How to Start a Travel Agency
There is no generic approach to opening a travel agency. This is in part due to the fact that the laws or regulations can vary from country to country and state to state.
The travel industry has been in the news a lot recently – for obvious reasons. So the idea of starting up in the business yourself might seem ill timed, to outsiders. In fact, according to those in the industry, things are definitely on the up and the service that an independent agency can offer is very appealing to a discerning public.
You won’t be able to compete with the big brands on price so it is all about what you can offer over and above that. This is where customer service is so important, what differentiates your business from others. Overall quality of service is a key aspect.
The current market
Setting up as a travel agent shouldn’t be confused with being a tour operator. The difference is that the former sells the holidays while the latter organises them. It’s possible to set up as an independent tour operator but there is a lot of competition for big firms that have the buying power to keep prices lower.
This isn’t to say travel agents are any less competitive but most are doing good business at the moment and apparently looking forward to a boom year next year. If this proves to be the case it would appear to be as good a time to start as any.
Who is it suited to?
By choosing a competitive industry you are inevitably resigning yourself to a high degree of hard graft. And you may not have the time to take advantage of the attraction of free or discount holidays at the start – so don’t have that as your only motivation.
Having said that, there are few, if any, small businesses which afford you much respite in the first couple of years. So your motivation needs to be linked with the work and the service you are providing.
Whichever way look initially you will be dealing with people from whom you want something. You want tour operators to sell you good deals and you want your customers to buy them from you – not from any other person up the road.
This means you will be actively dealing with people all day either on the phone or in person – which is demanding even if you are naturally interested in people. But if you don’t have the stamina or inclination for this kind of work you may wish to think on a career outside travel.
Travel agencies are more about selling advice to your clients than holidays. Your customers want to be reassured they will easily be able to hire a car, go walking or get vegetarian food. You will need to care about providing this personal touch.
And you don’t necessarily need to have experience of the industry. As with most things it may help but the most important thing is to be prepared for a steep learning curve.
Rules and regulations
Unusually, you don’t need any qualifications to set up as a travel agent so in effect anyone could do it. Neither is it governed by hundreds of rules and regulations although it will greatly increase your chances of success if you join a trade association. That is, customers and industry are unlikely to take you seriously without.
Membership of a trade association tells suppliers that you have a strong and supported business and customers will be reassured knowing their money is protected.
Trade associations are clearly important to the success of a travel business – if you want customer and industry confidence it seems you can’t really start up without one. But what is actually involved where it counts – in your wallet?
How to start
It’s quite possible to start out as a travel agent from home with a desk, PC and a telephone line. You can start to build up a client base from among friends and family so it isn’t technically difficult to get started.
But you do need to think bigger than this if you want the business to survive. Competing on a local level or around the high street are both non starters to a successful business. A truly local business won’t survive in such a changing market and the high street will bring you up against the big names. You need to open up to a national audience.
Look into an area that isn’t well served already by travel agents. If you can find no obvious reason for this and there is apparently a need for your business, set up there. Alternatively, start a business that isn’t office based and that provides something of a niche service.
How much does it cost?
Premises: If you’re starting from a secondary location rather than prime retail site, rent will obviously be reduced. As above, specialised travel services are more likely to work with you remotely so it matters less where you’re based
Staff: Although a remote – if cheaper – location may be a turn off when it comes to recruiting staff. This is not generally an industry where staff is highly paid but there is competition to recruit good people in the first place so additional perks may work well.
Look for people who’ve worked in the industry before who’ll be attracted to the discounted holidays and offer them good working conditions. Roughly speaking, salaries are on a par with office work but as with all jobs you should expect to pay more for extra talents (such as languages) or experience.
Advertising: Getting your name known is as important as in any new business. Local newspapers, yellow pages and Teletext are all good ways – although decent regular adverts aren’t cheap.
