Travel Agent Show Recap

Earlier this week, I had the opportunity to attend and exhibit at the Baltimore Home Based Travel Agent Show & Conference. All in all it was a good show and some good quality vendors. I was disappointed that Denyse and I did not connect as I would have loved to hear her impression of my challenge to her.

I asked Denyse to simply approach a variety of vendors and without identifying her host, just begin a conversation about YTB. I did, and the result was as expected--they feel YTB is a necessary evil. (Those are my words and not theirs) Many of the smaller niche suppliers were unaware of YTB.

I spoke with many YTB people and many are very happy with the program, but there were also many there whose purpose was to find a new host. I know for a fact that 4 RTAs signed up with Travel Planners at the show. One RTA that I had had a very contentious email fight several months back, actually hugged me and said I was right all along and she was done with YTB and her four friends who were in YTB are going to be getting out as well. To be honest, as she was coming up to me, I was not sure what to expect and hoping for a kick to my good knee! To Nia, if you are reading this--thanks for your honesty and for the hug. For the record, I do not hug and kiss men as some others may.

I did not see any YTB Police presence. If they were there, they were well undercover and likely not doing their job. There were no green t-shirts, and at the travel events (classes, meal functions, trade show) there was no recruiting. But up near Einsteins Bagels, a Rep was running what amounted to a three card monte game. He had his laptop open and was showing the presentations--he was surrounded by other Reps and RTAs all hanging on his word and agreeing that it was the best investment anyone could make, etc. Then he offered to to pay for a CLIA membership to anyone that signed up under him before the end of the show. Granted, this was not at the show technically, but it was in a high traffic area where those attending the show (and the NeoCon conference as well) would pass to get to the classrooms and ballrooms.

Which brings me to the point I made yesterday about the huge loophole for CLIA and their membership. This YTB Rep was offering to pay $399 for a membership because he earned much more from having the downline. The new RTA then needs no training, no enrollments in the ACC or MCC program to obtain the identification card. This loophole will not work in a SOT state (MD, VA, DC, NJ, and DE are not). CLIA acknowledged this loophole but felt that few RTAs would pay the additional $399 to become members.

Let's take a look at getting a CLIA card the right way through YTB, the loophole way, and Monte's way:

Option 1: Attend FCT at a cost of $149. Take a CLIA exam online at a cost of $30. Enroll in the ACC or MCC program at $65. Apply for the identification card at $49. Total cost is $293.00. Now keep in mind, in order to maintain this credential, you need to complete the ACC or MCC program which include numerous courses (additional money), numerous ship inspections at your expense, several personal sailings at your expense, and actually selling. Without knowing the details, the cost of these extras is probably close to $2500 at a minimum.

Option 2: If you are in a non SOT state, open a business checking account and pay CLIA $399 for an agency membership. Apply for the identification card at $29--it's a reduced price for the first two cards. Total cost is $428. Yes it is more, but there are zero requirements at this point. Yes you need to renew it annually, but renewals are discounted. And if you are in it for the perks (as most are) one reduced rate sailing would more than pay for the membership and the card. And if the ACC requirements are $2500 you can renew CLIA for nearly 7 years!

Option 3: Let Monte pay your $399 and you fork over the $29 for a card. Total cost $29

I had the pleasure of overhearing many of the questions being lobbed at CLIA at their booth and one I heard a lot was, "What forms do I need to fill out to get the free cruises/discounts?"  No inquiry on the requirements, what CLIA does, the training, the changes. Mostly about how to get the perks. A Traverus member even argued with the CLIA representative that he indeed did have a CTA because he bought the Traverus website.  I am still at a loss why The Travel Institute allows that to go unchecked. There was another argument from a current CLIA cardholder that was very upset about the production requirement for her to renew the card through YTB. The end result was she was told to "suck it up and sell some cruises".

Fair And Balanced

Fox News claims they are fair and balanced. I like to think this blog is as well. We present facts, backed up by documentation and we are willing to make corrections when we make an error. Of course there is a great deal of opinion as well.

Speaking of opinion, the publisher of Travel Research Online has a very fair and balanced opinion piece on how the industry has arrived at the place we are today. Certainly the MLMs are an issue and they are called out. But are they the cause of the problem? Not at all.

We have said that the suppliers and associations are the ones that have allowed the problem to get out of hand. We have said that the suppliers and associations are the best suited to fix it.

