The party all make progress together (which was the case in the first game as well; I don't think your friend knows how games work).
Well, when you think about it, if you weren't the host of the co-op game, you could basically only play the game when your friend was playing. Kind of like console Minecraft "servers". You may progress while you're playing, but that progress is saved to your friend's save file, which you can't access.