Word of mouth is effective but be aware this isn’t an industry where repeat business necessarily follows. An established client base will pass on word of your excellent service to its friends but intense competition for price means people will always shop around – even if they end up coming back to you. You will have to constantly address and re-address service, quality and value for money and let people know about it.
Internet: The buying public has grown used to shopping around online even though it doesn’t always want to buy online. Use the internet as an additional advertising or information tool to bring people in and answer basic questions. Then offer personal service and advice for their queries.
That way both you and your potential clients save time and effort by having all information to hand when sorting out the details of the holiday.
How much can you earn?
The travel industry is commission based so every time you sell a holiday for a tour operator they give you a percentage of the fee. This is where getting your name known will be important, though, as international tour operators aren’t going to offer an unknown business favourable rates. Commission varies a lot.
Striking an agreeable commission agreement will become easier once you are a member of a trade association – in fact they’re unlikely to look at you without. Travel agents don’t give out individual commission rates for obvious reasons but there is a general idea within the industry.
Minimum commissions start at around 10% but the high street names will be getting around 18%. So you’ll find it very difficult to compete if you are at the lower end of the scale.
Cash management is another issue of which you need to be aware. The customer will pay you a deposit on the holiday when they book it but the remaining amount won’t be paid until about eight weeks before date of departure. Only then will you receive your commission from the tour operator. However good cash management in the booking season of January and February will see you better off in the summer months.
Overall you need to be aware that being independent will not yield big money initially unless you can find a niche market that pays well. If you can find a consistent market for specialist holidays to far-flung destinations this may happen sooner.
The amount you earn really does depend on a simultaneous ability to sell to customers and to strike deals with the suppliers. So at the forefront is the need for excellent service to both of your customers: the holidaymakers and the tour operators.
Get the balance right and you might just have the ticket for success.
TIPS FOR SUCCESS
Look after your staff: Reduced rate holidays will prove a powerful incentive to lots of people wanting to work in the travel industry. But you need to attract and retain good people who are interested in the work and who can communicate with customers and represent you business well. Offer training and incentives and if you can, pay above average salaries. You’ll be rewarded with loyalty in a competitive industry
Have a national focus: Although you may be a local independent travel agent it doesn’t mean you should have a narrow local focus. You need to appeal to a national audience to ensure success because the market changes so fast. A national focus will mean tour operators will be keener to deal with you and therefore your holiday selection will be more extensive
When to go for profit: Don’t look for profit in the first couple of years but go all out to make your name known and get as much business as possible. Once this is achieved you’ll have increased bargaining power for your commission rate and access to a greater number of holidays – and hopefully will be able to start looking at profit and budgeting
Purchasing a turnkey solution for online travel agency: You only pay for the booking engines when they are used! If a client wants to book online through your website, the commissions paid for the reservation pay for the cost of the booking engine. Of course, you can use your website for your own research, and then book through normal channels for full commissions – but you don’t lose bookings to other sites that have online booking capabilities – including supplier websites!
Tips from Joey who tried the above investment:
It cost me little to buy my travel agency and maintain it. It’s run off US servers, caters to the international market, costs me about $100 to $200 a month to maintain (hosting fees, SEO placements, web marketing).. and it makes enough to support my mainline businesses.
Now compare that with opening a travel store. You pay:
- P20,000 a month on wages.
- P30,000 a month on rent
- P14,000 a month on misc utilities
- Food, transpo, etc etc etc.
I purchased my entire turnkey system for less than $500. Cheesy Already recouped investment. In a few weeks.
Online agencies like this offer tickets at prices generally lower than what you find at a brick and mortar outlet. It took minimal convincing for my foreign and local friends to buy from the website. So… market to your friends. When they spread the word, you’re in the black.
Related site: Philippine Travel Agencies Association (PTAA)
IATA offers comprehensive training and professional development services, among which the IATA/UFTAA International Travel and Tourism Training Programme is globally recognised as the best and most complete Travel and Tourism qualification. Visit IATA www.iata.org/training/travel_tourism/
source: startups.co.uk,photo from wowphilippinestour.com
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