Posted on: June 12, 2024 at 8:58 AM
Whether you are a seasoned professional or looking to break into the industry, partnering with a larger network when starting a travel agency can provide significant advantages. Increased buying power, business support, and minimized risk are just a few of the benefits of starting your travel agency under the umbrella of a larger organization.
In the world of travel, there are two traditional options for forming such a partnership: affiliating with a host agency or purchasing a travel franchise business.
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Both hosts and franchise companies provide unique benefits to help travel advisors build successful businesses. Understanding the differences between the two will help you determine which option is best fit for your goals.
What is a Franchise and What is a Host?
Purchasing a franchise is essentially buying a business in a box. You own and operate your own travel business, but leverage the power of proven systems and an established brand behind you. This setup gives you access to lower travel rates and the potential to earn higher commissions. With a franchise, you are also provided with robust technology, marketing, and ongoing training and support, ensuring that even as an independent business owner, you’re never truly alone.
In contrast, a host agency is simply a membership organization. The collective buying power of the group allows members to access better rates from travel providers than available as independent operators. As a member of the host, you may also have access to limited training, marketing, and support services.
Comparing Costs of Travel Franchise vs Host Agency: Consider Overall Earning Potential
One of the first comparisons when considering a host or franchise is the cost. While initial costs are certainly important, evaluating your overall earning potential is even more critical.
For newcomers to the travel industry, a franchise typically involves higher upfront cost. However, for experienced travel advisors with an existing client base, these fee can be reduced, making them comparable to or even less than that of a host agency. Additionally, the built-in benefits included in the franchise fee are immense.
Michelle Fee, CEO of Cruise Planners, notes, “With a franchise you have access to marketing programs, technology tools and ongoing support and training, all included within the franchise fee.” This support allows you to focus on selling travel and assisting your customers, ultimately leading to higher profits.
By comparison, host agencies may seem to have lower upfront startup costs, which can be appealing initially. However, with limited technology and basic marketing programs, it usually means you get what you pay for. It's critical to compare what's best for your business needs. As Fee emphasizes, “Establishing each one of these pillars on your own would be incredibly time-consuming and very costly.”
Understanding Franchise and Host Agency Commissions and Fees
Beyond upfront costs, it is also essential to consider commissions and fees. Commissions are the earnings from travel providers for each sale. Typically, you will then pay a fee to the franchise or host. This may be a flat royalty fee based on the total value of the sale you make, or it could be a portion of the commission earned.
Each host or franchise has a different commission structure, which may vary depending on the type of travel sold. While it's tempting to focus on the commission split only on face value, like the initial cost, considering how it impacts your long-term earning potential is crucial.
Rodney George, a Cruise Planners Franchise Owner, started his travel career with a host agency before coming to Cruise Planners and found the switch significantly beneficial. “I came from a host, and I gave up a percentage of my income to come to Cruise Planners,” George said. “But my income is five times greater now than it was four years ago, just because I don’t have to go out and reinvent all the stuff that just happens automatically with Cruise Planners. The marketing, the technology, the support – all that stuff is just done.”
Fee adds, “At a franchise like Cruise Planners, we do all the heavy lifting, so our travel advisors can have more time to sell. And when our advisors have more time to sell, they can earn more profits for their business.”
The Importance of Proven Systems and Brand Recognition
In addition to the many programs and support, one of the most significant benefits of a franchise is buying into an established brand with a track record of success.
“With a franchise, you have a proven model of success to help your business grow, reducing the risk of failure compared to a traditional new business,” Fee explains.
For instance, Cruise Planners has spent more than 30 years refining its systems and tools to ensure its travel advisors are successful. This history provides tremendous brand recognition and trust, which is critical for business growth. Instead of building a brand from scratch, you can quickly learn how to become a travel agent and spending more time focused on selling.
With a host agency, while you may get some increased buying power compared to being an independent operator, you miss out on the proven systems and brand equity that come with a franchise. Instead, you will have to building your brand, a time-consuming and costly endeavor for a small business owner.
Franchise or Host: Finding the Right Fit
Both franchises and hosts offer benefits to independent travel advisors looking to grow their businesses. While the initial costs of a travel franchise may be higher, the comprehensive support, programs and proven systems provided by franchises can ultimately lead to a greater earning potential and business growth.
