that 100% of zero will always equal $0.00.
As for the free lunch, save it for your next ship inspection.
John P. Hart, CTC is President of GTM Travel Group, a well-established Host Agency located in Ponte Vedra Beach, Florida. GTM hosts a nationwide affiliation of leisure-focused ICs. Hart first utilized what was then called “outside agents” over 25-years ago in agencies that he owned and operated in North Florida. Even though he earned his CTC 24 years ago, Hart dislikes the term “industry veteran”. He considers that a synonym for “old”!
One thought on “There’s no “Free Lunch” with 100% Host commissions”
Great article! Thanks John!