Mr. Earls tends to agree and in this piece entitled "A State of Disarray", he challenges the industry suppliers, the industry associations and the industry at large to get their act together and police themselves

Why MLM instead of Host Agency?

For the last couple of years, there has been much debate, some of it civil, but much of it not, about the Multi-Level Marketing (MLM) travel businesses. Much of this debate has centered on how professional or not the MLM agents are. This has been due to the lack of knowledge exhibited, behavior at travel trade shows and conferences, and other things. Unfortunately, I have witnessed the same from some traditional travel agents.

So, at least for the purposes of this post, I'd like us all to ignore those aspects of the debate. What I would like to focus on is why do people choose to be part of an MLM travel company rather than become an independent contractor for a host agency. My thesis is that it is all due to the money that can be made for recruiting more and more people to the business. It has very little to do with selling travel, or any other product for that matter. I note that some people call this "selling travel stores" rather than "recruiting".

The typical MLM travel company charges an initial sign-up fee to join as Referring Travel Agent (or some similar name), and then a monthly fee for a travel booking website. In order to comply with laws that regulate MLM companies, they usually have a companion position, available for free, called a Representative (REP or something similar) whose job is to sell those RTA positions. The way the REP makes money is that they get a part of the sign-up fee and possibly part of the mothly fees. In addition, they get bonuses based on the number of RTA positions that they sell, and those of the REPs that are under them sell. The RTA makes money by getting people to book their travel through the website they are renting. In exchange, the company gives them a percentage of the commissions on that travel sale. It is important to note that while there is no requirement for an RTA to also be a REP, generally they are.

What I would like to know is how many people that become RTAs would actually stay with their MLM company if the REP positions and the bonuses were eliminated? Suppose there were a company that would allow you to become a Travel Agent simply by paying a one-time fee of $495 and a fee for a booking website of $49.95 per month. You would earn 60% of all commissions the company earned as a result of travel sales through your website. Since this is MLM, we'll even consider that you would also be paid 10% of all commissions earned by those that you directly recruit to join the company. Would those of you that are RTAs or the equivalent with YTB, Traverus, World Ventures or others want to be part of this company? If so, why? If not, why not?

Suppose there was a Travel Host Agency that would allow you to become a Travel Agent for free. They would give you a travel booking site using the same booking engine as the company above, also for free. You would earn 80% of all commissions the company earned as a result of travel sales that you make through your website. Since this is not MLM, there would be no override for anyone that you recruit. Would you rather work with this company or the MLM? Why?

Remember that for the purposes of these questions, I am assuming that back-office support, training for agents, and all other aspects of the two companies are equal. I am only focusing on the compensation plans. I am not saying that agents shouldn't be trained. I'm just leaving that out of this particular discussion.

Personally, I can't believe that anyone would want to pay an up-front fee of any amount, a monthly fee of any amount, and give up 20% of commissions earned for something they could get for free. Perhaps the lure of the 10% override would do it. But how many people could be recruited that would be willing to pay an up-front fee, a monthly fee, and give up 20% of commissions earned when they could get the same elsewhere for free? I would think the answer is that not many people would choose the MLM described over the host agency described.

So, why do people join the MLM travel companies? Obviously, it is all for the recruiting fees and bonuses. They are exposed to the dream of a large down-line of people doing their work for them, while they collect the recruiting bonuses that get larger and large, the bigger their downline gets. The focus is not on selling travel. If the selling of travel (or some other product) were not there, the whole thing would be an illegal Ponzi scheme. Like any of those schemes, the bulk of the money goes to the founders and those that got in very early. Those that get in late generally do very poorly, unless they can find some new untapped source of new recruits.

The bottom line of all this, is that I would like any MLM "travel agent" to explain to me is why they stay with that company, if all they are really serious about is selling travel? Please explain it only in terms that refer to the compensation you get for selling travel, vs. the expenses you have. Leave the recruiting bonuses and fees out of the equation. If you can't give me an adequate explanation of why you would not do better with another more traditional host agency, then I must assume that the only reason you stay with the MLM company is because of those recruiting bonuses. That would prove my thesis.

It would also prove to the travel suppliers that the MLM travel companies are not really about selling travel. They are really about recruiting, and a little about rebating commissions to themselves and family members for personal travel. Maybe then, they would wake up and stop doing business with those companies.

Note: For those that cannot read, this is another guest post (JF)