By Bryan Kramer
This morning I was busy researching a number of articles when I noticed a post pop up on my news feed, it was a testimonial about Hoprocket. I recall a friend explaining it was the hot topic on the streets of Port Moresby. She said the organisation was offering everyday PNGeans great opportunity to make alot of money in US dollars and fast. My initial response was it sounds like a pyramid scheme and it if it sounds too good to be true then it usually is.
I decided to take time-out from my usual busy schedule researching national issues and look into whether Hoprocket is what it claims to be.
So what is Hoprocket?
According to its website it's an exclusive online travel membership club where unpublished discounted rates to the world’s finest accommodations ... Its members take advantage of unbelievable prices on their travel offerings including hotels, condos, cruises and more!
To be more accurate it is also a members only on-line travel company using its members to on-sell its membership through a pyramid style scheme. In return it offers them a commission of the membership fee. Similar to a pyramid scheme the people at the bottom help the people at the top get rich in this case extremely rich.
What is a pyramid scheme?
It is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal.
Under a pyramid scheme in the short term people receive benefits however in the long term it is unable to sustain itself and most will end up out of pocket.
Unlike the usual pyramid scheme Hoprocket uses travel membership offering wholesale travel discounts as a platform to run a pyramid membership scheme. It may argue it is not a pyramid scheme because its members will always benefit from the travel discounts it offers.
So how does it work?
Hoprocket setup an online search engine (website) claiming to provide wholesale (discount) travel rates on airfares, hotel accommodation, car rental, cruise ships etc. However to access these special rates on their one-line website one must become a member by paying them a fee.
There are three levels of membership -
1) Standard US$99 per annum - giving you access to standard discount travel fares etc and reward points for referring other people to access it's website as a guest to book their travel and benefit off the standard discounts on offer.
2) Elite membership is where you pay US$300 one off payment plus US$60 monthly fee or US$720 per annum. The benefits include greater discounts and the option to make commissions by signing up other people to become an elite member.
3) Premium elite membership is US$700 annual fee without having to pay any monthly fee - premium discount rates including commissions to sign up elite or premium members.
Each level of membership offers a number of benefits, they are quite complicated given the multiple marketing and point of sale schemes they use to entice people to join.
Now if you travel alot as most do in the developed countries, US, Europe or Australia then becoming a member of Hoprocket may be beneficial on the account of the discounted travel rates on offer which may offset the costs to maintain your membership.
For example under the standard membership assuming I'm planning to go on a overseas trip and in order to access great travel discounts I pay $99 ($321) annual standard fee giving me access to use Hoprocket travel on-line website to find great travel deals - discount flights, accommodation and hire car rates etc. Assuming their discounts save me K500 then my standard membership has paid for itself.
No under the elite membership I have to pay $300 up front and $60 every month to maintain my membership - In total this adds up to $1080 per year ($300 + $60 x 12 months) or K3,311. To maintain your membership every year thereafter you will be required to maintain $60 monthly fee which works out K2,337 per year.
If I normally travel overseas and spent K10,000 each year, now assuming I decide to become an elite member and potentially benefit from the travel discounts saving me K4,000 then the annual membership has paid for itself with a saving of K699 (K4,000 saving less K3,311 elite membership fee). Every year after that I have to ensure I benefit of savings in excess of K2,337 or I end up losing my membership for failing to maintain monthly membership fees to hoprocket. However there is no guarantee I will receive savings of K4,000 it may only be K2,000 it all depends on where I travel and whether Hoprocket actually offers discounts for that route or destination.
Furthermore most in PNG don't travel as much so there maybe little if no benefit other than earn a commission from on-selling their membership.
Cash is earned in the form of commissions by helping Hoprocket sell its membership to other people like your family and friends. Hoprocket will in turn share some of the membership fees with you.
I have reviewed a number of their on-line presentations and when I crunched the numbers I found that in the end their is little benefit if you don't travel.
I understand those who represent HopRocket would have conducted a number of very impressive presentations as to why you should become an elite member by paying US$360 (US$300 one off fee and $60 first months monthly subscription). What they wouldn't have told you is that it's essentially a pyramid scheme and how much money they make off you.
The commission fee structure is quite complex using a number of schemes available to to its elite and premium members
1) Fast Track Bonus
2) 3 & Free
4) Life Style
Fast Start Bonus
Under this scheme you can earn cash or commissions from signing up new members (level 1) who may in turn sign up new members (level 2) and so forth. Hoprocket offers commission fee up to five levels
Level 1 - represent the members you directly sign up - commission is one off $45 (K145) for each new member.
Level 2 - represent the new members your level 1 members sign up where you may receive a one off commission $20 or K65 for each new member.
Level 3- represent the new members the level 2 members sign up - where you receive a commission $10 or K34.5 for each new member.
Level 4- represent the new members the level 3 members sign up - commission $5 or K16 for each new member.
Level 5 - represent the new members the level 3 members sign up - commission $5 or K16 for each new member.
So you have the potential to earn commissions not only from the members you sign up but also from the members they sign up and so forth but only as far as level 5.
3 & Free
Under this scheme if you convince three or more people to sign up to elite membership where each pays their $60 monthly fee then Hoprocket will not charge you the $60 monthly fee. However in any given month should just one fail to maintain their $60 monthly payment then you will be required to pay your $60 monthly fee for that month or any subsequent month thereafter they default.
Under this commission scheme instead of signing up the new members individually you try sign them up in lots of three. For example if you sign up three elite members you will receive $50 commission for each member receiving a total of $150 (3 x $50). If you assist those three members sign up a further three members (3x3 =9) then you will receive $30 for each of 9 members $30 x 9 = $270 (K877). If you assist the nine new members sign up a further 3 members 9 x3 = 27 members then you will be paid $20 each = $540 (K1,753).
While there is much potential for people to make alot of money from this scheme in the short term its important to note HopRocket doesn't sell products or services it doesn't employ people or pay taxes. It uses you to sell its membership paying you a commission the money is then sent overseas further reducing our foreign reserves. You benefit off the one off fee while it benefits of the long term monthly and annual membership subscriptions (K2,337)
While it talks up it's rewards, hop-points, hot pass etc etc in the end you will end up out of pocket and if not, then the majority of those in PNG who subscribe to it will.
The scheme benefits those who are at the top of pyramid passing on the cost of their membership to the people under them. Those who are gifted at sales convincing unsuspecting people to depart with their savings or worse borrow funds to sign up to it will benefit the most. They make the commission fee and pass on the burden to their members to on-sell to other new members. The minute you can't sign up new members you loss out 1) from you initial joining fee of $360 and $60 monthly payment you are still required to keep paying.
So if you or your family don't really travel much in a year than it will be of little value because you won't be able to offset your savings in travel against what you spent or continue to spend on membership monthly fees.
I could go on and on to further explain in some detail how this scheme works there are so many other promotional marketing schemes like rewards and hot points etc but its my view in the end the majority of PNGeans will have no real benefit from this scheme.
Hoprocket will syphon our foreign reserves because all membership fees are paid in US$. For every membership you pay the greater portion will always end up in their Hoprockets pockets.
Remember in the end you will be only able to sign up so many people and when that ends you still keep paying and Hoprocket keeps earnings millions if not billions.
So I can imagine those Hiprocket representatives who are running around the country carrying out awareness are very excited for every person that signs up in PNG they will end up collecting a commission which may add up to being in the millions of US$.
Keep our foreign currency in our country say no to Hoprocket lets not make those who flew in the country overnight any richer off our ignorance.