Agent Issues The war for independents: Host agencies vie for ICs By Jamie Biesiada / December 12, 2017 Share 1 Photo Credit: TW Illustration by Jenn Martins -- The number of agents working as independent contractors (ICs) rather than as agency employees has been on the rise for years, and it's not surprising, since the model is largely viewed as a win-win for host agencies that can bolster sales and add specialists to their ranks at a lower cost than by bringing on employees.As for the ICs, they can essentially run their own business with the flexibility their lifestyle requires. In recent months, the ranks of ICs have increasingly been bolstered by interest from prospective contractors who are new to travel.Meanwhile, there has been a great deal of movement from hosts and consortia competing for ICs and advertising their competitive advantages offered by their toolkits, as well as in price and culture. While larger hosts tend to have advantages on the pricing front, smaller hosts are surviving. And all, regardless of size, are working to differentiate themselves and their offerings.Still, recruiting ICs can be tricky. Most importantly, hosts face the challenge of protecting their agency from fraud, but perhaps the most daunting challenge is policing their new ICs to ensure that they perform at a high level and won't turn potential clients away.Industry trade shows, such as the ASTA Global Convention earlier this year, offer hosts an important platform where they can meet potential independent contractors. Recruiting ICs new to travelIt's widely recognized that the number of agencies in retail locations has been decreasing for years. According to ASTA, brick-and-mortar agencies made up 43% of ASTA members in 2011, but they had dropped to 35% by 2016. Meanwhile, the number of home-based agencies increased from 31% in 2011 to 44% in 2016.Over the past year or so the industry has seen a flood of ICs interested in affiliating with hosts, either knocking on the hosts' doors themselves or going through channels such as consortia.David Kolner David Kolner, senior vice president of global member partnerships at Virtuoso, calls it the "IC-fication" of the industry. This year, Virtuoso has added more than 1,000 agents, many of whom are ICs joining existing member agencies.Virtuoso announced that growth at its annual Travel Week in August, and the trend has continued into the fall."We're absolutely still seeing an enormous amount of growth on the IC front," Kolner said.While agents working as employees of agencies often decide to strike out on their own as ICs, many of the new entrants of late tend to be new to the industry. Starting out as an IC is a popular way to get up to speed in the industry and build experience, Kolner said.Nexion is experiencing something similar."There are some agents who come from different hosts or may come from being employees at an agency, and those continue to happen," Nexion president Jackie Friedman said. "But there are so many new people interested in coming into the travel industry."She attributed that interest to several things. First, compensation for salaried positions might not be high enough. Additionally, becoming an IC is a good way to start in the industry while maintaining another job, and it's a good second career or bridge to retirement."As the model becomes more prevalent and as more folks hear about it, we definitely have seen an increase in inquiries," she said.Jackie Friedman Friedman posited that hosts' presence at industry conferences like Travel Weekly's CruiseWorld and CLIA's Cruise360 could be among the reasons for that increase.Maggie Fischer, chief marketing officer at CCRA, which recently introduced a host agency membership category, suggested that travel's prevalence on social media has been another reason for that increase. She called it a "game-changer" in attracting people to an industry they didn't previously know could provide viable careers."The beginning of my career, it was such a fight to even prove that travel agents still existed," she said. "And now, it's kind of a scramble to accommodate all of these people who want to break into the industry."Avoya Travel's senior vice president of sales, Scott Koepf, said that the industry is experiencing a "huge influx" of new-to-travel individuals looking to affiliate with host agencies as ICs.Historically, Koepf said, host agencies came onto the travel scene about 15 years ago, and "when the dust settled a little bit, you ended up with the biggest and the strongest host agencies that remained." Since then, he said, the surviving hosts have been competing for the same pool of IC agents.At this point, he said, there are only so many ICs in the industry who have not already aligned themselves with a host, so now hosts are setting up programs to be receptive to new-to-travel ICs, which is another factor explaining why the influx is happening today.Movement from hosts, consortiaThis year has seen a number of efforts by hosts and consortia competing for ICs, among them CCRA's addition of a host agency membership.Earlier this year, Worldview rebranded itself as Travel Edge and posted its commission splits, fees and perks for ICs online in a bid to attract both inexperienced and seasoned ICs. Cheryl Nicholson, executive vice president for leisure, said the company has been bringing in a mix of both kinds of ICs.Also this year, Travel Leaders Group announced a merger with Altour, increasing the merged company's scale and breadth, which CEO Ninan Chacko said at the time would make it an even more attractive home for ICs.Perry Lungmus, vice president of Travel Leaders Network, said the company has acted as a sort of matchmaker between people interested in affiliating with a host and Travel Leaders' variety of host agencies. Nexion is one, but a number of Travel Leaders Network members also operate as hosts, as do brands under the Travel Leaders Elite Travel Division."I think there are a lot of interesting value propositions given the scope, the scale of what Travel Leaders Network is all about," he said.Nexion representative Wendy Graziano meeting with agents during Travel Weekly’s CruiseWorld in 2016. Photo Credit: TW photo by Jamie Biesiada Competing on price, tools, cultureConsidering the number of hosts both large and small in the industry today, competition for ICs is real."There is a competition, per se, because we're all recruiting," said Gail Grimmett, president of the Travel Leaders Group Elite Travel Division. "I feel there's a lot more to offer an IC other than just talking about commission split, because there are other things that drive the value of the service that they provide that, in the end, helps the client in every single way, whether that's customer service help, whether that's technology help, whether that's being able to get them their upgrades or waivers."According to Kolner, hosts are competing in