Mark Pestronk
Mark Pestronk

Q: My agency has been essentially dormant for the past 10 months. We have kept our ARC, Iatan and CLIA appointments, and we have paid a small, monthly fee charged by our GDS vendor, but we have given up our office lease and are working from home. Once we start up again, I am thinking of giving up our industry appointments and signing up with a host agency. First, what, exactly, is a host agency? How does an agency qualify to be one? Are there any special legal or financial requirements? How do they make their money? What are the advantages for experienced advisors like us? What are the drawbacks? Can you recommend a good host agency?

A: By giving up your own appointments and joining a host, you would be following a major trend. Many agencies today seem to be facing a choice like yours.

A host agency is nothing more than a regular travel agency that has independent sales contractors (ICs). There are no particular legal requirements, so theoretically, even your dormant agency could become a host if you sign up ICs.

Legally, most of the biggest hosts now are separate companies from the wholly owned, original travel agency, mainly to ensure that the ICs are not reclassified as employees of the agency by government authorities. Indeed, some hosts have given up their affiliated agency entirely and sell only through ICs.

Hosts make their money in three ways: first, by taking a portion of the commission that suppliers pay before the bulk of the commission is passed through to you. Second, by receiving volume or share-based overrides from suppliers and GDSs. Third, by charging fees for some services, although the fees are often just reimbursements for the host's out-of-pocket costs.

Some hosts have hundreds or even thousands of ICs. Most of those have formal programs, including training, large meetings for idea exchange and sales and booking support. Many also offer marketing, client relationship management, accounting and booking tools.

However, the biggest advantage is undoubtedly that hosts have higher levels of commissions than you would be able to get on your own. Hosts obtain these levels by skillful negotiation and pooling the volume of their ICs.

Cruise lines, tour operators and resorts almost always offer higher-than-standard commissions to host agencies, and sometimes hotels, car rental companies and even airlines do, as well. Some hosts also offer negotiated group programs that enable you to sell at a discount.

The drawback to being hosted: once you give up industry appointments and a GDS contract, you are at the host's mercy to keep you in business. The host could terminate your contract, typically on 30 days' notice, for any reason, leaving you high and dry.

Finally, I represent many host agencies, so I cannot recommend one over others without having a conflict. I know that the web is full of host agency reviews and the like, so you can do your own research and get references. 

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