Nexion's Friedman on the past, present and future of host agencies

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From left, Nexion's Jackie Friedman and Royal Caribbean's Vicki Freed and Michael Bayley on stage of the CoNexion 2018 conference.
From left, Nexion's Jackie Friedman and Royal Caribbean's Vicki Freed and Michael Bayley on stage of the CoNexion 2018 conference.

ONBOARD THE HARMONY OF THE SEAS -- Since their advent several decades ago, host agencies have undergone a number of changes, and Nexion Travel Group president Jackie Friedman predicted that the future promises a shift toward hosts more as providers of services and less as providers of additional commission.

Friedman discussed the history and future of hosts at the recent CoNexion 2018 conference here.

Hosts got their start as agencies that enabled "outside agents" to sell travel, often as a subset of a brick-and-mortar agency. As technology evolved, Friedman said, agents became interested in different ways to run their businesses.

"Some of it was driven by the commission caps and then cuts by airlines," she said. 

At that time, a number of brick-and-mortars operated by issuing air tickets and collecting commission. 

"When that economic changed, when that situation changed, it caused folks to reinvent how they wanted to operate their business," she said. "They could do it at a lower cost structure, and that's really how Nexion was born."

As technology became more advanced, it became less and less important where agents worked, Friedman said.

"It wasn't as important to be that local agency where customers could walk in," she said. "Yes, there's still a need for those, and it's still a part of the distribution [landscape], but it's a smaller part."

More and more agents started working from home, and host agencies enabled that. It was an attractive proposition for many. It enabled full- or part-time work, and it could serve as a bridge into the industry, or it could be a bridge to retirement.

That was also the time when network marketing companies -- also known as multilevel marketing companies (MLMs) -- came on the travel scene. While MLMs are less prevalent today, they were, and remain, a point of consternation for many in the industry thanks to some badly behaving agents and questionable recruitment practices. 

But the MLMs also played a role in the history of host agencies, Friedman said, because many who started in MLMs realized they were interested in a career in travel, not in recruiting and building their downlines.

"I think that was -- as much as we may not like it -- an important part of the evolution of host agencies because it educated more and more people that, wow! this could be a great career," she said.

It was also a kick in the pants, so to speak, for host agencies, which realized they had to educate this new crop of agents, an effort that began some 10 years ago. That was about the time when Robbi Hamida, now senior vice president of agency operations, started at Nexion. Friedman said he was brought on to launch a program for agents coming into the business.

Vicki Freed, senior vice president of sales, trade support and service at Royal Caribbean International, recalled, "We have gone from a card mill-type of a host agency to a host agency that's really focused on education. You do not see them advertising 'cruise like a travel agent' or 'travel at a travel agent discount.' I don't see that anymore. I see, 'If you want to have a serious career in this industry, come join our host agency, and we will provide you with the following benefits.'"

Those benefits include marketing and education, she said.

Today, the growth that host agencies are experiencing is coming from bringing independent contractors (ICs) into the industry. While there is some movement of agents from one host agency to another, there isn't a lot of it, and Friedman contends that hosts' value to suppliers is bringing new agents into travel.

It has not been a quick or easy process, Friedman said, because it takes time, patience and training. Hosts are also tasked with overcoming the perception that they are only geared to serve new agents, though today, Nexion has about as many veteran agents as new ones.

"It's a trade-off," she said. "Absolutely yes, I will give up a small split of my commission, but what I get in return for that is worth way more than I'm paying. I'm getting marketing. I'm getting technology. I'm getting education. I'm getting all of these things that I would otherwise have to pay for in many cases if I didn't have a host agency."

Suppliers face a challenge, Freed said, in reaching the ICs and identifying top producers or agents who could be top producers with the right help. But, she added, hosts are giving the industry "the next generation of really significant players in our business."

Royal Caribbean is actively supporting the host-IC model. It is trying to recruit two individuals who will focus primarily on supporting hosted ICs.

"When we were talking about 2019 -- and we have explosive growth at Royal Caribbean -- what should the distribution look like?" Freed said. "Should we double down on direct? Should we double down on travel agent business? And we made the decision to double down on the travel agent business."

In the current environment, a number of ICs are starting to bring on their own employees or ICs, commonly referred to as "subagents." Friedman cautioned against doing so just to add to one's earnings. The most successful subagent ventures she's seen have had purpose: taking on business that's too much for one agent to handle, bringing on an agent with a new specialty, mentoring or even bringing on a new agent as a succession plan. 

They also must be aware of both current and changing worker classification laws in various states and at the federal level.

Host agencies have evolved over the years, and future evolution is inevitable. In 10 years, Friedman said, "I think the host agency will evolve into a provider of services. It may not be that we change that much what we do. It may be the perception has changed in terms of what we do."

In a decade, more agents will be working as ICs. It's a trend that Friedman said will continue. Hosts will improve the way agents communicate with clients, she predicted, but a lot of the future will be dictated by the companies whose products they sell.

"A lot of it depends on the economic relationships with suppliers," she said. "But we have to continue to answer the question, 'What value and what benefits are we providing?' 

"I believe 10 years from now, we will be a little less of a commodity and more of a business partner. And that evolution is happening, and the good agents get that. But the agents that are just looking at, 'I want to earn an extra point of commission or two,' I don't think there's going to be as much of that."

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