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Travel Agent Resources

Travel MLMs Explained

By Courtney Eisen

February 22, 2024

We’re about to discuss travel Multi-Level Marketing (MLM) businesses and how they differ from host agencies. Our goal is to ensure that aspiring travel agents are well-informed about the potential pitfalls of joining a travel MLM. We want to help agents understand the differences between full-service travel companies like host agencies (like us!), which support agents in selling travel, and travel MLMs, which tend to focus on selling memberships.

Be Smart, Travel MLMs Can be Sneaky

Sometimes, aspiring travel agents mistakenly believe that a travel MLM functions like a host agency. However, that's simply not the case. Host agencies and MLMs are two distinct types of businesses. One provides infrastructure for you to sell trips and earn commissions while the other tries to rope you, and those who trust you, into a failing business model where travel is sort of an afterthought. Too harsh? Well, I really dislike shady travel MLMs. A host agency is far superior to a travel MLM, and whether you choose to apply for our host, or another host agency, I can sleep well knowing that you didn't sign up for an MLM.

MLM travel business models use misleading advertising, prey on people who are economically disadvantaged, and do not provide practical support to serious travel agents.

It's rare for a travel MLM to explicitly state, "Hey! We're a travel MLM!" However, they often use coded language and jargon that should raise your suspicions. MLM marketing is also referred to as "network marketing" and "direct sales." So, if you come across a website using such terminology, they're probably talking about an MLM business model.

Agents in Travel MLMs Don't Make Much Money

An MLM expert, Robert FitzPatrick, conducted a study that covered 10 publicly traded MLMs, including the now-defunct travel MLM, Your Travel Business (YTB). The study found that 99% of MLM participants received less a staggeringly low amount of less than $10 a week in commissions, before deducting expenses.

Travel MLMs, like other conventional MLMs, have a high rate of failure. Let's delve deeper into the specifics.

Many travel MLMs are not required to disclose their income statements since they are not publicly traded. However, those that do share their disclosures present a grim picture of income potential.

Travel MLM WorldVentures reported revealed that 85.4% of its representatives earned absolutely nothing or, even worse, operated at a loss. The average yearly earnings of a WorldVentures rep were reported at $354.31, while the annual cost to join WorldVentures in the first year is a minimum of $769.89.

Travel MLMs have their own jargon for their travel agent members. If you're with a host agency, you'll likely be referred to as an "independent contractor" or a travel business. In contrast, a travel MLM will use terms like representatives (PlanNet Marketing), builders (Surge365), or referring travel agent (YTB).

In travel MLMs, the primary revenue stream comes from selling memberships to recruits, rather than commissions from selling travel. This is where travel MLMs become shady, as they make more money from recruiting sales reps than from selling travel itself. This resembles a pyramid scheme, which is a major red flag.

Travel MLMs, similar to other MLMs, have two revenue streams for their members:

  1. Commissions from selling travel (minimal)

  2. Commissions, kickbacks or other financial incentives on selling memberships by recruiting others into the organization (the real money maker)

The dominant revenue stream in travel MLMs is from selling memberships, not travel. To be clear, you will be recruiting people in your network to join a shady MLM and not benefiting from the far more lucrative and ethical business of selling travel.

For travel MLMs, recruits are considered the "downline," and travel MLMs entice them with promises of residual or passive income trickling down from the upper levels of the downline. This resembles, or to be more clear, is a pyramid scheme, where those at the top benefit the most.

The shady reputation of MLMs extends beyond the travel industry, but it was the rise and fall of Your Travel Business (YTB) that left a particularly sour taste in the travel industry's mouth.

In short, YTB operated as a typical pyramid scheme, preying on economically vulnerable individuals with promises of get-rich-quick schemes that required minimal time and financial investment.

At the time of its closure, 85% of YTB's revenue came from selling memberships and marketing materials to new recruits, rather than from travel sales. Shockingly, the average annual commission paid to a YTB rep was $44.29. Furthermore, 81% of all YTB reps earned no money at all, while 4% of reps at the top of the upline, no surprise here, received 96% of all commissions.

YTB faced lawsuits in California and Illinois, as well as a class-action lawsuit that ultimately left them bankrupt. However, remnants of YTB can still be found in today's travel MLMs landscape. YTB's founder, J. Lloyd "Coach" Tomer, now serves as the Chief Visionary Officer for Surge365.

Travel MLMs Have Minimal Information on Their Websites

One thing you might find, should you decide to go down the travel MLM rabbit hole, is that they lack concrete information on their websites. They offer little to no details about commissions, backend support, Seller of Travel requirements, E&O insurance, or even basic information about joining without signing up for email listservs or participating in sizzle calls. Some of these websites don't even include profiles of the people running the business. If the only way to get support from your agency is by emailing an address with no name or employee attached to it, it's a major red flag. Overall, they make a lot of promises without providing any substantial information.

Travel MLMs have become smarter in their marketing tactics. Instead of making income claims, which the FTC requires them to substantiate, they now appeal to lifestyle and offer promises of free or discounted travel.

If you're still considering joining an MLM, the FTC has a resource page with questions to ask your sponsor before making a decision. You should read that, and really reconsider life choices. I know I am harsh, but seriously. Don't join a travel MLM. It will not be worth it and you will break trust with the people you recruit.

Travel MLMs vs. Legitimate Host Agencies

So, how does a travel MLM differ from a host agency? The major difference lies in their revenue streams. Host agencies earn money when you sell travel, while travel MLMs make more money from membership sales. This means that host agencies are motivated to support you in selling as much travel as possible.

Now that being said, many host agencies do charge a fee to be a part of their agency. There are admittedly pros and cons to this fee. The fee usually covers errors and ommissions insurance as well as licensing fees and other costs that your host might incur by having you on their team, however, many hosts do have a model where they bring in revenue from their membership fees and training costs. We have heard of agents spending thousands of dollars on training only to make no sales and not even understand their value proposition. However, paying the fee means the host will let you remain an active agent with them regardless of your sales.

Our business model is the exact opposite. We do not charge our agents any fees, in fact, we incur a loss on each new recruit and only make money when an agent starts selling. That, paired with our competitive commission split of 80/20 versus the standard starting commission split of 70/30 (you'll notice this if you do your own research), makes our program competitive. Why do we do this? Well, we know our methods lead to higher revenue from our agents, so we take the loss for a few months knowing we will eventually recoup it through the commission split. Also, not charging a fee and truly only making money when our agents make sales builds trust, our agent's know we are committed to their success.

So, are other host agencies that charge fees MLMs? Not exactly, but many could be considered soft MLMs. We will leave that up to you to decide. Moral of the story here, though, is that you should do your homework. Research multiple hosts and find one aligned with your goals. If you're goal, for example, is to earn six or seven figures, then an agency like ours would be a good fit. However, if you are slow to learn new things, want to do this as a hobby with zero pressure to sell, joining a host with a fee would be a better option. Why? Well, we have requirements to remain with our agency. If you do not meet those requirements, you can be dropped from our team. For example, you must make one sale every 90 days -- it can be anything, a car transfer to your cousin, for example, but we need to know that you are selling.

If your goal is to become a travel agent who focuses on building a client base, receiving ongoing travel education, establishing relationships with suppliers, and providing excellent customer service, we strongly advise against joining a travel MLM. Instead, we recommend considering a host agency. Which host agency you pick, however, will be determined by your own motivations. Love all things Disney and want to only sell Disney trips? We would not be a good match for you. Want to make as much money as possible, while providing your clients with the best possible experience? Check out our travel agent training and apply to join our team!

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