three primary areas: price (commission splits, fees and the like), the toolkit they offer ICs (both technology and physical, like rented office space) and culture."Culture is that je ne sais quoi you cannot put your finger on but is the part about why you love working at a company," he said.Friedman said Nexion's No. 1 recruiting tool is referrals from existing agents. A continued presence at industry trade shows and in digital and print publications also helps, as do regular demos and webinars about Nexion."Obviously, it is somewhat competitive," she said. "My philosophy is that there's no host that's perfect for everybody."Price certainly plays a factor."I think that regardless of the size of the host agency, we're all competing on the compensation model," said Nicholson, whose Travel Edge pays 100% commission to its highest-performing agents.Interestingly, though, most hosts contend that pricing is only one piece of the equation, making it unlikely that larger hosts could price out smaller hosts."I think if it were going to happen, it already would have happened," Friedman said. "To me, an agent really needs to understand the correlation between what they get, both in terms of revenue and in terms of support."Many smaller hosts are leveraging relationships with agency networks and consortia to combat factors like not being able to develop technology suites in-house and also leveraging those networks' relationships with suppliers."Small can sometimes be great," Lungmus said. "It really can be exactly what an IC is looking for. They have identity, they have connection, rather than being one of 1,000. There's nothing wrong with that one out of 1,000 if that works for you as an IC, but a lot of them want the connection."Ann Chamberlin agreed that small works for some. Chamberlin is the senior vice president of membership, marketing and strategic partnerships for ASTA and the president of the National Association of Career Travel Agents.Smaller hosts tend to be more boutique and focused, she said."The IC will go where they feel there is a fit, and what's good for their business and what's good for their customer," she said.Jenny Westermann owns a smaller agency that hosts ICs: Sanders Travel in Fort Worth, Texas, a Virtuoso member that has always operated by using ICs, with 28 in three states today. Its staff of 12 works to support those ICs."The commission splits and stuff have been a big topic, and it's something we work on and we try to be a player in that game, as well," Westermann said. "But we also realize the fact that what we're trying to build here does have a little bit additional cost to some of those things we're trying to do, and I do think that people do see some value to that."ICs tend to take into account other value propositions, especially training.Savannah Hill, a Nexion-hosted IC based in Rockwall, Texas, decided to enter travel after a career in education. With three children under age 4, the flexibility of being an IC appealed to her. Nexion stood out, she said, because of the amount of support and training it offers a new agent."Even if I could go to another agency where my commission might be higher, the cut might be higher, I know that I wouldn't be getting the support I have or the training I'm getting to make my business do as well," she said. "I wouldn't be selling as much."Policing against fraud, bad agentsWith an onslaught of new ICs comes a new set of challenges for hosts and consortia: policing the efforts of beginners.When it comes to fraud prevention, there are many steps hosts can take, often following the advice of their consortia. In 2008, Bonnie Lee, CEO of Travel Quest, a Travel Leaders Network member, had an incident of fraud in her agency and was left footing the bill."I am a woman who learned," she said.Today, Travel Quest has a program that scans GDS transactions every 15 minutes every day looking for suspect transactions. Before even bringing on an IC, Lee does a background check and uses online searches to validate as much as possible (for instance, how long a prospective IC has had their website)."You do your best to validate that what they're telling you is true," she said. "Then, another part of it is just gut instinct."Betsy Geiser Betsy Geiser, vice president of Uniglobe Travel Center, said that finding potentially fraudulent ICs "has been a learning experience for many of us.""There are signs we look for in the initial call and screen out those who are only looking for benefits or want GDS access with no previous experience," she said. "There are fraudsters who make their rounds, host to host, and we are well versed on what to ask and what to look for. If they are new to the industry, we look for passion and previous business or sales experience and the understanding that building a new business can take some time to turn a profit."Uniglobe also runs background and reference checks and conducts online searches, and Geiser said the agency is unafraid to sever a relationship if suspicions arise.Saying no to a potential IC is important, according to Stephen McGillivray, chief marketing officer for Travel Leaders Group."I think the host has to have a strong enough business foundation where they're filtering out ICs they don't want," he said.Stephen McGillivray In many cases, the 80/20 rule applies to hosts: 80% of sales come from 20% of ICs, and that's the 20% that hosts have to keep their eyes on. Consortia like Travel Leaders Group help hosts create business guidelines to do so, McGillivray said.Fraud aside, however, it's difficult to filter out ICs who are, simply put, bad agents."It's hard, and the answer is you do the best you can, but you're definitely going to run into challenges," Friedman said.Vetting ICs properly is a big part in bringing on quality agents, she said.ASTA's Verified Travel Advisor certification is one industrywide attempt to identify professional agents vetted by their national trade association."Affiliation with ASTA goes a really long way because of how firmly we have grounded ourselves in ethical standards," said the Society's director of communication, Erika Richter.Paying attention to what ICs are doing is also important."Like any other business, we do hear when a client isn't happy," Grimmett said. "We listen, and we watch the agents."But providing training is also key. Nexion requires new-to-travel ICs to participate in one of several training programs it offers, which come at a cost."By making them have that kind of investment in their career, it does weed out people who are truly hobbyists," Friedman said.Despite the challenges that come with hosting and bringing inexperienced agents on board, though, most predict the IC model is here to stay and will only grow in popularity."Everything that I'm seeing is indicating growth in this model," Nicholson said, "and I haven't seen anything that would indicate that that's going to change."