“Are you hosted?”
I hear this question all the time. But what exactly does it mean, and how should a travel advisor decide if they want to be hosted — and who should be their host?
According to good old ChatGPT, “a host travel agency is a licensed travel agency that allows independent travel advisors to operate under its accreditation, supplier contracts and administrative infrastructure in exchange for a share of commissions.”
But are all hosts created equal? No — and that makes for quite the dilemma in our industry. As a travel lawyer, I create, review and critique host agency agreements every week, so I know advisors need to be incredibly careful when selecting a host agency. As some advisors may know, there are currently several active lawsuits involving host agencies and their failure to properly pay independent contractors (ICs).
My aim for this column is to help identify key issues travel advisors should keep in mind when making a host agency decision.
Words Matter
Host agencies need to be careful when it comes to provisions that create more of an employment relationship, as compared to an IC relationship. Wording matters in this area. For instance, an IC can’t be “hired” by a host agency, yet we often see imprecise wording, with some even calling the contract an “employment agreement” or stating that the agency agrees to “hire” the IC.
Commission Division and Fee Structure
A large driving factor in choosing a host is often the commission split. Some critical questions to ask about this include: Are you, as the advisor, going to pay a monthly fee to the agency? What are you going to get in return? Is the commission split going to remain constant for the term of the agreement? (Make sure the agreement actually has a term in it!) Does the split increase when the advisor surpasses a certain sales point? If so, does it reset to the original amount each calendar year? Does the host charge a fee for certain “extras,” such as after-hours support for travelers or ticketing fees?
Another important question: When will the advisor actually be paid? This is a big issue. We know it’s often “after travel is completed,” but how long after? Advisors should negotiate being paid within 30 days after the agency is paid, or once a client’s travel is completed. And, if an advisor finds that their agency is often late in paying them, I suggest they put in writing that the agency is in breach of the agreement. This can come in handy, as sometimes the “first breach” becomes controlling, and an advisor might be able to invalidate other provisions if they get into a dispute.
Exclusivity
Does the agreement contain an exclusivity provision? For most folks, one host is enough, but what if an advisor is hosted by an agency that primarily specializes in one area of travel (think: theme parks or cruises) and they want to sell more than that?
An advisor may find that other agencies offer better supplier incentives, based on their volume to those other destinations, so keeping your options open is wise. If the agreement doesn’t contain an exclusivity provision, then it’s not exclusive. But, if it does, an advisor should ask to strike it.
Termination Provisions
All good things usually come to an end. It’s unlikely to find an IC who has stayed with a host for decades. Often, advisors leave to open their own agencies. Sometimes, it’s for a better commission split. Personalities can also get in the way. I believe the termination part of the host agreement may be the most important.
If an advisor will continue to service their bookings after leaving a host, they will need to decide how they will actually do that. Will they have access to the CRM or email system? It’s tough to service a booking without access to anything — and the host might want them to pay a monthly fee for continued access.
If an advisor leaves, will their commission be at the same percentage or less because they left? It should be the same (unless the advisor breached the IC agreement, and then they might get nothing).
This is also where non-solicitation provisions typically come into play. Be wary, read them carefully and ask a lawyer for help in understanding your rights. Never sign an IC agreement that contains a non-compete provision. (It’s hard to believe that Louisiana has a law that allows ICs to be bound by a non-compete provision!)
Insurance
When it comes to insurance, it’s all in the fine print. The IC agreement may promise an advisor coverage under its policy, but what does that really mean? Find out the following things: What is the deductible? What is the policy limit? What are the exclusions? Very few advisors ask to see the policy — be different. If an advisor has created their own LLC or corporation for their travel business, that can affect coverage decisions made by the insurance company (for which the host agency will have no control).
I believe advisors are best served by spending around $600 annually to buy their very own E&O policy. Take control of your destiny — it is money well-spent.
Wrapping It Up
Most travel advisors are hosted. Most will change host agencies more than once. So, I highly recommend advisors spend the time (and money) to know what they’re getting into (and more importantly, how they will be able to get out of it when the time comes). There are definitely more issues than just the ones in this column, but these are the big ones to take note of and refer back to.
Jeffrey Ment
Jeffrey Ment currently works as a travel law attorney and previously worked as a travel advisor, airline sales manager and tour guide. For more than 30 years, he has represented individuals and companies in the travel industry.
Have a question for Jeffrey? Send an email to [email protected].
