Evaluating Your Hosting Fees
By: Sandy Saburn, CTIE

Most travel advisors working in the industry today are “hosted” meaning they are affiliated with a larger organization and booking under that organization’s IATA number to get increased commissions and support. Like any other vendor/client relationship, it is important to look at how that’s working from time to time to make sure you have the best arrangement for your business.

Before I dive deep into how to look at the relationship and see where tweaks might be needed, let me first say that a lot of people fall into a very common trap: They think that the best option is to avoid fees associated with hosting by getting their own credentials which then means they don’t pay any fees to a host. The reality is when you are working under your own credentials you earn less commission because your commission level is based on your sales only. When you are hosted, your commission is based on the aggregate sales of the entire agency. For instance, if you have a booking with a commissionable amount of $10,000, if you are under your own credentials your commission might be 10%, maybe 12%. If you are hosted, that commission might be 16% or even more. That’s means you’d earn $1,600 vs. $1,000.

The one time this works well under your own credentials is if you only work with a small handful of vendors. Aside from the commission level, you lose all the support and opportunities that come along with being hosted.

So, let’s assume it is best for you to be hosted. Now you must figure out the best match for you. From a purely financial perspective you need to look at:

  1. Annual fee
  2. Monthly fee
  3. Commission split
  4. Other deductions from the earned commission

Annual fees– Many agencies charge an annual fee that includes things like E&O insurance, various technology platforms, consortia access, and other items. Make sure you know what is included and don’t assume. These fees vary widely from free to thousands of dollars depending on what the agency is providing you.

Monthly fee- In addition to the annual fee, many agencies charge a monthly fee that varies based on your commission plan.

Commission split- There is a wide range of commission plans available in the industry all the way up to 100%. Yes, you can be hosted and keep 100% of your commissions! It’s important to evaluate where you are regularly and make sure the plan you are on makes sense for where you are right now AND where your business is headed. You should evaluate your plan at least once per year and see if moving to another plan would be good for you. If you are currently at 90/10 and are selling more than $600,000 per year it would probably benefit you financially to move to 100%.

Other deductions- Does your host charge any other fees? Some agencies charge fees if you book with a non-preferred vendor, or they charge a per-booking invoicing fee. Whatever it is, make sure you know and figure it into your calculations.

Once you have these numbers, evaluate, and see what is or what would be the best fit for you. Here is how you can do a comparison.

First, you need to know the total amount of commission you generated for a specific period. You can look at this quarterly, twice a year, or yearly. Once you know, you can start plugging this into the table below.

For example:

This is a real example from an advisor who was on an 80/20 plan:

Sales: $475,000 (12 months)

Commission generated: $57,000 (12 months)

 

Costs/Expenses Current Plan

(80/20 split)

Option A

(90/10 split)

Option B

100% plan

Annual Fee $0 $499 $499
Monthly Fee $0 $839.88 ($69.99 x 12) $5,988 ($499 x 12)
Commission Split $11,400 (80/20 split) $5,700 (90/10) $0 (100% plan)
Other Deductions $0 $0 $0
TOTAL COST FOR HOSTING $11,400 $7,038.88 $6,487

 

This advisor was sure that she was on the best plan because she had no annual fee and no monthly fee and was giving up just 20% of her commission. When you do the math, you see that’s not the case. At 100% she would put nearly $5,000 in her pocket. That’s enough to hire an assistant that many advisors desperately need. Even if the advisor wasn’t comfortable with paying the $499 per month fee to have the 100% plan, they are still much better off with the 90/10 plan. They can move to the higher plan when they are ready.

It is important to not just look at where you are now, but also look to the future. Are you in growth mode? Then you need to go ahead and identify the next level you need to move to and when the right time is to make that change. If you know at what sales level you should make your move, you can be assured you are maximizing the amount you put in your pocket.

You owe it to yourself and your business to look at these numbers and make sure you are getting the greatest benefits from all options.