Right now there is so much hype on the internet about making money in travel. The travel deals are touting that it’s an $8 TRILLION per year industry, if you just get the tiny-est slice of this pie, you’ll be rich.
The problem is, most of the travel deals are not selling travel – they are just pretending to be. There is nothing wrong with selling travel packages and getting paid a commission. If you can selling a luxury holiday package and save your customers 60% if they had have arranged that package themselves, then more power to ya. But that’s NOT where the travel deals are making their money.
There may be a few legitimate online travel deals using a multilevel marketing pay plan, but there not many. Travel MLM’s simply can’t make money selling travel. They just can’t, the profit margins are too low. The industry is too competitive. You can find many great, competitively priced travel deals just by asking Google. The travel MLM’s are making their money on selling memberships. Here’s how they work…
They sell you a monthly subscription that allows you the privilege of purchasing travel packages at a discounted price. There’s nothing wrong with that. Consumer retail stores like Sam’s Club and Costco do the same thing. For $40 to $50 per year, you get the privilege of purchasing goods at these stores for less than you would at other retail stores.
The problem is the travel MLM’s are putting a compensation plan behind the membership programs. They are not selling travel, which is the real product, but they are selling memberships and compensating their reps on the sale of memberships. It seems legit, but it in fact is a very sneaky way to pass up money from people at the bottom, who pay the monthly fees, to the people at the top, without giving them something of real value.
Yes, the memberships do allow you to purchase travel packages at a discounted price, but that’s not where the emphasis is. Most of the emphasis is on the sale of memberships, not the travel packages.
Please understand this – memberships for travel discounts are not real products. They are one step away from the real product, the travel packages. But they can be cleverly disguised to make them seem like they are something of real value, which they are not.
A membership only gives you the privilege of discounted travel, not the travel itself. Therefore it is only valuable when you decide to use the privilege. At all other times, it is worthless. And that is what’s wrong with most travel MLM’s. They are trying to recruit people into their “travel club” where only a small portion of the people are going to take advantage of the real products – discounted travel.
To give you an real example of this type of business, a well established travel MLM company is currently under very close scrutiny from several state attorney generals because people are questioning the validity of it.
In 2006, the company reported gross revenues of over $24 million. The actual sale of travel totaled $2.5 million, or 10.5% of the total revenue. About $18 million, or 74.3% came from monthly membership fees and $3.3 million, or 13.9% came from selling training tools to the distributors. The company’s real product, travel packages, only constituted a small percentage of it’s total revenue.
You best watch out, because the attorney generals are not just going after the perpetrators, they are coming after the distributors as well.